Gulf Resources, Inc.

Greetings and welcome to the Gulf Resources Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Helen Chu. You may begin.

Hi, thank you, operator. Good morning, ladies and gentlemen, and good evening to all of those of you who are joining us from China. And we'd like to welcome all of you to GovResources' third quarter 2024 conference call. I'm Helen Xu, the IR Director. Our CEO of the company, Mr. Shelby Liu, is also joining this call today. I'd like to remind you, to all our listeners, that in this call, certain management statements during the call will contain for looking for information about Gulf Resources Incorporation and its subsidiary business. and products within the meaning of Rule 175 under the Security Act of 1933 and Rule 3B-6 under the Security Exchange Act of 1934 and are subject to the safe harbor created by those rules. Actual results may differ from those discussed today taking into account a number of risk factors including but not limited to the general economic and business conditions in the PRC, the risks associated with the pandemic outbreak or future product development and production capabilities, shipments to end customers, market acceptance of new and existing products, additional competition from existing and new competition from the bromine and other oil fields and power production chemicals, changing technology, the ability to make future bromine assets and the various other factors beyond its control. All forelooking statements expressly qualify in their entirety by this cautionary statement. the risk factors detailed in the company's report filed with the SEC. Gulf Resources assumes no obligation to revise or update any forelooking statements to reflect events or circumstances after the date of this call. Accordingly, our company believes expectations reflecting in those forelooking statements are reasonable and there can be no assurance of such will prove to be correct. In addition, any reference to a company's future performance represents the management's estimates as of today, the 20th of November, 2024. For those of you unable to listen to this entire call at this time, a replay will be available at the company's website. The call is also accessible through the webcast, and the link is accessible through our website, so please locate our press release issued earlier for the details. I'd like to start out the call by saying that the company regrets that the change in auditors made it difficult to file out our 2023 10-K and 2024 10-Q in a timely manner. We also regret that we have not had a conference call since the end of the third quarter of last year. We recognize that we have to be active in communicating with investors and hope today will be the start of a new discussion between the company and its investors. In this case, we will focus on the third quarter of 2024. But we are also willing to take questions about the first and second quarters as well as the fourth quarter of last year. I'd like to briefly cover the financial results. Then I will summarize a few issues of importance before turning the call over to Mr. Liu. And then we will be opening for the QA section. So since the company filed its 10Q yesterday for the third quarter All our financials are in the 10Q file. So for the three months ended September 30, 2024, the revenues for the third quarter were approximately $2.2 million, a decline of 21.8% compared to the same period of last year. The net loss was approximately $3.5 million. and the basic and diluted loss was 33 per share. During third quarter, the bombing revenues declined by 68% to approximately 1.6 million and crude salt revenue declined by 26% to $654,000. Bombing operation loss was approximately 4.0 million while crude salt operation loss was $102,000. The losses from operations from our currently inactive chemical and natural gas business were approximately $339,000 and $39,000 respectively. For the nine months ended September 30th to the 24th, The revenues were approximately $5.9 million, a decline of 74.4% compared to the same period of 2023. The losses from operations by segment were as follows. Bromine was approximately $13.5 million, crude salt was approximately $47 million, chemicals was $990,000, and natural gas was The net loss was approximately $40.6 million and the basic and diluted loss per share was $3.78. We incurred a loss of approximately $29.2 million from the disposition of equipment and purchased approximately $60.5 million worth of equipment. new equipment. Our cash position declined to approximately $11 million from $72.2 million as of December 31, 2023. The total assets at the end of the third quarter was approximately $193.9 million. There are five major issues we'd like to highlight during this call. the economics of the bromine business, the purchase of land for crude salt and bromine, and our chemical businesses, our natural gas business, and the last is the cost of our flood prevention project. Firstly, let's look at our bromine segment. To better understand the economics of our bromine segment, I'm going to focus on the results of the third quarters from year 2022, 2023, and 2024. So during the year 2022, the company earned approximately $10.6 million in bromine. But in year 2024, we lost $4 million. During this period, revenue declined by 92%. Much of the decline was due to the price of bromine, which dropped 68%, but some was also due to the lower level of tone produced, which declined 75%. During this period, our utilization dropped from 34% to 8%. One impact of the lower level of production and the decline in utilization was that the cost per tone more than doubled from 2,773 to 5,709 because overhead, depreciation, amortization, and other costs had to be allocated over a much lower level of production. Like oil, gold, or any other element, our company has a relatively fixed amount of bromine available for mining in our properties. When the pandemic hit, demand for bromine, especially for antiseptics, surged. As the price of bromine declined, Mangerman decided to limit the sales and protect our mineral assets for the time when prices rebound. When we made this decision, Mangerman recognized that a lower level of production would impact our profits. However, we believe it will have been to shareholders to sell more of our bromine at extremely low prices. Since the end of third quarter, bromine prices have increased substantially. We believe we are approaching the time when we will choose to increase production and utilization. The second issue was about the purchase of land for the crude salt fields and bromine. In June, the company had an opportunity to secure additional land for crude salt fields and bromine from groups in our production area nearby. At the time, we were aware of the existing price of bromine and the impact of that price on the likely earnings we would have in this quarter. We believe this was an exceptional opportunity for us to gain control of more land for the production of crude salt and bromine in the future. Our management team conducted an analysis of this opportunity and concluded that acquiring its crude salt fields would enable the company to produce more crude salt and bromine and that the cash we invested was likely to be returned in the next four to five years. We also want our shareholders to know that we are still in negotiations with sellers over the timing and the terms of the stock portion of the agreement. The company wants investors to understand that we would not have made this decision in June if we were not convinced This was an excellent short-term investment that would not jeopardize any of our other opportunities. The third issue is about our chemical factories. While the company made the decision to spend money on the crude salt field, We also decided to postpone spending money on completing our chemical factory. We have invested about $45 million out of a projected $69 million in building this new chemical factory. However, as we studied in the industry, we concluded that the most companies in our niches, currently some of them are losing money. Further, we continue to see interesting new opportunities in areas like zinc, bromine, and sodium iron factories. If we were to pursue one of these opportunities, we would modify the configuration of our factory rather than commit capital to a business that does not produce short or intermediate term returns. we decided to wait until we had better visibility as to the best opportunities. We are still committed to our list chemical business. We are looking at many different alternatives, including potential joint ventures, and we'll move ahead with chemicals as the market improves. The third issue is about our natural gas project. The company has also refrained from investing more money in our natural gas segment. We have been working with local authorities as they are finalizing the provincial environmental plan. During this period, we have become convinced that we may maximize our returns by strategy, such as in natural gas in Sichuan province, by finding the right joint venture partner. The last issue is about flood prevention. In flood prevention project in year 2023, the company spent slightly more than $50 million on flood prevention because the work was conducted in neighboring rivers that were not part of our property. These investments were expensive instead of capitalized. These expenditures impacted both our earnings and balance sheet. However, we believe they will benefit us in the future. In the past six years, the company spent about 47 million in flood repair after the two typhoons. As we have previously reported, not only did the flood damages our facilities, they also impacted our ability to produce from some of our wells. With this flood prevention project completed, we believe this may help the company to obtain approval to open our bombing factories number two and number 10. So now let me turn the call over to Mr. Liu for some comments.

Director Liu. Director Liu.