Good day, ladies and gentlemen. And welcome to the Gulf Resources 2021 Second Quarter Earnings Conference. At this time, all participants have been placed on a listen-only mode and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Helen Xu, IR Director at Gulf Resources. Helen, the floor is yours.

Thank you, operator. Good morning, ladies and gentlemen. And good evening to all of you joining us from China and US. We'd like to welcome all of you to Gulf Resources' second quarter 2021 earnings conference call. I am Helen Xu, the IR Director. Our CEO of the company, Mr. Xiaobin Liu, will also join us this call today. I'd like to remind you to all of our listeners that, in this call, certain management's statements during the call will contain forward-looking information about Gulf Resources and its subsidiaries' business and products within the meaning of Rule 175 under Securities Act of 1933 and Rule 3b-6 under the SEC 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 COVID-19 pandemic outbreak, future product developments 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 the other oilfield and power production chemicals, changing technology, the ability to make future bromine assets and the various other factors beyond the company's control. All forward-looking statements are expressly qualified in their entirety by this cautionary statement and the risk factors detailed with the company's reports filed with the SEC. Gulf Resources assumes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. Accordingly, our company believes expectations reflecting those forward-looking statements are reasonable and there can be no assurance of such will prove to be correct. In addition, any reference to the company's future performance represents the management's estimates as of today, August 16, 2021. For those of you unable to listen to the 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. And at this moment, I just want to say that due to the company website issue and the webcasting we issued early in our press release has been updated and the company already issued a new webcasting link and the PR is on its way. So, I think it will be issued very soon in 5 or 10 minutes before the call, supposed to be the before the call. It's underway now. So, now, let's turn the call back to Mr. Liu now.

[Foreign Language] Thank you, Helen. I'm Xiaobin Liu, CEO of the company. First of all, I'd like to welcome all of you to the Gulf Resources earnings call second quarter of year 2021. In this quarter, the company's former auditors Morison Cogen resigned, and the company engaged WWC to serve as independent auditor very quickly and then be able to file its 2021 second quarter 10-Q report on time. The company is optimistic about the second half of year 2021. Production loss in the second quarter is likely to be recovered in the third quarter and bromine prices remains high. At current levels of production, our bromine business should be profitable. We have expensed all of our annual stock grants. So, overhead will be reduced. We believe that we could receive approvals for one or more of our closed bromine facilities in the near future. In year 2022, we may begin to generate revenues from our chemical factory. We expect that our chemical business could be profitable in year 2023. We continue to believe that we may be able to produce both natural gas and brine products in Sichuan if we are able to obtain the required government approvals. So now, I will turn the call back to Helen.

So, now, I would like to discuss with our investors and shareholders about the company's financial results and some questions we received from our investors. So, I assume most of you have seen our press release that contains our income statement, balance sheet and the cash flow as well as a review of events in the quarter and the future expectations. Because there is much to discuss, so we will go quickly with reviewing the press release, major press [ph] and focus on questions we have already received from the investors. Then we will open the call to questions for those on the phone now. So, now let's look at the balance sheet first ended by June 30, 2021. The cash balance is approximately $97.1 million and the current asset is approximately $105 million. Working capital was approximately $95.7 million. Book value is approximately $278.1 million. Now, looking at the income statement. Net revenues for the second quarter of 2021 increased 108% to approximately $11.1 million compared to previous year the same period. Gross margin increased for second quarter 2021 by 1,157% from $336,500 to $4 million compared to the same period of previous year. As a percentage of revenues, gross margin for second quarter year 2021 was 38% compared to 6.3% in the previous year. Direct labor and factory overhead for second quarter 2021 incurred during plant shutdown decreased 19.7%. As a percentage of sales, they were 10.5% against 32.4%. G&A expenses for second quarter 2021 increased approximately $3.7 million compared to the previous year. However, there was – approximately $3.1 million of the increase was attributable to one-time stock awards. Net loss before taxes for second quarter 2021 declined 19.6% compared to the previous year same period. Taxes were a loss of $356,000 for second quarter 2021, against…

[Operator Instructions]. Your first question is coming from Max Waring [ph].

Hi. This is Max Waring. I was just wondering what's the annual production capacity of these four factories? This quarter, we did about 1,800 tonnes. I thought maybe we could do about 2,500 tonnes. What's about the maximum these four factors can do in one quarter? [Foreign Language]

[Foreign Language] For this whole year, for the full bromine facilities, if they are operating, considering normally, we have one month holiday and stop of production at around the end of the year. The whole year production would be around 8,000 tonnes to 8,500 tonnes for this fall.

Okay, for this year, but what's maximum capacity? Like, what's full production?

You mean this year? Or, like, the whole year?

No, not this year. Just ever. What's full capacity? Is that that full capacity for any year, 8,500 tonnes? Or can we do more?

8,000 tonnes to 8,500 tonnes is the maximum production. Like is a normally production.

This question has to do with – I think we get every quarter, but share repurchases. That would bring huge shareholder value. Is there any chance to get that next year once we get the cash flows going or is that still longer than that? [Foreign Language]

[Foreign Language] Currently, the company management did not think about these share buybacks yet because you know that we need the cash for – put back company's own business operation back on track. And secondly, because company was always looking for – if there is any good acquisition target. But when all of our business operations back on track and when they can produce good cash flow and revenues, company will consider about this buyback.

The next question is coming from John Rolls.

My summary is the company managed to lose money in an extremely strong market for your main product, bromine. And that leads me to two questions and then one comment. One question is that the average price you received for bromine was much lower than the market price throughout the second quarter. How did that come about and what are the prospects for the future? Are you now selling bromine at close to the market price? [Foreign Language]

[Foreign Language] Firstly, the second quarter bromine market prices were increased badly. So, our data is the average selling price. And because some of our bromine was sold based on our first quarter agreements with our customers. These are two major reasons. But in the third quarter, this selling price will be come up because we use some second quarter agreements to sell our third quarter bromine products. So third quarter, the price will be more close to market price.

The second question is that you spent a considerable amount of money during your shutdown to add wells. And it was stated that this would increase capacity utilization. Instead, your bromine capacity utilization does not go up in quarter two. But according to my calculations, actually went down somewhat. Why did that happen? [Foreign Language]

[Foreign Language] Firstly, because the wells and output aqueducts, we have their useful lives. So, in order to extending their useful lives, we have to do a lot of maintenance in order to keep the utilization rate not going down so much. Secondly, because after some wells and aqueducts, they're utilized and they write off them. Now your cost to build new wells and aqueducts also increased a lot.

I'd like to close with just one comment. I agree that stock grants are a sensible way of rewarding management. But it's almost always linked to good performance. In my view, performance in this quarter was not good. You had lower volume sales than you had yourself predicted, the lower price than the market price, your auditor quits, there was no progress and the continuing issues of shut-down factories of natural gas, and the stock price has not improved. Yet you rewarded management for the second time in a year. I recommend that you look at future grants as rewards for good performance. [Foreign Language]

[Foreign Language] Thanks for your comments. Mr. Liu explains that, yes, the company's – first of all, its revenue and income didn't decrease this quarter. It's under its taxation because that this quarter the National Environmental Protection inspection team came to Shandong Province. I think this news we can see on the older news on any public media. Because they came to Shandong and the local governments become nervous, and they always come to the company, they have asked for unexpected and unplanned intermittent inspection or ask the company to temporarily stop production for one or two days and do some – for their work preparation. So, this quarter, the company's production work [indiscernible] affected by this issue. That's why its production volume decreased this quarter under the company's expectations and this matter was unexpected. Secondly, because company's auditor resigned this quarter and the company staff and management was depressed that time, in order to increase the staff's confidence and to make them more motivated, that's why this stock compensation was granted that time. Later on, company will consider about your comment. Of course, we'll not issue like this much to staff and we'll make their performance connected to stocks and the company performance as well in the future.

The next question is coming from Matthew Macchiarella.

I just want to make a comment. I think there's one problem with the company as such. It's about communication. So, I really appreciate if you think to invest, like, for example, $1 million in order to do these three things. The first one, hire a professional investor relator, so that you can start to participate to conference with investment bankers and make sure that Gulf Resources will be known in the financial community. Make a presentation of your company, like a PDF. Another topic that according to me would be very important is to hire a professional communication firm, so that you can start to give, for example, one month update. So, each month, you write like a press release giving an update to investors, so they are informed of what happens because we will have 12 updates during the new year. And the third part is that – I really think that you should hire also like a professional web service because, as of today, I am just on your website, it told that the site is temporarily unavailable. It's very important as of today that website provides a lot of information to investors. It works well. It's full of information that is not accessible, that your website is unavailable today. Because otherwise people have a bad reputation of your company if your website doesn't work. [Foreign Language]

[Foreign Language] Hi, Massimo. So, here's the response from Mr. Liu. He says, thanks very much for your comments. We did consider about your question and we did receive your email already. Because previously, for previous past years, the company had no income because all our facilities were shut down at that time. We don't have any income. And this year, due to COVID-19, our discussion with US professional IR company was not so smoothly. And due to this COVID-19, they cannot easily travel to China and the company also cannot easily travel to US as well. So, this created the difficulties for company to hire a new IR. But we will consider your comments and we will hire a professional IR in the near future. And we will also consider to redo the company website again based on your comments.

As I mentioned before, communication is very important. So, please consider also to make a lot of press releases in order to get investor informed. I want to do another question that was already done, but I want to put on another angle. In the last two, three years, the number of shares passed from 9.5 million to 10.5 million primarily for stock grants. Your company has $100 million of cash. I understand that you want to invest this cash for rebuild the company factories and also to make a light acquisition. But I really ask you – probably I would be your first international shareholder because I have a huge backup – to do at least a share buyback of 1 million shares. This is the number of shares of stock granted in the last two years. So, basically, if you do like this one, it would be really appreciated. All the stocks granted to management for incentives should come from bank of the company and not from issue of new share. This is something very useful and is something very common in Europe and United States where the stock grants are not done to dilute shareholder, but the stock grants are done with share buyback. So, if you do 1 million share buybacks, you basically do the share buybacks to cover the stocks granted in the last two years. I would really be happy if you can accept like this one. Not huge share buyback, but just share buyback to cover the stock grants, so you give a signal to the market. 1 million of shares through stock buyback is just $5 million. You have more than $90 million. [Foreign Language]

Hi, Maximo. Do you mean $1 million buyback or 1 million share buyback.

1 million share buyback. That is $5 million. Because three years ago, the company had 9.5 million shares. As of today, you have 10.5 million shares. So, there were issued around 1 million share for stock grants to management. I think that would be right for shareholder if you announced today like a 1 million share buyback that is $5 million that is to cover all the stock grants that were issued in the last year. [Foreign Language]

[Foreign Language] Yes, thanks for your comments and we'll consider it very carefully.

I hope that you would also put into practice because I think that would be a good choice.

Yes, we will. Just email me anytime where you have questions.

And the next question is coming from Randy Leggett.

Just to reiterate what the fellow said before. It's kind of like hiding – I know you're not hiding and don't take that the wrong way. It's kind of like the accounting thing and then not telling us about the inspection because all of us are working at the price of bromine and saying, there's no way they can't hit that guide. And then we either find out on a conference call. It just seems to happen every quarter. And I totally agree, and we've talked about this and talked about it about hiring a professional PR firm. You can't do it all under that. But just not Helen – it just doesn't look good. Let's face that fact. And any company that I've ever invested in, if they didn't do that, they'd get creamed in the market. And it's just kind of frustrating. And on top of that, is there any government regulation? I know, we have a problem with dividends because we don't have an overseas subsidiary. And that's been talked about for years too. But is there anything holding us back from doing a buyback from a government regulation standpoint? That's my question really. We should have said something about the accounting firm, and we should have said something about the inspection before the quarterly call. And the CEO should know that. I don't really know what else to say, it's just kind of frustrating. You've got so much going on for you, nobody really knows about except for us on the conference calls. That's what I find kind of just sad. Y'all could be making tons of money if we just get the thing out somewhere. But getting back, but is that a government regulation on the buyback or is that just something y'all decided just – I know we've held off on because we had all these expenses. But is there any government – do they prohibit that?

Yes, I'll double check it for you. [Foreign Language] [Technical Difficulty]

And also, we should let investors know week beforehand when we're doing an investor call too. Those are just simple things that the management can get straightened out on their own, I think.

[Foreign Language] Actually, there is no government restrictions on the share buyback. But, now, Chinese government have very strict policy on wiring funds to overseas. So, this is a problem. If we want to wire funds to overseas, it's very difficult. We have to submit application, everything get approval. Even company paying invoices, we have to provide a lot of documentation.

I guess I understand that. But there again, the other thing was, it's just really simple to tell investors. Hey, put out a press release until we hire a PR firm. Hey, this is what happened with the accounting firm. Hey, we had an inspection this week. We're two weeks behind. People would understand that if you just tell us. It just concerns shareholders when we don't tell everybody. I think he should know that. So, just please tell him that. [Foreign Language]

[Foreign Language] Okay, we got you.

The next question is coming from Keegan Wynn Switzer.

This is Keegan Wynn Switzer. I'm a private investor. My question is actually one that was submitted earlier around the chemical factory. I think someone had asked what the projected revenues and profits or profit margins were expected to be. I know this is really hard to predict this far in advance, but are there any ranges that you guys are thinking or considering? [Foreign Language]

[Foreign Language] We cannot provide it right now, but we try our best – the next time while company is going to issue a guidance, we try to estimate the gross margin and revenue for our chemical segments and products.

I think that'd be great. And then, I know it'll probably have to ramp. So maybe, by quarter or by half year would be helpful because I know it will take some time to ramp up. But people like me are holding this just because that'll be coming in the future. It'll be helpful to know how much revenue it will bring in. So, that's all for me.

And the next question is coming from Peter Osiris.

I'm a private investor. I have two questions. Just so I understand, when you gave guidance in the first quarter of $14 million in [Technical Difficulty], I just want to understand what happened with [Technical Difficulty] with inspections. You mentioned the inspections a couple of times. These were unplanned inspections and it forced you to stop and start your production. Is that correct?

Yes, you're right.

Have you expected to have these inspections in a different quarter, like the third quarter or the fourth quarter? Or this is just a new inspection?

We expected this production loss in the second quarter will be recovered in the third quarter.

If the inspections had not happened, would you have made your guide? Think you would have made your guide?

The line was not clear. I cannot hear you really. Will we issue a new guidance?

If there had been no inspection, do you think that you would have made your original guidance? [Foreign Language]

[Foreign Language] Yes, definitely. Because due to this National Environmental Protection inspection team, they came to the Shandong province. Every level of government agencies, they become very nervous. So because they become nervous, they came – every level comes to company and they said, okay, you have to stop for one or two days for the inspection. But then later, we stop and start our production continually for one or two days. Because this is not planned and it's totally unexpected every time, so we cannot predict it the as usual. And we were not able to issue a press release saying, okay, this government inspection team is going to come because we do not know when and how long any time they come just without any notice or plan. So, by end of the quarter, then our production results come out, we did not achieve our quarterly guidance. But without this issue, definitely, we can meet our guidance in terms of revenue and net income.

I'd just make the comment, I agree with the earlier comments that – I understand you were working very hard on getting new orders, but the next time this happens, you should issue a press release about it. The second thing I'd like to ask was actually a comment. [indiscernible] asking about stock buybacks. And I understand there is a problem of getting money out of China to do stock buybacks, is that correct?

Sorry.

There is a problem of getting money out of China to do stock buybacks, is that correct?

Yes. Yes. It is.

Here is something I would like the company to consider, okay? Given that stock grants is given to executives, the executives now own stock in the company in the United States, is that correct?

Yes.

If the company could buy stock from the executives, pay the executives in R&D, the company would then have stock and money in the United States where it could do the stock buybacks? Do you understand me?

Yes, I got your idea.

The stock issues to executives could provide over the long term a way for the company to get money out of China to do the things that investors want. [Foreign Language]

[Foreign Language] We will discuss with the management and staff to see how to do it and the possibilities of this way. Or if it's applicable.

Thank you. And there were no other questions. Helen, if there are any closing remarks, I'll pass the call back to you.

No, I think if there is no more questions, we can close the call for today. [Foreign Language] Okay, thank you all for joining the call. Have a good day. And have a good night in China.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your lines at this time and have a wonderful day. Thank you for your participation.