Table of ~~consultants and experienced personnel to manage the operation in Saudi Arabia.~~Contents

Maintenance, expansion and refurbishment of our facilities and the development and implementation of new manufacturing processes involve significant risks which may adversely affect our business, results of operations, financial condition and cash flows.

Our facilities require periodic maintenance, upgrading, expansion, refurbishment or improvement. Any unexpected operational or mechanical failure, including failure associated with breakdowns and forced outages, could reduce our ~~facilities'~~facilities’ production capacity below expected levels which would reduce our revenues and profitability. Unanticipated expenditures associated with maintaining, upgrading, expanding, refurbishing or improving our facilities may also reduce profitability.

If we make any major modifications to our facilities, such modifications likely would result in substantial additional capital expenditures and may prolong the time necessary to bring the facility ~~on line.~~online. We may also choose to refurbish or upgrade our facilities based on our assessment that such activity will provide adequate financial returns. However, such activities require time for development before commencement of commercial operations, and key assumptions underpinning a decision to make such an investment may prove incorrect, including assumptions regarding construction costs, demand growth and timing which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Finally, we may not be successful or efficient in developing or implementing new production processes. Innovation in production processes involves significant expense and carries inherent risks, including difficulties in designing and developing new process technologies, development and production timing delays, lower than anticipated manufacturing yields, and product defects. Disruptions in the production process can also result from errors, defects in materials, delays in obtaining or revising operating permits and licenses, returns of product from customers, interruption in our supply of materials or resources and disruptions at our facilities due to accidents, maintenance issues, or unsafe working conditions, all of which could affect the timing of production ramps and yields. Production issues can lead to increased costs and may affect our ability to meet product demand, which could adversely impact our business, results of operations, financial condition and cash flows.

There are certain hazards and risks inherent in our operations that could adversely affect those operations and results of operations and financial condition.

As a manufacturer and distributor of diversified chemical products, our business is subject to operating risks inherent in chemical manufacturing, storage, handling and transportation. These risks include, but are not limited to, fires, explosions, severe weather and natural disasters, mechanical failure, unscheduled downtime, loss of raw materials or our products, transportation interruptions, remediation, chemical spills, terrorist acts or war, discharges or releases of toxic or hazardous substances or gases. These hazards can cause personal injury and loss of life, severe damage to, or destruction of, property and equipment and environmental contamination. In addition, our suppliers are also subject to similar risks that may adversely impact our production capabilities. A significant limitation on our ability to manufacture products due to disruption of manufacturing operations or related infrastructure could have a material adverse effect on our results of operations and financial condition.

While we adapt our manufacturing and distribution processes and controls to minimize the inherent risk of our operations, to promote workplace safety and to minimize the potential for human error, we cannot completely eliminate the risk of accidental contamination or injury from hazardous or regulated materials, including injury of our employees, individuals who handle our products or goods treated with our products, or others who claim to have been exposed to our products, nor can we completely eliminate the unanticipated interruption or suspension of operations at our facilities due to such events. We may be held liable for significant damages or fines in the event of contamination or injury, and such assessed damages or fines could have a material adverse effect on our results of operations and financial conditions. Our property, business interruption and casualty insurance may not fully insure us against all potential hazards incidental to our business.

Conditions in the global economy may adversely affect our results of operations, financial condition and cash flows.

The demand for our products have historically correlated closely with general economic growth rates. The occurrence of recessions or other periods of low or negative growth will typically have a direct adverse impact on our results of operations, financial condition and cash flows. Other factors that affect general economic conditions in the world or in a major region, such as changes in population growth rates or periods of civil unrest, weather and national disasters or health epidemics and pandemics also impact the demand for our products. Economic conditions that impair the functioning of financial markets and financial institutions also pose risks to us, including risks to the safety of our financial assets and to the ability of our partners and customers to fulfill their commitments to us.

In addition, the revenue and profitability of our operations have historically been subject to fluctuation, which makes future financial results less predictable. Our revenue, gross margin and profit vary among our products, customer groups and geographic markets. Overall gross margins and profitability in any given period are dependent partially on the product, customer and geographic mix reflected in that period’s net revenue. In addition, newer geographic markets may be relatively less profitable due to investments associated with entering those markets and local pricing pressures. Market trends, competitive pressures, increased raw material or shipping costs, regulatory impacts and other factors may result in reductions in revenue or

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pressure on gross margins of certain segments in a given period which may necessitate adjustments to our operations.

The global outbreak of COVID-19 has had, and may continue to have, an adverse impact on the business, results of operations, financial position, and liquidity of the Company and/or its customers, suppliers, and other counterparties.

The COVID-19 pandemic has caused, and may continue to cause, a global slowdown of economic activity, particularly, reduced demand in durable goods markets such as automotive and construction, disruptions in global supply chains, significant economic uncertainty and volatility and disruption of financial markets. The COVID-19 pandemic is having an impact on the Company’s operations and financial performance, as well as on the operations and financial performance of many of the Company’s customers and suppliers. Across all of our businesses, we are facing increased operational challenges from the continued need to protect employee health and safety by requiring restrictions on the movement of people, which can cause workplace disruptions, reduced productivity, operational disruptions or shutdowns, and the incurrence of additional costs. Due to the economic slowdown caused by the COVID-19 pandemic, we are also experiencing, and may continue experiencing, lower demand and volume for products and services from our customers, as well as potential restrictions or delays on deliveries of key raw materials from our suppliers. See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, for additional information on how we have been impacted and the steps we have taken in response.

Because the severity, magnitude and duration of the COVID-19 pandemic and its economic consequences are uncertain, rapidly changing and difficult to predict, the pandemic’s impact on the Company’s operations and financial performance, as well as its impact on our ability to successfully execute our business strategies and initiatives, remains uncertain and difficult to predict. Additionally, the ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not within our control, including, but not limited, to: governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic (including restrictions on travel and transport and human capital constraints); the impact of the pandemic and actions taken in response on global and regional economies, travel, and economic activity; the availability of federal, state, local or non-U.S. funding programs; general economic uncertainty in key global markets and financial market volatility; the weakening of demand in certain end markets; prolonged disruption in global logistics channels; global economic conditions and levels of economic growth; and the pace of recovery as the COVID-19 pandemic subsides. We expect that the longer the period of economic and global supply chain and disruption continues, the more material the impact could be on our business operations, financial performance and results of operations, and this could include potential charges, impairments and other adverse financial impacts in future periods.

As the COVID-19 pandemic continues to adversely affect our operating and financial results, it may also have the effect of heightening many of the other risks described in the risk factors herein, the COVID-19 pandemic may also affect our operating and financial results in a manner that is not presently known to us.

Domestic or international natural disasters or other severe weather events, health epidemics or pandemics or terrorist attacks may disrupt our operations or those of our customers or suppliers, decrease demand for our products or otherwise have an adverse impact on our business.

Chemical related assets, and U.S. corporations such as ours, may be at a greater risk of future terrorist attacks (including both physical attacks and cyber–attacks) than other possible targets in the U.S. Moreover, extraordinary events such as natural disasters, other severe weather events or global or local health epidemics (such as the COVID-19 pandemic) could result in significant damage to our facilities, the pipeline systems and other infrastructure we rely on and/or disruption of our operations and may negatively affect local economies, including those of our customers or suppliers. The occurrence of such events cannot be predicted, although their occurrence can be expected to continue to adversely impact the economy in general and our specific markets.

The resulting damage from a natural disaster, other severe weather events or terrorist attack could include loss of life, property damage or site closure. Several of our facilities are located in regions where natural disasters and other severe weather events have previously disrupted, and may in the future disrupt, our ability to manufacture and deliver products from certain facilities. Any damage resulting in stoppage or reduction of our facilities’ production capacity could reduce our revenues and any unanticipated capital expenditures to repair such damage (to the extent not covered by our insurance policies) may reduce profitability. Any, or a combination, of these factors could also adversely impact our results of operations, financial condition and cash flows.

We are exposed to local business risks in different countries, which could have a material adverse effect on our financial condition and results of operations.

Although we do not have production operations and assets outside of the U.S., we do have a global portfolio of customers and thus we are subject to a variety of international market risks including, but not limited to: ongoing instability or changes in a country’s or region’s economic or political conditions, including inflation, recession, interest rate fluctuations, civil unrest and actual or anticipated military or political conflicts; longer accounts receivable cycles and financial instability or credit risk among customers and distributors; trade regulations and procedures and actions affecting production, pricing and marketing of

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products, including domestic and foreign customs and tariffs or other trade barriers; regulations favoring local contractors or requiring foreign contractors to employ citizens of, or purchase supplies from, a local jurisdiction; local labor conditions and regulations and the geographical dispersion of the workforce; changes in the regulatory or legal environment; differing technology standards or customer requirements; import, export or other business licensing requirements or requirements relating to making foreign direct investments, which could affect our ability to obtain favorable terms for labor and raw materials or lead to penalties or restrictions; data privacy regulations; risk of non-compliance with the sanction laws or U.S. Foreign Corrupt Practices Act or similar anti-bribery legislation in other countries by agents or other third-party representatives; risk of nationalization of private enterprises by foreign governments; foreign currency exchange restrictions and fluctuations; the outbreak of global or regional health epidemics or pandemics (such as the COVID-19 pandemic); difficulties associated with repatriating cash generated or held abroad in a tax-efficient manner and changes in tax laws; and fluctuations in freight costs and disruptions in the transportation and shipping infrastructure at important geographic points of exit and entry for our products and shipments.

Such economic and political uncertainties may materially and adversely affect our business, financial condition or results of operations in ways that cannot be predicted at this time. Although it is impossible to predict the occurrences or consequences of any such events, they could result in a decrease in demand for our products, make it difficult or impossible to deliver products to our customers or to receive raw materials from our suppliers and create delays and inefficiencies in our supply chain. We are also predominantly uninsured for losses and interruptions caused by terrorist acts, conflicts and wars.

Certain activist stockholders actions could cause us to incur expense and hinder execution of our strategy.

While we seek to actively engage with our stockholders and consider their views on business and strategy, we could be subject to actions or proposals from our stockholders that do not align with our business strategies or the interests of our other stockholders. Responding to these stockholders could be costly and time-consuming, disrupt our business and operations and divert the attention of our management. Furthermore, uncertainties associated with such activities could negatively impact our ability to execute our strategic plan, retain customers and skilled employees and affect long-term growth. In addition, such activities may cause our stock price to fluctuate based on temporary or speculative market perceptions that do not necessarily reflect our business operations.

Delaware law and certain provisions of our organizational documents may make a takeover of our company more difficult.

Provisions of our charter and bylaws may have the effect of delaying, deferring or preventing a change in control of our company. A change of control could be proposed in the form of a tender offer or takeover proposal that might result in a premium over the market price for our common stock. In addition, these provisions could make it more difficult to bring about a change in the composition of our board of directors, which could result in the entrenchment of current management. For example, our charter and bylaws: require that the number of directors be determined, and provide that any vacancy or new board seat may be filled only by the board; do not permit stockholders to call a special meeting; and establish advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

Our employment agreements and equity arrangements with our executive officers also contain change in control provisions. Under the terms of these arrangements, the executive officers may be entitled to receive significant cash payments, immediate vesting of equity awards and continued medical benefits in the event their employment is terminated under certain circumstances in connection with or in certain circumstances following, a “corporate change”. We disclose in proxy statements filed with the SEC potential payments to our named executive officers in connection with such “corporate change.” Certain change of control transactions may also constitute an event of default under our agreements with our creditors and other third parties.

These arrangements and provisions of our organizational documents and Delaware law may have the effect of delaying, deferring or preventing changes of control or changes in management of our company, even if such transactions or changes would have significant benefits for our stockholders. As a result, these provisions could limit the price some investors might be willing to pay in the future for shares of our common stock.

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Risks Related to Legal and Regulatory Matters

We are subject to numerous regulations that could require us to modify our current business practices and incur increased costs.

We are subject to numerous regulations, including customs and international trade laws, export control, data privacy, antitrust laws and zoning and occupancy laws that regulate manufacturers generally and/or govern the importation, promotion and sale of our products, the operation of our facilities and our relationship with our customers, suppliers and competitors. In addition, we face risk associated with trade protection laws, policies and measures and other regulatory requirements affecting trade and investment, including loss or modification of exemptions for taxes and tariffs, imposition of new tariffs and duties and import and export licensing requirements. If these laws or regulations were to change (including as a result of policies that may be adopted by the new Biden administration) or were violated by our management, employees, suppliers, buying agents or trading companies, the costs of certain goods could increase, or we could experience delays in shipments of our goods, be subject to fines or penalties, or suffer reputational harm, which could reduce demand for our products and hurt our business and negatively impact our results of operations. In addition, changes in federal and state minimum wage laws and other laws relating to employee benefits could cause us to incur additional wage and benefits costs, which could negatively impact our profitability.

Legal requirements are frequently changed and subject to interpretation, and we are unable to predict the ultimate cost of compliance with these requirements or their effects on our operations. We may be required to make significant expenditures or modify our business practices to comply with existing or future laws and regulations, which may increase our costs and materially limit our ability to operate our business.

Adverse results of legal proceedings could materially adversely affect us.

We are subject to and may in the future be subject to a variety of legal proceedings and claims that arise out of the ordinary conduct of our business, including legal proceedings brought in non-U.S. jurisdictions. Results of legal proceedings cannot be predicted with certainty. Irrespective of its merits, litigation may be both lengthy and disruptive to our operations and may cause significant expenditure and diversion of management attention. We may be faced with significant monetary damages or injunctive relief against us that could have an adverse impact on our business and results of operations should we fail to prevail in certain matters.

We expect to continue to incur capital expenditures and operating costs as a result of our compliance with existing and future environmental laws and regulations.

Our industry is subject to extensive laws and evolving regulations related to the protection of the environment. These laws and regulations have tended to become more stringent over time, continue to increase in both number and complexity and affect our operations with respect to, among other things: the discharge of pollutants into the environment; emissions into the atmosphere (including greenhouse gas emissions); and restrictions, liabilities and obligations in connection with storage, transportation, treatment and disposal of hazardous substances and waste. We are also subject to laws and regulations that require us to operate and maintain our facilities to the satisfaction of applicable regulatory authorities.

In addition, failure to comply with these laws or regulations, or failure to obtain required permits from applicable regulatory authorities, may expose us to fines, penalties or interruptions in operations. To the extent these capital expenditures or operating costs are not ultimately reflected in the prices of our products and services, or that we are subject to fines, penalties or other interruptions in our operations, our business, results of operations, financial condition and cash flows may be adversely affected.

The adoption of climate change legislation or regulation could result in increased operating costs and reduced demand for our products.

The nature of our operations could make us subject to legislation or regulations affecting the emission of greenhouse gases. The U.S. Environmental Protection Agency has promulgated (and may in the future promulgate) regulations applicable to projects involving greenhouse gas emissions above a certain threshold, and the U.S. and certain states within the U.S. have enacted, or are considering, limitations on greenhouse gas emissions. Jurisdictions outside the U.S. are also addressing greenhouse gases by legislation or regulation. In addition, efforts have been made and continue to be made at the international level toward the adoption of international treaties or protocols that would address global greenhouse gas emissions. These limitations may include the adoption of cap and trade regimes, carbon taxes, restrictive permitting, increased efficiency standards and incentives or mandates for renewable energy. For example, in January 2021, President Biden signed executive orders that represent his administrations first actions to fight climate change, which included an executive order to reenter the Paris Agreement international treaty on climate change that requires member countries to review and progress their intended contributions and set greenhouse gas reduction goals every five years beginning in 2020. The implementation of this treaty and other efforts to reduce greenhouse gas emissions could make our products more expensive, lengthen project implementation times and reduce

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demand for hydrocarbons, as well as shift hydrocarbon demand toward relatively lower-carbon sources. Such legislation, regulation, treaties or protocols may also increase our compliance costs, such as for monitoring or sequestering emissions.

Risks Related to Technology

Increased information systems security threats and more sophisticated and targeted computer crime could pose a risk to our systems, networks, products and services.

Increased information systems security threats and more sophisticated, targeted computer crime pose a risk to the security of our systems and networks and the confidentiality, availability, and integrity of our data, operations, and communications. While we attempt to mitigate these risks by employing a number of measures, including security measures, employee training, comprehensive monitoring of our networks and systems, upgrading our equipment and software and maintenance of backup and protective systems, if these measures prove inadequate, we could be adversely affected by, among other things, loss or damage of intellectual property, proprietary and confidential information, and communications or customer data, having our business operations interrupted, our supply chain interrupted and increased costs to prevent, respond to, or mitigate these cyber security threats. Any significant disruption or slowdown of our systems could cause customers to cancel orders, result in us being unable to manufacture or deliver products (or cause delays), harm our reputation or cause standard business processes to become inefficient or ineffective, which could adversely affect our results of operations, financial condition and cash flows.

If we are not able to continue the technological innovation and successful commercial introduction of new products, our customers may turn to other producers to meet their requirements, which may adversely affect our results of operations, financial condition and cash flows.

Our industry and the markets into which we sell our products experience periodic technological change and ongoing product improvements. In addition, our customers may introduce new generations of their own products, adopt new or different risk profiles, or require new technological and increased performance specifications that would require us to develop customized products. Our future growth and profitability will depend on our ability to maintain or enhance technological capabilities, develop and market products and applications that meet changing customer requirements and successfully anticipate or respond to technological changes in a cost effective and timely manner. Our inability to maintain a technological edge, innovate and improve our products could cause a decline in the demand and sales of our products and adversely affect our results of operations, financial condition and cash flows.

Ineffectiveness of our enterprise resource planning (“ERP”) system may adversely affect our business and results of operations or the effectiveness of internal controls over financial reporting.

During the last five years, we implemented a new ERP system at our specialty petrochemicals facility in order to better manage our business, and we continue to implement additional improvements to the system. ERP implementations are complex and time-consuming projects that involve substantial expenditures on system software and implementation activities over a significant period of time. If the ERP system does not operate as intended, it could adversely affect our financial reporting systems and our ability to produce financial reports, the effectiveness of internal controls over financial reporting (including our disclosure controls and procedures), and our business and results of operations.

Risks Related to Financing and Tax

Changes in tax laws or exposure to additional income tax liabilities could affect our future profitability.

Factors that could materially affect our future effective tax rates include but are not limited to: changes in tax laws or the regulatory environment; changes in accounting and tax standards or practices; changes in the composition of operating income by tax jurisdiction; and our operating results before taxes.

We are subject to federal and state income taxes in the United States. Significant judgment is required in determining our provision for income taxes. We believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different to that which is reflected in our Consolidated Financial Statements. Should any tax authority take issue with our estimates, our results of operations, financial condition and cash flows could be adversely affected.

We are subject to examination by federal and state tax authorities. While we regularly assess the likelihood of favorable or unfavorable outcomes resulting from examinations by the IRS and other tax authorities to determine the adequacy of our provision for income taxes, there can be no assurance that the actual outcome resulting from these examinations will not materially adversely affect our financial condition and operating results.

The covenants in the instruments that govern our outstanding indebtedness may limit our operating and financial flexibility.

The covenants in the instruments that govern our outstanding indebtedness limit our ability to, among other things:

incur indebtedness and liens;

make loans and investments;

prepay, redeem or repurchase debt;

engage in acquisitions, consolidations,

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asset dispositions, sale-leaseback transactions and affiliate transactions;

change our business;

amend some of our debt agreements; and

grant negative pledges to other creditors.

In addition, the ARC Agreement (as defined herein) also has financial covenants that require TOCCO to maintain a maximum Consolidated Leverage Ratio and minimum Consolidated Fixed Charge Coverage Ratio (each as defined in the ARC Agreement). See Part II, Item 7. ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations-Liquidity~~Operations under the heading “Liquidity and Capital ~~Resources-Credit Agreement.~~

Resources.”

A failure by us or our subsidiaries to comply with the covenants and restrictions contained in the agreements governing our indebtedness could result in an event of default under such indebtedness, which could adversely affect our ability to respond to changes in our business and manage our operations. Upon the occurrence of an event of default under any of the agreements

governing our indebtedness, the lenders could elect to declare all amounts outstanding to be due and payable and exercise other remedies as set forth in the agreements. Further, an event of default or acceleration of indebtedness under one instrument may constitute an event of default under another instrument. If any of our indebtedness were to be accelerated, there can be no assurance that our assets would be sufficient to repay this indebtedness in full, which could have a material adverse effect on our ability to continue to operate as a going concern.

Our ~~substantial~~ indebtedness could limit cash flow available for our operations and could adversely affect our ability to service debt or obtain additional financing if necessary.

As of December 31, ~~2018,~~2020, we had ~~$18 million~~nil in borrowings outstanding under our revolving credit facility (the ~~"Revolving Facility"~~“Revolving Facility”) and ~~$84.5~~$46.6 million in borrowings outstanding under our term loan facility (the ~~"Term~~“Term Loan Facility" and, together with the Revolving Facility, the ~~"Credit Facilities"~~“Credit Facilities”). Pursuant to the terms of the amended and restated credit agreement (as amended, to the ~~date hereof, the "ARC Agreement"~~“ARC Agreement”) governing the Credit Facilities, we also have the option, at any time, to request an increase to the commitment under the Revolving Facility and/or the Term Loan Facility by an additional amount of up to $50.0 million in the aggregate, subject to lenders acceptance of the increased commitment and other conditions.

Although the agreements governing our existing indebtedness contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of important exceptions, and additional indebtedness that we may incur from time to time to finance projects or for other reasons in compliance with these restrictions could be substantial. If we incur significant additional indebtedness, the related risks that we face could increase.

For example, in May 2020, SHR and TC received loan proceeds in an aggregate principal amount of approximately $6.1 million under the new Payment Protection Program (“PPP Loans”), which may be partially or fully forgiven if we comply with the provisions of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES Act”). However, since the enactment of the CARES Act, the Small Business Administration and the Treasury Department issued numerous rules and additional guidance to implement the PPP Loans under the CARES Act, application of which remains to be seen. As a result of this unclear regulatory environment, it is difficult to determine and predict with certainty eligibility and available benefits under the PPP Loans. We expect that our use of the proceeds of the PPP Loans is consistent with the intended purpose for the PPP Loans, such as maintaining the continuity of our workforce, including compensation and benefits. However, no assurance can be provided whether we will obtain forgiveness of the PPP Loans in whole or in part. If we are not successful in obtaining forgiveness of all or a portion of the PPP Loans, the unforgiven portion of such indebtedness could remain outstanding until the maturity which could reduce our liquidity. Additionally, if the SBA conducts an audit of our PPP Loans, there is no guarantee the result will be favorable in determining whether full or partial forgiveness is obtained.

Our current, or any future, indebtedness (including any unforgiven portion of the PPP Loans) could:

limit our flexibility in planning for, or reacting to, changes in the markets in which we compete;

place us at a competitive disadvantage relative to our competitors with less indebtedness;

limit our ability to reinvest in our business;

render us more vulnerable to general adverse economic, regulatory and industry conditions; and

require us to dedicate a substantial portion of our cash flow to service our indebtedness.

Our ability to meet our cash requirements, including our debt service obligations, is dependent upon our ability to maintain our operating performance, which will be subject to general economic and competitive conditions and to financial, business and other factors, many of which are beyond our control. We cannot provide assurance that our business will generate sufficient cash flow from operations to fund our cash requirements and debt service obligations.

~~Conditions in the global economy may adversely affect our results of operations, financial condition and cash flows.~~

The demand for our products have historically correlated closely with general economic growth rates. The occurrence of recessions or other periods of low or negative growth will typically have a direct adverse impact on our results of operations, financial condition and cash flows. Other factors that affect general economic conditions in the world or in a major region, such as changes in population growth rates or periods of civil unrest, also impact the demand for our products. Economic conditions that impair the functioning of financial markets and financial institutions also pose risks to us, including risks to the safety of our financial assets and to the ability of our partners and customers to fulfill their commitments to us.

In addition, the revenue and profitability of our operations have historically been subject to fluctuation, which makes future financial results less predictable. Our revenue, gross margin and profit vary among our products, customer groups and geographic markets. Overall gross margins and profitability in any given period are dependent partially on the product, customer and geographic mix reflected in that period's net revenue. In addition, newer geographic markets may be relatively less profitable due to investments associated with entering those markets and local pricing pressures. Market trends, competitive pressures, increased raw material or shipping costs, regulatory impacts and other factors may result in reductions in revenue or pressure on gross margins of certain segments in a given period which may necessitate adjustments to our operations.

To service our current, and any future, indebtedness, we will require a significant amount of cash, which may adversely affect our future results.

Our ability to generate cash depends on many factors beyond our control, and any failure to meet our debt service obligations

could harm our business, results of operations and financial condition. Our ability to make payments on and to refinance our indebtedness, and to fund working capital needs and planned capital expenditures, will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, business, legislative, regulatory and other factors that are beyond our control.

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If our business does not generate sufficient cash flow from operations or if future borrowings are not available to us in an amount sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs, we may need to refinance all or a portion of our indebtedness (or otherwise seek amendment or relief from the terms of our indebtedness), on or before the maturity thereof, sell assets, reduce or delay capital investments or seek to raise additional capital, any of which could have a material adverse effect on our operations. We might not generate sufficient cash flow to repay indebtedness as currently anticipated. In addition, we may not be able to effect any of these actions, if necessary, on commercially reasonable terms or at all. Our ability to restructure or refinance our indebtedness, will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or future debt instruments may limit or prevent us from taking any of these actions. Our inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance or restructure our obligations on commercially reasonable terms or at all, would have a material adverse effect on our business, results of operations and financial conditions.

~~There are certain hazards and risks inherent in our operations that could adversely affect those operations and results of operations and financial condition.~~

~~Increases in the costs of our raw materials could have an adverse effect on our financial condition and results of operations if those costs cannot be passed onto our customers.~~

Our results of operations are directly affected by the cost of raw materials. Since the cost of these primary raw materials comprise a significant amount of our total cost of goods sold, the selling prices for our products and therefore our total revenue is impacted by movements in these raw material costs, as well as the cost of other inputs. In the past we have experienced erratic and significant changes in the costs of these raw materials, the cost of which has generally correlated with changes in energy prices, supply and demand factors, and prices for natural gas and crude oil. In addition, product mix can have an impact on our overall unit selling prices, since we provide an extensive product offering and therefore experience a wide range of unit selling prices. Because of the significant portion of our cost of goods sold represented by these raw materials, our gross profit margins could be adversely affected by changes in the cost of these raw materials if we are unable to pass the increases on to our customers.

Due to volatile raw material prices, there can be no assurance that we can continue to recover raw material costs or retain customers in the future. For example, our logistics costs have increased substantially within the past three years, narrowing our profit margins. This may force us to increase our pricing, which could cause customers to consider competitors' products, some of which may be available at a lower cost. Significant loss of customers could result in a material adverse effect on our results of operations, financial condition and cash flows.

If the availability of our raw materials is limited, we may be unable to produce some of our products in quantities sufficient to meet customer demand or on favorable economic terms, which could have an adverse effect on our results of operations, financial condition and cash flows.

We use polyethylene waxes in our specialty synthetic wax segment and use additional non-primary raw materials in the production of our products in the specialty petrochemical segment and synthetic wax segment. Suppliers may not be able to meet our raw material requirements and we may not be able to obtain substitute supplies from alternative suppliers in sufficient quantities, on economic terms, or in a timely manner. A lack of timely availability of our raw materials in the quantities we require to produce our products could result in our inability to meet customer demand and could have a material adverse effect on our results of operations, financial condition and cash flows.

~~Certain activist stockholders actions could cause us to incur expense and hinder execution of our strategy.~~

~~We expect to continue to incur capital expenditures and operating costs as a result of our compliance with existing and future environmental laws and regulations.~~

Our industry is subject to extensive laws and regulations related to the protection of the environment. These laws and regulations continue to increase in both number and complexity and affect our operations with respect to, among other things: the discharge of pollutants into the environment; emissions into the atmosphere (including greenhouse gas emissions); and restrictions, liabilities and obligations in connection with storage, transportation, treatment and disposal of hazardous substances and waste. We are also subject to laws and regulations that require us to operate and maintain our facilities to the satisfaction of applicable regulatory authorities. In addition, failure to comply with these laws or regulations, or failure to obtain required permits from applicable regulatory authorities, may expose us to fines, penalties or interruptions in operations. To the extent these capital expenditures or operating costs are not ultimately reflected in the prices of our products and services, or that we are subject to fines, penalties or other interruptions in our operations, our business, results of operations, financial position and cash flows may be adversely affected.

If we are unable to access third-party transportation for our raw materials and finished products, we may not be able to fulfill our obligations to our customers in a timely manner, which could have a material adverse effect on our results of operations, financial condition and cash flows.

We rely upon transportation provided by third parties (including common carriers, rail companies and trans-ocean cargo companies) to receive raw materials used in the production of our products and to deliver finished products to our customers. While we attempt to offset the risks associated with third-party transportation issues, including by managing our supplies of raw materials, such mitigation efforts may not be successful. If we are unable to access third-party transportation at economically attractive rates, or at all, or if there is any other significant disruption in the availability of third-party transportation, we may not be able to obtain sufficient quantities of raw materials (on favorable terms, or at all) to match the pace of production and/or we may not be able to fulfill our obligations to our customers in a timely manner, which could have a material adverse effect on our results of operations, financial condition and cash flows.

~~We are subject to numerous regulations that could require us to modify our current business practices and incur increased costs.~~

We are subject to numerous regulations, including customs and international trade laws, export control, data privacy, antitrust laws and zoning and occupancy laws that regulate manufacturers generally and/or govern the importation, promotion and sale of our products, the operation of our facilities and our relationship with our customers, suppliers and competitors. In addition, we face risk associated with trade protection laws, policies and measures and other regulatory requirements affecting trade and investment, including loss or modification of exemptions for taxes and tariffs, imposition of new tariffs and duties and import and export licensing requirements. If these laws or regulations were to change or were violated by our management, employees, suppliers, buying agents or trading companies, the costs of certain goods could increase, or we could experience delays in shipments of our goods, be subject to fines or penalties, or suffer reputational harm, which could reduce demand for our products and hurt our business and negatively impact our results of operations. In addition, changes in federal and state minimum wage laws and other laws relating to employee benefits could cause us to incur additional wage and benefits costs, which could negatively impact our profitability.

Failure to successfully consummate extraordinary transactions, including the integration of other businesses, assets, products or technologies, or realize the financial and strategic goals that were contemplated at the time of any such transaction may adversely affect our future business, results of operations and financial condition.

As part of our business strategy, we from time to time explore possible investments, acquisitions, strategic alliances, joint ventures, divestitures and outsourcing transactions (collectively, "extraordinary transactions") in order to further our business objectives. To pursue this strategy successfully, we must identify suitable candidates for, and successfully complete, extraordinary transactions, some of which may be large and complex, and manage post-closing issues such as the integration of acquired businesses or employees. The expense and effort incurred in exploring and consummating extraordinary transactions, the time it takes to integrate an acquisition or our failure to integrate businesses successfully, could result in additional and/or unexpected expenses and losses. We also may not be successful in negotiating the terms of any potential extraordinary transactions, conducting thorough due diligence, financing an extraordinary transaction or effectively integrating the acquired business, product or technology into our existing business and operations. Our due diligence may fail to identify all of the problems, liabilities or other shortcomings or challenges of an acquired business, product or technology. Moreover, we may incur significant expenses whether or not a contemplated extraordinary transaction is ultimately consummated.

Additionally, in connection with any extraordinary transaction we consummate, we many not fully realize all of the anticipated synergies and other benefits we expect to achieve (on our expected timeframe, or at all), and we may incur unanticipated expenses, write-downs, impairment charges or unforeseen liabilities that could negatively affect our business, financial condition and results of operations, disrupt relationships with current and new employees, customers and vendors, incur significant debt or have to delay or not proceed with announced transactions. Further, managing extraordinary transactions requires varying levels of management and employee resources, which may divert our attention from other business operations.

~~The adoption of climate change legislation or regulation could result in increased operating costs and reduced demand for our products.~~

The nature of our operations could make us subject to legislation or regulations affecting the emission of greenhouse gases. The U.S. Environmental Protection Agency has promulgated (and may in the future promulgate) regulations applicable to projects involving greenhouse gas emissions above a certain threshold, and the U.S. and certain states within the U.S. have enacted, or are considering, limitations on greenhouse gas emissions. Jurisdictions outside the U.S. are also addressing greenhouse gases by legislation or regulation. In addition, efforts have been made and continue to be made at the international level toward the adoption of international treaties or protocols that would address global greenhouse gas emissions. These limitations may include the adoption of cap and trade regimes, carbon taxes, restrictive permitting, increased efficiency standards and incentives or mandates for renewable energy. Any such requirements could make our products more expensive, lengthen project implementation times and reduce demand for hydrocarbons, as well as shift hydrocarbon demand toward relatively lower-carbon sources. Such legislation, regulation, treaties or protocols may also increase our compliance costs, such as for monitoring or sequestering emissions.

~~Adverse results of legal proceedings could materially adversely affect us.~~

~~Cost pressures could negatively impact AMAK's operating margins and expansion plans.~~

Cost pressures may continue to occur across the resources industry. As the prices for AMAK's products are determined by the global commodity markets in which it operates, AMAK does not generally have the ability to offset these cost pressures through corresponding price increases, which can adversely affect its operating margins or require changes in operations, including, but not limited to, temporary planned shutdowns. Notwithstanding AMAK's efforts to reduce costs, and a number of key cost inputs being commodity price-linked, the inability to reduce costs and a timing lag may adversely impact AMAK's operating margins for an extended period.

~~An impairment of goodwill could negatively impact our results of operations.~~

At least annually, we assess goodwill for impairment. If an initial qualitative assessment identifies that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, additional quantitative testing is performed. We may also elect to skip the qualitative testing and proceed directly to quantitative testing. If the quantitative testing indicates that goodwill is impaired, the carrying value of goodwill is written down to fair value with a charge against earnings. Since we utilize a discounted cash flow methodology to calculate the fair value of our operating units, continued weak demand for a specific product line or business could result in an impairment charge. Accordingly, any determination requiring the write-off of a significant portion of goodwill could negatively impact our results of operations.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Borrowings under the Credit Facilities are, and additional borrowings in the future may be, at variable rates of interest that expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed will remain the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. We may in the future enter into, interest rate swaps for our variable rate debt whereby we exchange floating for fixed rate interest payments in order to reduce exposure to interest rate volatility. However, any interest rate swaps into which we enter may not fully mitigate our interest rate risk.

~~We are exposed to local business risks in different countries, which could have a material adverse effect on our financial condition and results of operations.~~

ongoing instability or changes in a country's or region's economic or political conditions, including inflation, recession, interest rate fluctuations, civil unrest and actual or anticipated military or political conflicts (including the potential impact of continued hostilities and conflict in Yemen on the operations of AMAK);

~~longer accounts receivable cycles and financial instability or credit risk among customers and distributors;~~

~~trade regulations and procedures and actions affecting production, pricing and marketing of products, including domestic and foreign customs and tariffs or other trade barriers;~~

~~regulations favoring local contractors or requiring foreign contractors to employ citizens of, or purchase supplies from, a local jurisdiction;~~

~~local labor conditions and regulations and the geographical dispersion of the workforce;~~

~~changes in the regulatory or legal environment;~~

~~differing technology standards or customer requirements;~~

import, export or other business licensing requirements or requirements relating to making foreign direct investments, which could affect our ability to obtain favorable terms for labor and raw materials or lead to penalties or restrictions;

~~data privacy regulations;~~

~~risk of non-compliance with the U.S. Foreign Corrupt Practices Act or similar anti-bribery legislation in other countries by agents or other third-party representatives;~~

~~risk of nationalization of private enterprises by foreign governments (including the risk that AMAK's mining and exploration leases may be terminated by the Saudi Ministry of Petroleum and Minerals);~~

~~foreign currency exchange restrictions and fluctuations;~~

~~difficulties associated with repatriating cash generated or held abroad in a tax-efficient manner and changes in tax laws; and~~

~~fluctuations in freight costs and disruptions in the transportation and shipping infrastructure at important geographic points of exit and entry for our products and shipments.~~

~~We may have additional tax liabilities, which may adversely affect our financial position.~~

We are subject to income taxes and state taxes in the U.S. Significant judgment is required in determining our provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different to that which is reflected in our consolidated financial statements. Should any tax authority take issue with our estimates, our results of operations, financial position and cash flows could be adversely affected.

The U.S. Tax Cuts and Jobs Act ("TCJA") was enacted on December 22, 2017, and introduces significant changes to U.S. income tax law. Accounting Standards Codification 740, Accounting for Income Taxes, requires companies to recognize the effects of tax law changes in the period of enactment. Effective in 2018, the TCJA made a number changes, such as reducing the U.S. statutory tax rate from 35% to 21%, creating new taxes on certain foreign sourced earnings and certain related-party payments, which are referred to as the global intangible low taxed income tax and the base erosion tax, respectively, establishing a dividends received deduction for dividends paid by foreign subsidiaries to the U.S., the elimination or limitation of certain deductions, and imposing a mandatory tax on previously unrepatriated earnings accumulated offshore. Due to the timing of the new tax law provided in the TCJA and the substantial changes it brings, the Staff of the SEC issued Staff Accounting Bulletin No. 118, which provides registrants with a measurement period to report the impact of the new US tax law. As a result, the recorded and estimated impacts of the TCJA may change in future periods, which may adversely affect our estimates, our results of operations, financial position and cash flows.

AMAK is also subject to various taxes in Saudi Arabia. While AMAK currently benefits from certain tax credits that reduce its overall tax liability, there can be no assurance that relevant tax authorities will continue to maintain such credits. In addition, there can be no assurances that future changes in tax law in Saudi Arabia will not result in increased tax liability to AMAK. A material increase in tax liability could have an adverse effect on AMAK's results of operations and financial condition, which may in turn have an adverse effect on our investment in AMAK.

~~We from time to time are subject to contingent liabilities. If any contingent liabilities become actual liabilities, our financial condition may be adversely affected.~~

We are subject to various contingent liabilities that may affect our liquidity and our ability to meet our obligations, including our limited corporate guarantee to SIDF in connection with AMAK's Loan to fund mining operations. To the extent any of our current or future contingent liabilities become actual liabilities, it may have an adverse effect on our financial condition.

~~We may be unable to recover our investment in AMAK, which could adversely affect our results of operations and financial condition.~~

We will only recover our investment in AMAK through the receipt of distributions or future share repurchases from AMAK or the sale of part or all of our interest in AMAK. If AMAK does not continue to be profitable, our ability to recover our investment will be adversely affected. Moreover, if AMAK continues to be profitable, there can be no assurance that the board of directors of AMAK will determine that it is in the best interests of AMAK and its shareholders to make distributions to its shareholders or to initiate additional share repurchases. In addition, we understand that AMAK is required to sell a portion of its equity to the public once AMAK has been profitable for two years. While the proceeds of such a sale might allow us to recover our investment in AMAK, there is no assurance that the market conditions for any such public sale will be favorable enough to allow us to recover our investment or that some or all of our shares in AMAK will be include in any such sale. To the extent we are unable to recover our investments in AMAK, our results of operations and financial condition may be adversely affected.

~~AMAK may have fewer mineral reserves than its estimates indicate.~~

Fluctuations in the price of commodities, variation in production costs or different recovery rates could result in AMAK's estimated reserves being revised in the future. If such a revision were to indicate a substantial reduction in proven or probable reserves at one or more of AMAK's projects, it could adversely affect our investment in AMAK.

~~Domestic or international terrorist attacks may disrupt our operations or otherwise have an adverse impact on our business.~~

It is possible that further acts of terrorism may be directed against the U.S. domestically or abroad, and such acts of terrorism could be directed against our investment in those locations. Moreover, chemical related assets, and U.S. corporations such as ours, may be at a greater risk of future terrorist attacks than other possible targets. The resulting damage from such an event could include loss of life, property damage or site closure. Any, or a combination, of these factors could adversely impact our results of operations, financial position and cash flows.

~~Increased information systems security threats and more sophisticated and targeted computer crime could pose a risk to our systems, networks, products and services.~~

Increased information systems security threats and more sophisticated, targeted computer crime pose a risk to the security of our systems and networks and the confidentiality, availability, and integrity of our data, operations, and communications. While we attempt to mitigate these risks by employing a number of measures, including security measures, employee training, comprehensive monitoring of our networks and systems, and maintenance of backup and protective systems, if these measures prove inadequate, we could be adversely affected by, among other things, loss or damage of intellectual property, proprietary and confidential information, and communications or customer data, having our business operations interrupted and increased costs to prevent, respond to, or mitigate these cyber security threats. Any significant disruption or slowdown of our systems could cause customers to cancel orders or standard business processes to become inefficient or ineffective, which could adversely affect our results of operations, financial position and cash flows.

Implementation of changes to our enterprise resource planning ("ERP") system may adversely affect our business and results of operations or the effectiveness of internal controls over financial reporting.

During 2017, we implemented a new ERP system at our specialty petrochemical facility in order to better manage our business, and we continue to implement additional improvements to the system. ERP implementations are complex and time-consuming projects that involve substantial expenditures on system software and implementation activities over a significant period of time. If we do not effectively implement changes to ERP system, or if the system does not operate as intended, it could adversely affect our financial reporting systems and our ability to produce financial reports, the effectiveness of internal controls over financial reporting (including our disclosure controls and procedures), and our business and results of operations.

~~Item~~ITEM 1B. Unresolved Staff Comments.

None.

~~Item~~ITEM 2. Properties.

~~United States~~ Specialty ~~Petrochemical~~Petrochemicals Facility

SHR owns and operates a specialty ~~petrochemical~~petrochemicals facility ~~near~~located in Silsbee, Texas ~~which is~~ approximately 30 miles north of Beaumont ~~Texas,~~ and 90 miles east of Houston. The base SHR facility consists of ~~eight~~five operating units which, while interconnected, make distinct products through ~~different~~differing processes: (i) a Penhex Unit; (ii) a ~~Reformer;~~Reformer Unit; (iii) a Cyclo-pentane Unit; (iv) an Advanced Reformer unit; and (v) an ~~Aromatics Hydrogenation Unit; (vi)~~Isomerization Unit. In addition to the base plant, SHR operates three proprietary chemical production facilities for toll processing customers. The Reformer Unit, the Advanced Reformer unit, and the Cyclo-Pentane Unit further process streams produced by the Penhex Unit.

Our present total capacity at our Silsbee facility is 13,000 barrels per day of fresh feed; however, our air permits limit us to a ~~White Oil Fractionation Unit; (vii)~~maximum processing rate of 11,000 barrels per day. During 2018, we constructed a ~~Hydrocarbon Processing Demonstration Unit, and (viii) a P-Xylene Unit. All of these units are currently in operation. Our new~~ 4,000 ~~barrel~~barrels per day Advanced Reformer unit ~~successfully re-started in December 2018. This unit will~~to increase our capability to upgrade by-products produced from the Penhex Unit and to provide security of hydrogen supply ~~for Penhex~~to the plant.

In support of the Specialty Petrochemicals segment, we own approximately 100 storage tanks with total capacity of approximately 294,000 barrels, and ~~custom processing projects as well as increase~~127 acres of land at the ~~value~~plant site, 107 acres of ~~our by-products.~~which are developed. We also own a truck and railroad loading terminal consisting of storage tanks, nine rail spurs, and truck and tank car loading facilities on approximately 63 acres of which 33 acres are developed.

GSPL owns and operates ~~three~~two 8-inch diameter pipelines and five 4-inch diameter pipelines, aggregating approximately 70 miles in length connecting ~~SHR's~~SHR’s facility to (1) a natural gas line, (2) ~~SHR's~~SHR’s truck and rail loading terminal and (3) a major petroleum products pipeline system owned by an unaffiliated third party. All pipelines are operated within Texas Railroad Commission and DOT regulations for maintenance and integrity.

~~United States~~ Specialty ~~Polyethylene Wax~~Waxes Facility

TC owns and operates a specialty ~~synthetic wax~~waxes facility from its 27.5 acre plant site located in Pasadena, Texas. ~~After the acquisition of the adjacent BASF facility ("B Plant") in 2016 the~~The plant contains several stainless steel reactors ranging in size from 3,300 to 16,000 gallons with overhead condensing systems, two 4,000 gallon glass line reactors, five Sandvik forming belts with pastillating capabilities, five high vacuum wiped film evaporators varying in size from 12 to 20 m², steel batch column with 10,000 gallon still pot and 20 theoretical stages of structured packing. This plant has the ability to crystallize and recover solids from the crystallization process. There are also three fully equipped, ~~laboratories onsite.~~on-site laboratories. With a base product offering of polyethylene waxes, TC is well suited to manage high molecular weight materials that must be managed in the molten state. TC offers pastillating for waxes, polymers and resins, flaking capabilities, as well as solids packaging services.

Table of Contents

In 2017, TC expanded its processing capabilities with the start-up of the hydrogenation/distillation unit. This ~~$25~~approximately $29 million investment provides ~~TC's customers~~TC with state-of-the-art distillation and high-pressure hydrogenation capabilities. During ~~2018,~~2019, TC ~~experienced~~continued to experience issues with the reliable operation of this unit in accordance with its design specifications. ~~Efforts are underway to implement~~Toward the end of 2019 we completed a number of design corrections and ~~fixes~~other modifications including changes to operating procedures and operator training in order to improve the ~~unit's capability and~~unit’s operational reliability. ~~TC offers pastillating for waxes, polymers and resins, flaking capabilities, as well as solids packaging services.~~

~~Investment in AMAK~~

~~As of December 31, 2018, we owned a 33% interest in AMAK.~~

Prior to December 2008, we held a thirty year mining lease (which commenced on May 22, 1993) covering an approximate 44 square kilometer area in Najran Province in southwestern Saudi Arabia. The lease carried an option to renew or extend the termWhile operational reliability of the ~~lease for additional periods~~unit has improved, its performance did not ~~to exceed twenty years. The lease and other related assets located in Saudi Arabia were contributed to AMAK in December 2008. The above-ground ore processing facility became~~ fully operational during the second half of 2012. Late in the fourth quarter of 2015 AMAK temporarily closed the operation to preserve the assets in the ground while initiating steps to improve efficiencies and optimize operations. The facility resumed operation in the fourth quarter of 2016 and operating rates, metal recoveries and concentrate quality continued to improve steadily throughout 2017 and 2018.meet design specifications.

AMAK shipped approximately 58,000, 28,000, and 51,000 metric tons of copper and zinc concentrate to outside smelters during 2018, 2017 and 2016, respectively. In 2014 AMAK initiated operation of its precious metal recovery circuit at the mill and produced gold and silver doré intermittently through 2014 and 2015. The precious metals circuit was recommissioned in fourth quarter of 2017 and produced commercial quantities of gold and silver bearing doré in 2018.

The facility includes an underground mine, ore-treatment plant and related infrastructures. The ore-treatment plant is comprised of primary crushing, ore storage, SAG milling and pebble crushing, secondary ball milling, pre-flotation, copper and zinc flotation, concentrate thickening, tailings filtration, cyanide leaching, reagent handling, tailings dam and utilities. Related infrastructure includes a 300 men capacity camp for single status accommodation for expatriates and Saudi employees, an on-site medical facility, a service building for 300 employees, on-site diesel generation of 10 megawatts, potable water supply, sewage treatment plant and an assay laboratory. The facilities at the Port of Jazan are comprised of unloading facilities, concentrate storage and reclamation and ship loading facilities.

Metal price assumptions follow SEC guidance not to exceed a three year trailing average. The following chart illustrates the change in metal prices from the previous three year average to current levels:

Average Price
For 2016-2018

Spot Price as of
12/31/18

Percentage
Increase (Decrease)

Gold per ounce $ 1,258.20
$ 1,279.00
(1.65 )%
Silver per ounce $ 16.62
$ 15.47
6.95 %
Copper per pound $ 2.93
$ 2.98
(5.78 )%
Zinc per pound $ 1.32
$ 1.25
4.82 %

Three mineralized zones, the Saadah, Al Houra and Moyeath, were outlined by initial diamond drilling. Based on the original 1994 WGM feasibility study as updated in 1996, 2005 and 2009 the following tables set forth a summary of the diluted recoverable, proven and probable mineralized materials of AMAK in the Al Masane area along with the estimated average grades of these mineralized materials as adjusted to reflect production that began in July 2012:

Zone
Proven Reserves
(Mtonnes)

Copper
(%)

Zinc
(%)

Gold
(g/t)

Silver
(g/t)

Saadah 0.45
1.5
3.7
0.8
21.0
Al Houra 0.03
0.8
3.8
0.7
21.0
Moyeath —
—
—
—
—
Total 0.48
1.4
3.7
0.8
21.0

Zone
Probable Reserves
(Mtonnes)

Copper
(%)

Zinc
(%)

Gold
(g/t)

Silver
(g/t)

Saadah 5.19
1.2
3.4
0.8
23.0
Al Houra 1.90
0.9
3.8
1.2
39.0
Moyeath 0.70
0.8
7.2
1.0
55.0
Total 7.79
1.1
3.9
0.9
29.0

Total proven and probable reserves 8.27

Less production through December 31, 2018 3.37

Remaining proven and probable reserves 4.90

For purposes of calculating proven and probable mineralized materials, a dilution of 5% at zero grade on the Saadah zone and 15% at zero grade on the Al Houra and Moyeath zones was assumed. A mining recovery of 80% was used for the Saadah zone and 88% for the Al Houra and Moyeath zones. Mining dilution is the amount of wall-rock adjacent to the ore body that is included in the ore extraction process. Base case cutoffs used were 5.0% zinc equivalent. Ore reserves were estimated using metal prices of USD $0.85 per pound for zinc, $2.50 per pound for copper, $800 per ounce for gold and $12.0 per ounce for silver.

Our rights to obtain additional mining licenses to other adjoining areas were also transferred to AMAK in December 2008 as part of our initial capital contribution. AMAK received formal approval in November 2015 of an additional 151 km² ~~or 37,313 acres of territory relatively close to the current mine. The new territory comprises the Guyan and Qatan exploration licenses covering 151 km~~² ~~and within the Guyan exploration license, a 10 km~~² or 2,471 acre mining lease which has potential for significant gold recovery. Some exploration holes were drilled in both Guyan and Qatan up to 40 years ago, but no reserves were attributed to these areas. Exploration activities were restarted in both of these areas during 2016, and SRK Consulting prepared a JORC compliant report in May 2017 showing approximately 99,000 ounces at the Jebel Guyan zone excluding other nearby prospects. The diamond drilling program continues at both the Jebel Guyan and Al Aqiq zones, testing depth and extension of mineralization with confirmed mineralization intersected at an additional 50 meters depth the Guyan zone. A JORC compliant reserve update is currently being studied by Mining One (Australia).

~~Historic three-year average commodity prices are shown in the following table:~~

Average Price in USD
2014-2016
2015-2017
2016-2018
Gold per ounce $ 1,224.96
$ 1,222.06
$ 1,258.20
Silver per ounce $ 17.29
$ 16.62
$ 16.62
Copper per pound $ 2.60
$ 2.50
$ 2.93
Zinc per pound $ 0.94
$ 1.05
$ 1.32

Proven mineralized materials are those mineral deposits for which quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, and grade is computed from results of detailed sampling. For ore deposits to be proven, the sites for inspection, sampling and measurement must be spaced so closely and the geologic character must be so well defined that the size, shape, depth and mineral content of reserves are well established. Probable mineralized materials are those for which quantity and grade are computed from information similar to that used for proven mineralized materials, but the sites for inspection, sampling

and measurement are farther apart or are otherwise less adequately spaced. However, the degree of assurance, although lower than that for proven mineralized materials, must be high enough to assume continuity between points of observation.

The metallurgical studies conducted on the ore samples taken from the zones indicated that 84.7% of the copper and 78.0% of the zinc could be recovered in copper and zinc concentrates. Overall, gold and silver recovery from the ore was estimated to be 77.3% and 81.3%, respectively, partly into copper concentrate and partly as bullion through cyanide processing of zinc concentrates and mine tailings. Further studies recommended by consultants may improve those recoveries and thus the potential profitability of the project; however, there can be no assurances of this effect.

AMAK contracted with SRK Consulting for a reserves update in 2017 and SRK reported JORC compliant reserves in August 2017. The SRK reserves estimate has since been updated by AMAK resource geologist (Qualified Person - QP as defined in JORC Code) in January 2018 and February 2019 with additional drill-hole data (85 holes and 8,970 meters in 2017 and 91 holes and 9,134 meters in 2018) and more comprehensive geological information from actual mining fronts. AMAK's JORC Compliant Reserves (January 2019) are given below:

Ore Reserves (Probable+Proven)
Zone
(Tonnes)
(Mtonnes)

Copper
(%)

Zinc
(%)

Gold
(g/t)

Silver
(g/t)

Saadah 2.8
0.98
3.39
0.74
25.43
Al Houra 2.8
0.83
3.34
0.90
26.40
Moyeath 0.80
0.77
6.53
0.61
41.61
Total 6.4
0.89
3.78
0.79
27.87

~~Ore reserves were estimated using metal prices of USD $1.11 per pound for zinc, $2.50 per pound for copper, $1,200 per ounce for gold and $15.00 per ounce for silver.~~

~~Mineable (recoverable) reserves include:~~

~~20% sidewall dilution in the stope production~~

~~0.07Mt surface stockpiles~~

~~Mineable (recoverable) reserves exclude:~~

~~Mining of any mineralization less than mineable width of 1.0m~~

~~Sill Pillar (which was previously included). Technically, it is not mineable with current underground infrastructure and backfilling practices, so this pillar (0.6Mt) excluded from Reserves~~

~~All of the Moyeath orebody since it is categorized as Inferred~~

~~Any low grade (CuEq<1.01%) material (0.4Mt) which has to mined out and stored separately~~

The updated reserves reflect a 1.5M tonnes increase to the MRE of January 2018, due to additional drilling at Moyeath and Saadah orebodies. The depth of three orebodies are not tested yet and underground drilling will continue in 2019 and coming years to extend the orebody at depth.

Access and all mine services already exist at the Moyeath orebody and AMAK recently started ore mining in the last quarter of 2018. In 2019, AMAK estimates that approximately 50,000 tonnes will be mined out from Moyeath orebody. A drilling program of 8,000 meters (8 months) has been completed at Moyeath, which upgraded 0.8M tonnes of inferred class to indicated class, which eventually mine designed and included in the life of mine schedule. AMAK believes that the Moyeath orebody is high grade for zinc and average grade as a copper. AMAK believes that Moyeath is the most attractive opportunity for an extended life and higher zinc metal recovery through the life of mine.

The metallurgical recoveries are assumed as 83% for copper and 75% for zinc after 2019. Actual metal recoveries in 2018 increased throughout the year so that these recovery assumptions are realistic and in line with actual performance of the process plant.

~~The following table sets forth tonnage mined historically with average assay values per year:~~

Year Mine Head Grade Mill Throughput
%Cu
%Zn
dmt
2011 1.26
3.02
9,460
2012 1.18
3.39
399,892
2013 1.48
3.19
699,316
2014 1.22
3.15
670,812
2015 1.11
3.69
591,419
2016 —
—
—
2017 1.10
3.22
385,495
2018 1.10
3.27
699,885

~~The following table sets forth tonnage milled with average assay values and metallurgical recoveries per year:~~

Year Copper Concentrate Zinc Concentrate
dmt
%Cu
%Zn
Recovery
dmt
%Zn
%Cu
Recovery
2011 443
16.51
7.51
61.64
377
40.69
3.56
53.64
2012 15,944
23.91
5.46
80.62
20,738
50.03
1.16
76.54
2013 35,140
25.20
4.73
85.68
33,460
49.82
0.83
74.62
2014 28,476
24.20
4.31
84.24
31,600
51.02
0.70
76.26
2015 24,218
22.70
5.13
84.12
35,447
48.46
0.62
78.63
2016 —
—
—
—
—
—
—
—
2017 15,492
19.10
6.20
72.80
16,544
47.20
1.10
63.40
2018 27,508
22.59
5.25
80.78
33,735
49.36
1.27
72.73

~~The following table sets forth tonnage sold with concentrate assay values and value received per year:~~

Year Copper Concentrate Zinc Concentrate

dmt

%Cu

Value received
(in USD millions)

dmt

%Zn

Value received
(in USD millions)

2011 —
—
—
—
—
—
2012 5,488
23.51
$ 6.9
15,193
47.53
$ 8.7
2013 35,908
23.86
$ 80.8
38,430
47.79
$ 24.2
2014 25,691
24.20
$ 42.3
29,326
50.52
$ 21.0
2015 26,378
23.50
$ 34.6
24,547
49.68
$ 16.0
2016 —
—
—
15,845
48.28
$ 9.5
2017 13,940
19.00
$ 17.3
14,080
47.80
$ 16.9
2018 26,286
22.89
$ 37.9
31,272
48.13
$ 29.1

~~United States~~ Mineral Interest

Our only mineral interest ~~in the United States~~ is ~~its~~our ownership interest in PEVM. See Item 1 – Business – ~~United States~~ Mineral Interests.

Offices

Outside of the facilities that we own, SHR has a leased corporate and sales office in Sugar Land, Texas.

~~Item~~ITEM 3. Legal Proceedings.

The Company is periodically named in legal actions arising from normal business activities. We evaluate the merits of these actions and, if we determine that an unfavorable outcome is probable and can be reasonably estimated, we will establish the necessary reserves. We are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect

on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.

~~Item~~ITEM 4. Mine Safety Disclosures.

Not applicable.

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PART II

~~Item~~ITEM 5. Market for ~~Registrant's~~Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.

Our common stock traded on the New York Stock Exchange ~~("NYSE"~~(“NYSE”) under the symbol ~~"TREC".~~“TREC."

~~At March 4, 2019,~~As of February 26, 2021, there were approximately ~~535~~427 recorded holders (including brokers' accounts) of the ~~Company's~~Company’s common stock. We have not paid any dividends since our inception and have instead deployed earnings to fund the development of our business. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital expenditure requirements, restrictions contained in current and future financing instruments, and other factors that our board of directors deems relevant. In addition, our ability to pay dividends depends in part on our receipt of cash dividends and distributions from our subsidiaries. The terms of certain of our current debt instruments restrict the ability of our subsidiaries to pay dividends, as may the terms of any of our future debt or preferred securities.

Total Stockholder Return

The following graph compares the cumulative total stockholder return on our common stock against the NYSE Composite Index and the S&P Specialty Chemical Index, for the five years ending December 31, ~~2018.~~2020. The graph was constructed on the assumption that $100 was invested in our common stock and each comparative on December 31, ~~2013,~~2015, and that any dividends were fully reinvested.

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~~Item~~ITEM 6. Selected Financial Data.

The following is a five-year summary of selected financial data for years ended December 31 (in thousands, except per share amounts) and should be read in conjunction with the information set forth in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Part II, Item 8. Financial Statements and Supplementary ~~Data:~~Data. As a result of the sale of our ownership interest in AMAK, which was completed in September 2020, AMAK’s historical financial results are reflected in our Consolidated Financial Statements as discontinued operations for all periods presented below. See additional information related to the sale of the Company’s investment in AMAK in Note 6 to the Consolidated Financial Statements.


	2020		2019		2018		2017		2016
	(thousands of dollars, except per share information)
Revenues	$	208,626	$	258,959	$	287,932	$	245,143	$	212,399

Income (loss) from continuing operations	4,966		(12,884)		(1,728)		21,512		17,559
Income (loss) from discontinued operations, net of tax	26,209		(2,090)		(604)		(3,503)		1,869
Net income (loss)	31,175		(14,974)		(2,332)		18,009		19,428

Basic income (loss) per common share:
Income (loss) from continuing operations (dollars)	0.20		(0.52)		(0.07)		0.89		0.72
Income (loss) from discontinued operations, net of tax (dollars)	1.06		(0.08)		(0.02)		(0.14)		0.08
Net income (loss) (dollars)	1.26		(0.61)		(0.10)		0.74		0.80

Diluted income (loss) per common share:
Income (loss) from continuing operations (dollars)	0.20		(0.52)		(0.07)		0.86		0.70
Income (loss) from discontinued operations, net of tax (dollars)	1.03		(0.08)		(0.02)		(0.14)		0.07
Net income (loss) (dollars)	1.23		(0.61)		(0.10)		(0.72)		0.78

EBITDA from continuing operations (1)	19,642		4,890		16,084		29,176		40,310
Adjusted EBITDA from continuing operations (1)	21,593		31,041		20,168		31,880		31,313
Total Assets	316,833		301,819		329,968		327,326		290,484
Current portion of long-term debt	4,194		4,194		4,194		8,061		10,145
Total long-term debt obligations	41,901		79,095		98,288		91,021		73,107

2018
2017
2016
2015
2014
Revenues $ 287,932
$ 245,143
$ 212,399
$ 241,976
$ 289,643
Net (Loss) Income (2,332 ) 18,009
19,428
18,598
15,571
Net (Loss) Income Per Share-Basic (0.10 ) 0.74
0.80
0.76
0.64
Net (Loss) Income Per Share-Diluted (0.10 ) 0.72
0.78
0.74
0.63
EBITDA (1) 15,319
24,742
41,694
39,639
29,814
Adjusted EBITDA (1) 20,619
31,710
31,008
47,317
33,027
Total Assets 329,968
327,326
290,484
257,791
230,782
Current Portion of Long-Term Debt 4,194
8,061
10,145
8,061
6,728
Total Long-Term Debt Obligations 98,288
91,021
73,107
73,169
72,430


~~(1)~~	Non-GAAP financial measure. See the information under the heading "Non-GAAP Financial Measures" below for additional information about this measures and a reconciliation to the most directly comparable financial measure under United States generally accepted accounting principles (“GAAP”).

(1)Non-GAAP financial measure. See the information under the heading “Non-GAAP Financial Measures" below for additional information about this measures and a reconciliation to the most directly comparable financial measure under United States generally accepted accounting principles (“GAAP”).

Non-GAAP Financial Measures

We include in this Annual Report on Form 10-K the non-GAAP financial measures of EBITDA from continuing operations and Adjusted EBITDA ~~and Adjusted Net Income (Loss)~~from continuing operations and provide reconciliations from our most directly comparable GAAP financial measure to those measures.

We believe these financial measures provide users of our financial statements with supplemental information that may be useful in evaluating our operating performance. We also believe that such ~~non–GAAP~~non-GAAP measures, when read in conjunction with our operating results presented under GAAP, can be used to better assess our performance from period to period and relative to performance of other companies in our industry, without regard to financing methods, historical cost basis or capital structure. These measures are not measures of financial performance or liquidity under GAAP and should be considered in addition to, and not as a substitute for, analysis of our results under GAAP.

~~EBITDA and Adjusted EBITDA:~~ We define EBITDA from continuing operations as net income (loss) from continuing operations plus interest expense, ~~(benefit) including derivative gains and losses,~~ income ~~taxes,~~tax expense (benefit), depreciation and amortization. We define Adjusted EBITDA from continuing operations as EBITDA from continuing operations plus share–based compensation, plus restructuring and severance expenses, plus impairment losses ~~on extinguishment of debt, plus or minus equity in AMAK's earnings and losses or gains from equity issuances,~~ and plus or minus gains or losses on ~~acquisitions.~~disposal of assets.

Adjusted Net Income (Loss): We define Adjusted Net Income (Loss) as net income (loss) plus or minus tax effected equity in AMAK's earnings and losses, minus tax effected restructuring and severance expenses, and adjustments for tax law changes in 2017.

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The following table presents a reconciliation of net income (loss), our most directly comparable GAAP financial performance measure for each of the periods presented, to EBITDA from continuing operations and Adjusted EBITDA ~~and Adjusted Net Income.~~from continuing operations.


	2020		2019		2018		2017		2016
Net income (loss)	$	31,175	$	(14,974)	$	(2,332)	$	18,009	$	19,428
Income (loss) from discontinued operations, net of tax	26,209		(2,090)		(604)		(3,503)		1,869
Income (loss) from continuing operations	4,966		(12,884)		(1,728)		21,512		17,559

Interest expense	2,491		5,139		4,100		2,931		1,981
Derivative (gains) losses on interest rate swap	—		—		—		(3)		4
Depreciation and amortization	16,148		16,201		14,358		10,961		9,777
Income tax (benefit) expense*	(3,963)		(3,566)		(646)		(6,228)		10,989
EBITDA from continuing operations	19,642		4,890		16,084		29,173		40,310

Share-based compensation**	1,912		1,319		1,422		2,707		2,552
Loss on disposal of assets	39		680		—		—		—
Impairment of goodwill and certain intangibles	—		24,152		—		—		—
Bargain purchase gain	—		—		—		—		(11,549)
Loss on extinguishment of debt	—		—		315		—		—
Restructuring and severance expenses	—		—		2,347		—		—
Adjusted EBITDA from continuing operations	$	21,593	$	31,041	$	20,168	$	31,880	$	31,313

2018
2017
2016
2015
2014
Net (Loss) Income $ (2,332 ) $ 18,009
$ 19,428
$ 18,598
$ 15,571

Interest expense 4,100
2,934
1,981
2,232
1,042
Derivative (gains) losses on interest rate swap —
(3 ) 4
(15 ) 378
Depreciation and amortization 14,358
10,961
9,777
9,060
5,676
Income tax (benefit) expense (807 ) (7,159 ) 10,504
9,764
7,147
EBITDA 15,319

24,742

41,694

39,639

29,814

Share-based compensation* 1,422
2,707
2,552
2,353
2,141
Bargain purchase gain on B Plant —
—
(11,549 ) —
—
Equity in losses of AMAK 901
4,261
1,479
5,325
1,072
Loss on extinguishment of debt 315
—
—
—
—
Restructuring and severance expenses 2,347
—
—
—
—
Gain from additional equity issuance by AMAK —
—
(3,168 ) —
—
Adjusted EBITDA $ 20,304

$ 31,710

$ 31,008

$ 47,317

$ 33,027

Net Income $ (2,332 ) $ 18,009
$ 19,428
$ 18,598
$ 15,571

Bargain purchase gain on B Plant —
—
(11,549 ) —
—
Equity in (earnings) losses of AMAK 901
4,261
1,479
5,325
1,072
Restructuring and severance expenses 2,347
—
—
—
—
Gain from additional equity issuance by AMAK —
—
(3,168 ) —
—
Total of adjustments 3,248
4,261
(13,238 ) 5,325
1,072
Taxes at statutory rate** (682 ) (895 ) 4,633
(1,864 ) (375 )
Tax effected adjustments 2,566

3,366

(8,605 )
3,461

697
Tax benefit of rate change from Tax Cuts and Jobs Act —
(10,307 ) —
—
—
Adjusted Net Income $ 234
$ 11,068
$ 10,823
$ 22,059
$ 16,268

* Reduced to reflect amount included in Restructuring and Severance Expenses.

** The Company used a statutory rate of 35% for ~~2014 through~~ 2016. For 2017 ~~and 2018~~through 2020 the Company estimated current taxable income to be zero and calculated deferred taxes using a statutory rate of 21% based on the enacted tax ~~rate on December 22, 2017 (Note~~rate. (See Notes 2 and ~~16)~~16 to the Consolidated Financial Statements).

** Reduced to reflect amount included in Restructuring and severance expenses.

~~Item~~ITEM 7. ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.

~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with Item 8. Financial Statements and Supplementary Data.

Forward Looking Statements

Some of the statements and information contained in this Annual Report on Form 10-K may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements regarding the ~~Company's~~Company’s financial position, business strategy and plans and objectives of the ~~Company's~~Company’s management for future operations and other statements that are not historical facts, are forward-looking statements. Forward-looking statements are often characterized by the use of words such as ~~"outlook," "may," "will," "should," "could," "expects," "plans," "anticipates," "contemplates," "proposes," "believes," "estimates," "predicts," "projects," "potential," "continue," "intend,"~~“outlook,” “may,” “will,” “can,” “shall,” “should,” “could,” “expects,” “plans,” “anticipates,” “contemplates,” “proposes,” “believes,” “estimates,” “predicts,” “projects,” “potential,” “continue,” “intend,” or the negative of such terms and other comparable terminology, or by discussions of strategy, plans or intentions.

Forward-looking statements ~~are subject to~~involve known and unknown risks, uncertainties, assumptions, and other important factors that could cause the actual results, performance or our achievements, or industry results, to differ materially from ~~those~~historical results, any future results, or performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and factors include, but are not limited ~~to:~~to the impacts of the COVID-19 pandemic on our business, financial results and financial condition and that of our customers, suppliers, and other counterparties; general economic and financial conditions domestically and internationally; insufficient cash flows from operating activities; ~~difficulties in obtaining financing;~~our ability to attract and retain key employees; feedstock, and product prices; feedstock availability and our ability to access third party transportation; competition; industry cycles; natural disasters or other severe weather events, health epidemics and pandemics (including the COVID-19 pandemic) and terrorist attacks; our ability to consummate extraordinary transactions, including acquisitions and dispositions, and realize the financial and strategic goals of such transactions; technological developments and our ability to maintain, expand and upgrade our facilities; regulatory changes; environmental matters; lawsuits; outstanding debt and other financial and legal ~~obligations; lawsuits; competition; industry cycles; feedstock, product~~obligations (including having to return the amounts borrowed under the PPP Loans or failing to qualify for forgiveness of such loans, in whole or in part); difficulties in obtaining additional financing on favorable conditions, or at all; local business risks in foreign countries, including civil unrest and ~~mineral prices; feedstock availability; technological developments;~~military or political conflict, local regulatory ~~changes; environmental matters; foreign government instability; foreign~~and legal

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environments and ~~political concepts;~~ foreign currency fluctuations; and other risks detailed in ~~this report under the headings~~ Part I, Item 1A. Risk Factors and Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations therein, and in our other filings with the SEC. Many of these risks and uncertainties are currently amplified by and will continue to be amplified by, or in the future may be amplified by, the COVID-19 pandemic and other natural disasters such as severe weather events.

There may be other factors of which we are currently unaware or deem immaterial that may cause our actual results to differ materially from the forward-looking statements. In addition, to the extent any inconsistency or conflict exists between the information included in this report and the information included in our prior releases, reports and other filings with the SEC, the information contained in this report updates and supersedes such information.

Forward-looking statements are based on current plans, estimates, assumptions and projections, and, therefore, you should not place undue reliance on them. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new information or future events.

Overview

The following discussion and analysis of our financial results, as well as the accompanying ~~consolidated financial statements~~Consolidated Financial Statements and related notes to ~~consolidated financial statements~~Consolidated Financial Statements to which they refer, are the responsibility of ~~the management of the Company.~~our management. Our accounting and financial reporting fairly reflect our business model ~~involving~~which is based on the manufacturing and marketing of specialty ~~petrochemical~~petrochemicals products and ~~specialty waxes. Our business model involves the manufacture and sale of tangible products~~waxes and providing custom ~~processing~~manufacturing services.

Our ~~consistent~~preferred supplier position into the specialty petrochemicals market is derived from the combination of our reputation as a reliable supplier established over many years, the very high purity of our products, and a focused approach to ~~providing high purity products and quality services~~customer service. In specialty waxes, we are able to deliver to our customers ~~has helped~~a product performance and price point that we believe is unique to ~~sustain~~ our ~~current position as~~market; while the diversity of our custom processing assets and capabilities offers solutions to our customers that we believe are uncommon along the U.S. Gulf Coast.

Enabling our success in these businesses is a ~~preferred supplier~~commitment to operational excellence which establishes a culture that prioritizes the safety of ~~various specialty petrochemical products.~~our employees and communities in which we operate, the integrity of our assets and regulatory compliance. This commitment drives a change to an emphasis on forward-looking, leading-indicators of our results and proactive steps to continuously improve our performance. We bring the same commitment to excellence to our commercial activities where we focus on the value proposition to our customers while understanding opportunities to maximize our value capture through service and product differentiation, supply chain and operating cost efficiencies and diversified supply options. We believe our focus on execution, meeting the needs of our customers, and growing our business while maintaining prudent control of our costs, will significantly contribute to enhanced shareholder value.

Business Environment and Risk Assessment

We believe we are well-positioned to participate in the US chemical industry growth driven by new investments and overall economic growth. While petrochemical prices are volatile on a short-term basis and depend on the demand of our customers' products, our investment decisions are based on our long-term business outlook using a disciplined approach in selecting and pursuing the most attractive investment opportunities.

The global impact of COVID-19 has resulted in various emergency measures to curb the spread of the virus. We continue to monitor the progression of the COVID-19 pandemic on a daily basis. Our guiding principle is, and has always been, the protection of our people and the communities in which we work, as well as maintaining the overall integrity of our assets. While our essential plant personnel remain on-site, many of our other employees are working remotely. We are continuing to follow the orders and guidance of federal, state, and local governmental agencies, as we maintain our own stringent protocols in an effort to mitigate the spread of the virus and protect the health of our employees, customers, and suppliers as well as the communities in which we work. As an organization, we adopted social distancing behaviors early, executed the necessary changes to enable all possible job duties to be performed remotely and rapidly identified and executed the necessary adjustments to support optimal productivity for all remote workers.

To date, our plants have continued to operate as normal, and our supply chain has generally remained intact, with adequate availability of raw materials. Importantly, under the U.S. Department of Homeland Security guidance issued on April 17, 2020 as updated through August 18, 2020, as well as many related state and local governmental orders, chemical manufacturing sites are considered essential critical infrastructure, and as such, are not currently subject to closure in the locations where we operate. Although there has been some disruption in global logistics channels, we have not experienced significant delays in fulfillment of customer orders.

The COVID-19 pandemic has had an impact on our business, results of operations, financial position and liquidity for the year ended December 31, 2020. In comparison to 2019, we saw reduced demand for our products and services in certain end markets, including durable goods such as automotive and construction, which we attribute to the economic slowdown caused by

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the COVID-19 pandemic. This weakened demand in certain end markets is likely to continue into 2021, and could spread more broadly to our other end markets.

Our management will continue to actively monitor the impact of the global pandemic on our business, results of operations, financial condition, liquidity, suppliers, industry, investments, and workforce. We do not currently anticipate any material impairments, with respect to intangible assets, long–lived assets, or right of use assets, increases in allowances for credit losses from our customers, restructuring charges, other expenses, or changes in accounting judgments to have a material impact on our Consolidated Financial Statements.

Specialty ~~Petrochemical Operations~~Petrochemicals Segment

~~SHR's worldwide~~SHR’s specialty ~~petrochemical demand increased during 2018~~petrochemicals sales decreased in 2020 compared to ~~2017.~~2019. Product sales revenue ~~increased 19.3%~~decreased 23.6% driven ~~primarily~~ by volume ~~growth~~decline of ~~7.6%. Overall product prices also increased compared to 2017~~11.4%, primarily due to ~~higher feedstock costs~~the impact of COVID-19 on our customers and end markets. Product prices were lower in ~~2018~~2020 compared to ~~2017. We~~2019 primarily due to lower feedstock costs. During 2020, SHR continued to emphasize our competitive advantages achieved through our high quality products and outstanding customer service and responsiveness. We ~~are~~ also ~~focused on~~continued to make strides in improving ~~operations~~safety and plant reliability.

During ~~2018~~2020, natural gasoline feedstock ~~prices~~costs were ~~about 24%, or $0.28 per gallon, higher~~approximately 27% lower than ~~2017~~2019, reflecting ~~higher~~lower crude oil prices. ~~After steadily increasing for most of 2018 feedstock prices declined sharply in the fourth quarter of 2018. About 60%~~Approximately 65% of our prime products are sold under formula pricing whereby feedstock ~~costs are~~price is passed along to the customer typically with a one month lag. ~~Thus, when~~Falling feedstock ~~prices start rising, we experience lower margins as formula pricing lags feedstock costs. During most~~costs during the first half of ~~2018~~2020 assisted prime products margins ~~were pressured~~while we saw a narrowing of margins in the second half of 2020 due to rising feedstock ~~costs and as a result of greater competitive pricing pressure on prime products sales that are based on non-formula pricing.~~costs. Our ~~byproduct~~by-product margins were ~~under pressure in the fourth quarter~~materially lower compared to 2019 due to ~~the Advanced Reformer outage~~lower by-product component prices.

Specialty Waxes Segment

Sales revenues for our specialty waxes business increased approximately 4.7% in 2020 from 2019 as we ~~sold byproducts~~had higher wax product revenues and higher custom processing revenues. The increase in revenues was due to an increase in wax feed supply as compared to 2019, where wax feed supply disruptions were impacted due to operating issues at ~~prices below the cost~~our wax feed suppliers.

Our Specialty Waxes products are used in a variety of ~~feedstock.~~

~~Specialty Wax Operations~~

~~Most wax markets are mature. Key~~ applications including: performance additives for ~~our polyethylene waxes are in~~ hot melt ~~adhesives ("HMA"), plastic~~adhesives; penetration and melting point modifiers for paraffin and microcrystalline waxes; lubrication and processing aides for plastics, PVC, ~~lubricants~~rubber, and ~~inks, paints and coatings, where they act as surface or rheology modifiers. The HMA market is expected to grow at a higher rate than GDP growth due to growth~~dry stir-in additives for inks. In oxidized forms, applications also include use in the developing markets and increases in packaging requirements due to changes in consumer purchasing (shift to home deliveries via the internet) in developed economies. Road marking paints are also expected to grow at rates exceeding GDP growth based upon an expectation that there will be infrastructure investment in the U.S. The PVC market is expected to grow at GDP rates; however, we expect to get more traction of our products within this market with acceptance of our new PVC grade waxes. The global wax market is benefiting from the reduction of paraffin wax availability from large refiners as they move toward more hydrocracking and hydroisomerization to produce group III lube oils and distillate. Our wax sales volume increased approximately 5% in 2018 from 2017 while revenues increased approximately 13%.

textile emulsions.

Restructuring and Severance Impact

During 2018, the Company incurred restructuring and severance expenses of $2.3 million which ~~are~~were included in General and Administrative Expenses. These expenses ~~are~~were primarily attributable to the termination of certain executives during 2018 as part of the restructuring of executive management and to the reduction in the workforce at our Silsbee, Texas facility in December 2018. These expenses ~~relate~~related to severance, stock compensation for continued vesting of time-vested shares issued under the ~~Company's~~Company’s long-term incentive plan, and certain employee benefits including medical insurance and vacation. As of December 31, ~~2018, approximately $1.1~~2019, there was less than $0.1 million ~~had been incurred, and an additional liability~~remaining for accrued restructuring related liabilities. As of ~~$1.2 million was accrued~~December 31, 2020, there were no remaining liabilities related to ~~future benefits.~~restructuring and severance.

~~Hurricane Harvey Impact~~

The financial impact of Hurricane Harvey to our company was significant. Harvey made landfall on the Texas Gulf Coast on August 25, 2017, and affected operations at both SHR and TC. We estimated the total negative impact to 2017 EBITDA ranged from approximately $1.5 million to $1.8 million. This included expenses related to generator rentals, overtime labor, and maintenance and repairs of approximately $0.7 million. This estimate also included lost sales due to outages at customer and supplier facilities. Neither of our facilities suffered any significant damage.

Liquidity and Capital Resources

Working Capital

Our approximate working capital days are summarized as follows:


	December 31, 2018	December 31, 2017	December 31, 2016		December 31, 2020	December 31, 2019	December 31, 2018
Days sales outstanding in accounts receivable	34.4	38.4	38.2	Days sales outstanding in accounts receivable	40.0	37.1	34.4
Days sales outstanding in inventory	21.0	27.5	30.2	Days sales outstanding in inventory	20.5	19.2	21.0
Days sales outstanding in accounts payable	24.2	27.3	22.9	Days sales outstanding in accounts payable	22.9	20.6	24.2
Days of working capital	31.1	38.5	45.5	Days of working capital	37.7	35.7	31.1

Table of ~~this Item 15~~Contents


~~(c)~~	~~Financial Statement Schedules~~

~~See (a) 2 of this Item 15~~

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


		TRECORA RESOURCES

		~~TRECORA RESOURCES~~

Dated: March ~~15, 2019~~09, 2021	By:		/s/ Patrick Quarles
				Patrick Quarles
				Chief Executive Officer and President

KNOW ALL MEN BY THESE PRESENTS that each of the undersigned directors and officers of Trecora Resources hereby constitutes and appoints Patrick Quarles and Sami Ahmad his or her true and lawful attorney-in-fact and agent, for him or her and in his or her name, place and stead, in any and all capacities, with full power to act alone, to sign any and all amendments to this Report, and to file each such amendment to the Report, with all exhibits thereto, and any and all other documents in connection therewith, with the Securities and Exchange Commission, hereby granting unto said attorney-in-fact and agent full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant in the capacities indicated on March ~~15, 2019.~~

9, 2021.



Signature			Title
/s/ Patrick Quarles Patrick Quarles			Chief Executive Officer, President and ~~President~~ Director (principal executive officer)
/s/ Sami Ahmad Sami Ahmad			Chief Financial Officer ~~(principal~~ (principal financial officer)
/s/ Christopher Groves Christopher Groves			Corporate Controller ~~(principal~~ (principal accounting officer)
/s/ Karen A. Twitchell Karen A. Twitchell			Chair of the Board and Director
/s/ Gary K. Adams Gary K. Adams			Director
/s/ Pamela R. Butcher Pamela R. Butcher			Director
/s/ Nicholas Carter Nicholas Carter			Director
/s/ ~~Joseph P. Palm~~Adam C. Peakes ~~Joseph P. Palm~~Adam C. Peakes			Director
/s/ Janet S. Roemer Janet S. Roemer			Director

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INDEX TO FINANCIAL STATEMENTS			Page
Report of Independent Registered Public Accounting Firm			F-~~F-2~~2

Consolidated Balance Sheets at December 31, ~~2018~~20 20 and ~~2017~~201 9			F-~~F-3~~4

Consolidated Statements of ~~Income~~Operations For the Years Ended December 31, ~~2018, 2017~~20 20 , 201 9 and ~~2016~~201 8			F-~~F-5~~5

Consolidated Statement of Stockholders' Equity For the Years Ended December 31, ~~2018, 2017~~2020, 2019 and ~~2016~~2018			F-6

Consolidated Statements of Cash Flows For the Years Ended December 31, ~~2018, 2017~~2020, 2019 and ~~2016~~2018			F-7

Notes to Consolidated Financial Statements			F-9

INDEX TO FINANCIAL STATEMENT SCHEDULES

Schedule II – Valuation and Qualifying Accounts For the Three Years Ended December 31, ~~2018~~20 20			F-39

Financial Statements of Al Masane Al Kobra Mining Company ~~for~~F or the ~~Years Ended~~P erio d E nd ed September 30, 2020 and the Y ears E nded December 31, ~~2018, 2017~~20 19 and ~~2016~~ 201 8			F-40

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Trecora Resources

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Trecora Resources and Subsidiaries (the ~~Company)~~“Company”) as of December 31, ~~2018~~2020 and ~~2017,~~2019, and the related consolidated statements of ~~income, comprehensive income,~~operations, stockholders’ equity and cash flows for each of the years in the ~~three–year~~three-year period ended December 31, ~~2018~~2020 and the related notes and schedules listed in the index at Item 15(a) (collectively referred to as the ~~financial statements)~~“Consolidated Financial Statements”). In our opinion, the ~~financial statements~~Consolidated Financial Statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2018~~2020 and ~~2017,~~2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, ~~2018,~~2020, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, ~~2018,~~2020, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March ~~15, 2019,~~9, 2021, expressed an unqualified opinion.

Basis for Opinion

These ~~financial statements~~Consolidated Financial Statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s ~~financial statements~~Consolidated Financial Statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the ~~financial statements~~Consolidated Financial Statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the ~~financial statements,~~Consolidated Financial Statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the ~~financial statements.~~Consolidated Financial Statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the ~~financial statements.~~Consolidated Financial Statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the Consolidated Financial Statements that were communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the Consolidated Financial Statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the Consolidated Financial Statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate audit opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Recoverability of the Specialty Waxes segment long-lived assets

The Company’s Specialty Waxes segment has total assets of $83.1 million, including Net Plant, Pipeline, and Equipment of $60.3 million and Net Intangibles Assets of $12.9 million. The Company considers the Specialty Waxes segment to be a single long lived asset group. A long-lived asset (asset group) shall be tested for recoverability whenever events or changes in circumstances indicate that it’s carrying amount may not be recoverable. For the year ended December 31, 2020, the Specialty Waxes segment had a net loss of $3.6 million.

We identified the recoverability of the Specialty Waxes segment long-lived assets as a critical audit matter because of the significant estimates and assumptions management used in the undiscounted cash flow analysis. Performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the following:

•We obtained an understanding and evaluated the design of internal controls over management’s evaluation of the recoverability of long-lived assets based on the Company’s undiscounted cash flows analysis.

•We evaluated management’s ability to forecast future sales, gross profit and future capital needs by comparing actual results to management’s historical forecasts.

F-2

Table of Contents

•We evaluated the reasonableness of significant assumptions in the undiscounted cash flow analysis, including future sales, operating costs, gross profit, and capitalization rates. In addition, we tested the mathematical accuracy of the undiscounted cash flows analysis.

/s/ BKM Sowan Horan, LLP

We have served as the Company’s auditor since 2010.

Addison, Texas

March ~~15, 2019~~

9, 2021

F-3

TRECORA RESOURCES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

December 31,
2018
2017
(thousands of dollars)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 6,735
$ 3,028
Trade receivables, net (Note 5) 27,112
25,779
Inventories (Note 7) 16,539
18,450
Prepaid expenses and other assets (Note 6) 4,664
3,645
Taxes receivable 182
5,584

Total current assets 55,232
56,486

PLANT, PIPELINE, AND EQUIPMENT – AT COST
268,419
245,761
LESS ACCUMULATED DEPRECIATION (73,762 ) (63,240 )

PLANT, PIPELINE, AND EQUIPMENT, NET (Note 8) 194,657
182,521

GOODWILL (Note 9) 21,798
21,798
OTHER INTANGIBLE ASSETS, net (Note 9) 18,947
20,808
INVESTMENT IN AMAK (Note 10) 38,746
45,125
MINERAL PROPERTIES IN THE UNITED STATES (Note 11) 588
588

TOTAL ASSETS $ 329,968
$ 327,326

LIABILITIES
CURRENT LIABILITIES
Accounts payable $ 19,106
$ 18,347
Accrued liabilities (Note 13) 5,439
3,961
Current portion of post-retirement benefit (Note 22) 19
305
Current portion of long-term debt (Note 12) 4,194
8,061
Current portion of other liabilities 733
870

Total current liabilities 29,491
31,544

LONG-TERM DEBT, net of current portion (Note 12) 98,288
91,021
POST- RETIREMENT BENEFIT, net of current portion (Note 22) 358
897

OTHER LIABILITIES , net of current portion 994
1,611
DEFERRED INCOME TAXES (Note 16) 15,676
17,242

Total liabilities 144,807
142,315

COMMITMENTS AND CONTINGENCIES (Note 14)

Table of Contents


TRECORA RESOURCES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
	December 31,
	2020		2019
	(thousands of dollars)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	55,664	$	6,145
Trade receivables, net (Note 4)	25,301		26,320
Inventories (Note 5)	12,945		13,624
Investment in AMAK (held-for-sale) (Note 6)	0		32,872
Prepaid expenses and other assets (Note 7)	9,198		4,947
Taxes receivable	2,788		182
Total current assets	105,896		84,090



PLANT, PIPELINE, AND EQUIPMENT, NET (Note 8)	187,104		188,919
OPERATING LEASE ASSETS, NET (Note 9)	10,528		13,512

INTANGIBLE ASSETS, NET (Note 10)	12,893		14,736
MINERAL PROPERTIES (Note 11)	412		562
TOTAL ASSETS	$	316,833	$	301,819

LIABILITIES
CURRENT LIABILITIES
Accounts payable	$	14,447	$	14,603

Accrued liabilities (Note 12)	6,857		5,742

Current portion of long-term debt (Note 13)	4,194		4,194
Current portion of operating lease (Note 9)	3,195		3,174
Current portion of other liabilities	891		922
Total current liabilities	29,584		28,635

CARES ACT, PPP Loans	6,123		0
LONG-TERM DEBT, net of current portion (Note 13)	41,901		79,095
POST- RETIREMENT BENEFIT, net of current portion (Note 22)	320		338
OPERATING LEASE LONG TERM (Note 9)	7,333		10,338
OTHER LIABILITIES, net of current portion	648		595
DEFERRED INCOME TAXES (Note 16)	26,517		11,375
Total liabilities	112,426		130,376

COMMITMENTS AND CONTINGENCIES (Note 14)	0		0

EQUITY
Common Stock ‑ authorized 40 million shares of $.10 par value; issued 24.8 and 24.6 million in 2020 and 2019, respectively, and outstanding 24.8 and 24.5 million in 2020 and 2019, respectively	2,483		2,475
Additional Paid-in Capital	61,311		59,530

Retained Earnings	140,324		109,149
Total Trecora Resources Stockholders' Equity	204,118		171,154
Noncontrolling interest	289		289
Total equity	204,407		171,443

TOTAL LIABILITIES AND EQUITY	$	316,833	$	301,819

F-4

TRECORA RESOURCES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

December 31,
2018
2017
(thousands of dollars)

EQUITY
Common Stock ‑ authorized 40 million shares of $.10 par value; issued 24.6 and 24.5 million in 2018 and 2017, respectively, and outstanding 24.5 and 24.3 million in 2018 and 2017, respectively 2,463
2,451
Additional Paid-in Capital 58,294
56,012
Common Stock in Treasury, at cost 0.1 million and 0.2 million shares in 2018 and 2017, respectively (8 ) (196 )
Retained Earnings 124,123
126,455
Total Trecora Resources Stockholders' Equity 184,872
184,722
Noncontrolling interest 289
289
Total equity 185,161
185,011

TOTAL LIABILITIES AND EQUITY $ 329,968
$ 327,326

~~TRECORA RESOURCES AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF OPERATIONS~~

~~For the years ended December 31,~~

Table of Contents

2018
2017
2016
(thousands of dollars)
Revenues
Specialty petrochemical and product sales $ 269,780
$ 227,334
$ 193,581
Processing fees 18,152
17,809
18,818
287,932

245,143

212,399
Operating costs and expenses
Cost of specialty petrochemical, product sales, and processing (including depreciation and amortization of $13,618, $10,089, and $9,016, respectively) 260,114
203,582
172,497
Gross Profit 27,818

41,561

39,902

General and Administrative Expenses
General and administrative 22,396
22,587
20,434
Restructuring and severance (Note 21) 2,347
—
—
Depreciation 740
872
761
25,483

23,459

21,195

Operating income 2,335
18,102
18,707

Other income (expense)
Interest expense (4,100 ) (2,931 ) (1,985 )
Loss on extinguishment of debt (315 ) —
—
Bargain purchase gain from acquisition (Note 3) —
—
11,549
Equity in losses of AMAK (Note 10) (901 ) (4,261 ) (1,479 )
Gain from additional equity issuance by AMAK (Note 10) —
—
3,168
Miscellaneous expense (158 ) (60 ) (28 )
(5,474 )
(7,252 )
11,225

Income (loss) before income tax expense (3,139 )
10,850

29,932

Income tax benefit (expense) 807
7,159
(10,504 )

Net income (loss) attributable to Trecora Resources $ (2,332 )
$ 18,009

$ 19,428

Net income (loss) per common share
Basic earnings (loss) per share (dollars) $ (0.10 ) $ 0.74
$ 0.80
Diluted earnings (loss) per share (dollars) $ (0.10 ) $ 0.72
$ 0.78

Weighted average number of common
shares outstanding
Basic 24,438
24,294
24,284
Diluted 24,438
25,129
24,982


TRECORA RESOURCES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31,
	2020		2019		2018
	(thousands of dollars)
Revenues
Product sales	$	192,375	$	243,314	$	269,780
Processing fees	16,251		15,645		18,152
	208,626		258,959		287,932
Operating costs and expenses
Cost of sales and processing (including depreciation and amortization of $15,300, $15,361, and $13,618, respectively)	179,948		220,444		260,114
Gross Profit	28,678		38,515		27,818

General and Administrative Expenses
General and administrative	24,892		24,386		22,532
Impairment of goodwill and certain intangibles (Note 10)	0		24,152		0
Restructuring and severance (Note 21)	0		0		2,347
Depreciation	848		840		740
	25,740		49,378		25,619

Operating income (loss)	2,938		(10,863)		2,199

Other expenses
Interest expense	2,491		5,139		4,100
Loss on extinguishment of debt	0		0		315
Loss on disposal of assets	39		680		0
Miscellaneous (income) expense	(595)		(232)		158
	1,935		5,587		4,573

Income (loss) from continuing operations before income tax benefit	1,003		(16,450)		(2,374)

Income tax benefit	3,963		3,566		646





Income (loss) from continuing operations	4,966		(12,884)		(1,728)

Income (loss) from discontinued operations, net of tax	26,209		(2,090)		(604)

Net income (loss)	$	31,175	$	(14,974)	$	(2,332)

Basic income (loss) per common share:
Net income (loss) from continuing operations (dollars)	$	0.20	$	(0.52)	$	(0.07)
Net income (loss) from discontinued operations, net of tax (dollars)	$	1.06	$	(0.08)	$	(0.02)
Net income (loss) (dollars)	$	1.26	$	(0.61)	$	(0.10)

Basic weighted average number of common shares outstanding	24,802		24,698		24,438

Diluted income (loss) per common share:
Net income (loss) from continuing operations (dollars)	$	0.20	$	(0.52)	$	(0.07)
Net income (loss) from discontinued operations, net of tax (dollars)	$	1.03	$	(0.08)	$	(0.02)
Net income (loss) (dollars)	$	1.23	$	(0.61)	$	(0.10)

Diluted weighted average number of common shares outstanding	25,356		24,698		24,438

F-5

Table of Contents

TRECORA RESOURCES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the years ended December 31, ~~2018, 2017,~~2020, 2019, and ~~2016~~2018


	TRECORA RESOURCES STOCKHOLDERS
				Additional								Non-
	Common Stock			Paid-In		Treasury		Retained				Controlling		Total
	Shares	Amount		Capital		Stock		Earnings		Total		Interest		Equity
	(thousands)
January 1, 2018	24,311	$	2,451	$	56,012	$	(196)	$	126,455	$	184,722	$	289	$	185,011

Stock options
Issued to Directors	—	—		(10)		—		—		(10)		—		(10)
Issued to Employees	—	—		154		—		—		154		—		154
Cancellations (see Note 15)	—	—		(680)		—		—		(680)		—		(680)
Restricted stock units
Issued to Directors	—	—		338		—		—		338		—		338
Issued to Employees	—	—		1,939		—		—		1,939		—		1,939
Common stock
Issued to Directors	188	10		489		89		—		588		—		588
Issued to Employees	183	2		127		155		—		284		—		284
Stock Exchange	(65)	—		(66)		(65)		—		(131)		—		(131)
Warrants exercised	9	—		(9)		9		—		—		—		0
Net Loss	—	—		—		—		(2,332)		(2,332)		—		(2,332)

December 31, 2018	24,626	$	2,463	$	58,294	$	(8)	$	124,123	$	184,872	$	289	$	185,161




Restricted stock units
Issued to Directors	—	—		353		—		—		353		—		353
Issued to Employees	—	—		883		—		—		883		—		883
Common stock
Issued to Directors	20	1		—		8		—		9		—		9
Issued to Employees	104	11		—		—		—		11		—		11
Net Loss	—	—		—		—		(14,974)		(14,974)		—		(14,974)

December 31, 2019	24,750	$	2,475	$	59,530	$	0	$	109,149	$	171,154	$	289	$	171,443




Restricted stock units
Issued to Directors	—	—		1,369		—		—		1,369		—		1,369
Issued to Employees	—	—		420		—		—		420		—		420
Common stock
Issued to Directors	56	5		(5)		—		—		—		—		0
Issued to Employees	27	3		(3)		—		—		—		—		0
Net Income	—	—		—		—		31,175		31,175		—		31,175

December 31, 2020	24,833	$	2,483	$	61,311	$	0	$	140,324	$	204,118	$	289	$	204,407

F-6

TRECORA RESOURCES STOCKHOLDERS
Additional Non-
Common Stock Paid-In Treasury Retained Controlling Total
Shares Amount Capital Stock Earnings Total Interest Equity
(thousands)

January 1, 2016 24,158
$ 2,416
$ 50,662
$ —
$ 89,018
$ 142,096
$ 289
$ 142,385

Stock options
Issued to Directors —
—
173
—
—
173
—
173
Issued to Employees —
—
1,234
—
—
1,234
—
1,234
Issued to Former Director —
—
48
—
—
48
—
48
Restricted common stock —
—
Issued to Directors —
—
254
—
—
254
—
254
Issued to Employees —
—
783
—
—
783
—
783
Common stock —
—
Issued to Directors 13
2
58
—
—
60
—
60
Issued to Employees 51
3
(8 ) 16
—
11
—
11
Treasury stock transferred from TOCCO to TREC —
30
270
(300 ) —
—
—
—
Net Income —
—
—
—
19,428
19,428
—
19,428

December 31, 2016 24,222

$ 2,451

$ 53,474

$ (284 )
$ 108,446

$ 164,087

$ 289

$ 164,376

Stock options
Issued to Directors —
—
100
—
—
100
—
100
Issued to Employees —
—
1,171
—
—
1,171
—
1,171
Restricted stock units
Issued to Directors —
—
310
—
—
310
—
310
Issued to Employees —
—
1,136
—
—
1,136
—
1,136
Common stock
Issued to Directors 29
—
(84 ) 29
—
(55 ) —
(55 )
Issued to Employees 57
—
(92 ) 56
—
(36 ) —
(36 )
Warrants exercised 3
—
(3 ) 3
—
—
—
—
Net Income —
—
—
—
18,009
18,009
—
18,009

December 31, 2017 24,311

$ 2,451

$ 56,012

$ (196 )
$ 126,455

$ 184,722

$ 289

$ 185,011

Stock options
Issued to Directors —
—
(10 ) —
—
(10 ) —
(10 )
Issued to Employees —
—
154
—
—
154
—
154
Cancellations (see Note 15) —
—
(680 ) —
—
(680 ) (680 )
Restricted stock units
Issued to Directors —
—
338
—
—
338
—
338
Issued to Employees —
—
1,939
—
—
1,939
—
1,939
Common stock
Issued to Directors 188
10
489
89
—
588
—
588
Issued to Employees 183
2
127
155
—
284
—
284

Table of Contents


TRECORA RESOURCES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,

	2020		2019		2018
	(thousands of dollars)
OPERATING ACTIVITIES
Net Income (Loss)	$	31,175	$	(14,974)	$	(2,332)
Income (Loss) from Discontinued Operations	26,209		(2,090)		(604)
Income (Loss) from Continuing Operations	$	4,966	$	(12,884)	$	(1,728)
Adjustments to reconcile Income (Loss) from Continuing Operations to Net Cash Provided by Operating Activities:
Depreciation and Amortization	14,306		14,345		12,497
Amortization of Intangible Assets	1,842		1,856		1,861

Stock-based Compensation	1,912		1,250		1,753
Deferred Income Taxes	14,553		(2,993)		(1,377)
Postretirement Obligation	(7)		(38)		(825)
Bad Debt Expense (Recoveries)	0		(23)		152
Amortization of Loan Fees	181		181		261
Loss on Extinguishment of Debt	0		0		315
Loss on Disposal of Assets	39		680		0
Impairment of Goodwill and Certain Intangibles	0		24,152		0
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Trade Receivables	1,018		816		(1,485)
(Increase) Decrease in Taxes Receivable	(2,606)		0		5,401
Decrease in Inventories	680		2,914		1,911
(Increase) Decrease in Prepaid Expenses and Other Assets	(2,403)		(304)		(1,222)
Increase (Decrease) in Other Liabilities	(5,739)		581		33
Increase (Decrease) in Accounts Payable and Accrued Liabilities	831		(4,944)		2,202

Net Cash Provided by Operating Activities - Continuing Operations	29,573		25,589		19,749
Net Cash (Used in) Provided by Operating Activities - Discontinued Operations	(4,008)		(468)		146
Net Cash Provided by Operating Activities	25,565		25,121		19,895
INVESTING ACTIVITIES
Additions to Plant, Pipeline and Equipment	(13,351)		(10,079)		(25,285)
Proceeds from PEVM	150		27		0
Net Cash Used in Investing Activities - Continuing Operations	(13,201)		(10,052)		(25,285)
Net Cash Provided by Investing Activities - Discontinued Operations	68,530		4,021		5,414
Net Cash Provided by (Used in) Investing Activities	55,329		(6,031)		(19,871)
FINANCING ACTIVITIES

Net Cash (Paid) Received Related to Stock-Based Compensation	(123)		(305)		860
Additions to CARES Act, PPP Loans	6,123		0		0
Additions to Long-Term Debt	20,000		2,000		18,177
Repayment of Long-Term Debt	(57,375)		(21,375)		(15,354)
Net Cash (Used in) Provided by Financing Activities	(31,375)		(19,680)		3,683

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	49,519		(590)		3,707
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	6,145		6,735		3,028

F-7

Table of Contents

Stock Exchange (see Notes 10 & 18) (65 ) —
(66 ) (65 ) —
(131 ) —
(131 )
Warrants 9
—
(9 ) 9
—
—
—
—
Net Income (Loss) —
—
—
—
(2,332 ) (2,332 ) —
(2,332 )

December 31, 2018 24,626

$ 2,463

$ 58,294

$ (8 )
$ 124,123

$ 184,872

$ 289

$ 185,161


TRECORA RESOURCES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,

	2020		2019		2018
	(thousands of dollars)
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	55,664	$	6,145	$	6,735

Supplemental disclosure of cash flow information:
Cash payments for interest	$	2,266	$	4,731	$	4,560
Cash payments (net of refunds) for taxes	$	(11,069)	$	53	$	(4,182)

Supplemental disclosure of non-cash items:
Capital expansion amortized to depreciation expense	$	821	$	792	$	787
Cash held in escrow by AMAK	$	1,877	$	0	$	0
Foreign taxes paid by AMAK	$	270	$	0	$	0
Stock exchange (Notes 10 & 18)	$	0	$	0	$	131

F-8

TRECORA RESOURCES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31,

2018
2017
2016
(thousands of dollars)
Operating activities
Net income (loss) attributable to Trecora Resources $ (2,332 ) $ 18,009
$ 19,428
Adjustments to reconcile net income (loss) attributable
to Trecora Resources to net cash provided by operating activities:
Depreciation 12,497
9,100
7,896
Amortization of intangible assets 1,861
1,861
1,880
Unrealized gain on derivative instruments —
(58 ) (119 )
Share-based compensation 1,753
2,707
2,552
Deferred income taxes (1,566 ) (5,841 ) 8,697
Postretirement obligation (825 ) (11 ) 271
Bargain purchase gain from acquisition —
—
(11,549 )
Equity in loss of AMAK 901
4,261
1,479
Gain from additional equity issuance by AMAK —
—
(3,168 )
Bad debt expense 152
—
90
Amortization of loan fees 261
247
272
Loss on extinguishment of debt 315
—
—
Changes in operating assets and liabilities:
Increase in trade receivables (1,485 ) (3,586 ) (2,809 )
(Increase) decrease in taxes receivable 5,401
(1,601 ) 3,689
(Increase) decrease in inventories 1,911
(579 ) (2,067 )
Increase in prepaid expenses and other assets (1,222 ) (806 ) (1,022 )
Increase (decrease) in other liabilities 33
142
(174 )
Increase in accounts payable and accrued liabilities 2,240
6,983
3,168
Net cash provided by operating activities 19,895
30,828
28,514

Investing activities
Additions to plant, pipeline and equipment (25,285 ) (51,584 ) (38,484 )
Acquisition of B Plant —
—
(2,011 )
Proceeds from AMAK share repurchase (Note 10) 5,347
—
—
Advances to AMAK, net 67
(107 ) (14 )
Net cash used in investing activities (19,871 ) (51,691 ) (40,509 )

Financing Activities
Issuance of common stock —
25
11
Net cash received (paid) related to stock-based compensation 860
(106 ) —
Additions to long-term debt 18,177
26,000
8,000
Repayment of long-term debt (15,354 ) (10,417 ) (6,250 )
Net cash provided by in financing activities 3,683
15,502
1,761

Table of Contents

TRECORA RESOURCES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31,

2018
2017
2016
(thousands of dollars)

Net increase (decrease) in cash and cash equivalents 3,707
(5,361 ) (10,234 )

Cash and cash equivalents at beginning of year 3,028
8,389
18,623

Cash and cash equivalents at end of year $ 6,735
$ 3,028
$ 8,389

Supplemental disclosure of cash flow information:
Cash payments for interest $ 4,560
$ 3,540
$ 2,545
Cash payments (net of refunds) for taxes $ (4,182 ) $ 92
$ (1,630 )

Supplemental disclosure of non-cash items:
Capital Expansion amortized to depreciation expense $ 787
$ 840
$ 1,047
Estimated earnout liability (Note 3) $ —
$ —
$ 733
Stock exchange (Notes 10 & 18) $ 131
$ —
$ —

NOTE 1 - BUSINESS AND OPERATIONS OF THE COMPANY

Trecora Resources ~~formerly Arabian American Development Company,~~ (the ~~"Company"~~“Company”) was organized as a Delaware corporation in 1967. The ~~Company's~~Company’s principal business activities are the manufacturing of various specialty ~~petrochemical~~petrochemicals products, specialty waxes and providing custom processing services. The Company owns 33% of a Saudi Arabian joint stock company, Al Masane Al Kobra Mining Company ("AMAK") (see Note 10) and approximately 55% of the capital stock of a Nevada mining company, Pioche Ely Valley Mines, Inc. ("PEVM"), which does not conduct any substantial business activity but owns undeveloped properties in the United States.

The ~~Company's~~Company’s specialty ~~petrochemical~~petrochemicals operations are primarily conducted through a wholly-owned subsidiary, Texas Oil and Chemical Co. II, Inc. ~~("TOCCO"~~(“TOCCO”). TOCCO owns all of the capital stock of South Hampton Resources, Inc. ~~("SHR"~~(“SHR”) and Trecora Chemical, Inc. ~~("TC"~~(“TC”). SHR owns all of the capital stock of Gulf State Pipe Line Company, Inc. ~~("GSPL"~~(“GSPL”). SHR owns and operates a specialty ~~petrochemical~~petrochemicals product facility ~~near~~in Silsbee, Texas which manufactures high purity hydrocarbons used primarily in polyethylene, packaging, polypropylene, expandable polystyrene, poly-iso/urethane foams, Canadian tar sands, and in the catalyst support industry. TC owns and operates a facility located in Pasadena, Texas which manufactures specialty waxes and provides custom processing services. These specialty waxes are used in the production of coatings, hot melt adhesives and lubricants. GSPL owns and operates pipelines that connect the SHR facility to a natural gas line, to ~~SHR's~~SHR’s truck and rail loading terminal and to a major petroleum pipeline owned by an unaffiliated third party.

The Company owns approximately 55% of the capital stock of a Nevada mining company, Pioche Ely Valley Mines, Inc. (“PEVM”), which does not conduct any substantial business activity but owns undeveloped properties in the United States.

The Company also previously owned 33% of a Saudi Arabian joint stock company, Al Masane Al Kobra Mining Company (“AMAK”). On October 2, 2019, we announced that we had entered into a Share Sale and Purchase Agreement (as amended, the “Purchase Agreement”) pursuant to which we agreed to sell our entire investment in AMAK. The share sale was completed on September 28, 2020. For more information, see Note 6.

We attribute revenues to countries based upon the origination of the transaction. All of our revenues for the years ended December 31, ~~2018, 2017,~~2020, 2019, and ~~2016,~~2018, originated in the United States. In addition, all of our long-lived assets are in the United States.

For convenience in this report, the terms ~~"Company"~~“Company", ~~"our"~~“our", ~~"us"~~“us", “we" or ~~"we"~~“TREC" may be used to refer to Trecora Resources and its subsidiaries.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation – The ~~consolidated financial statements~~Consolidated Financial Statements include the balance sheets, statements of ~~income,~~operations, stockholders' equity, and cash flows of the Company, TOCCO, TC, SHR, GSPL and PEVM. Other entities which are not controlled but over which the Company has the ability to exercise significant influence ~~such as AMAK,~~ are accounted for using the equity method of accounting. All intercompany profits, transactions and balances have been eliminated.

Cash, Cash Equivalents and Short-Term Investments – Our principal banking and short-term investing activities are with local and national financial institutions. Short-term investments with an original maturity of three months or less are classified as cash equivalents.

Inventories – ~~Finished~~For SHR, finished products and feedstock are recorded at the lower of cost, determined on the first-in, first-out method (FIFO), or ~~market for SHR.~~market. For TC, inventory is recorded at the lower of cost or market as follows: (1) raw material cost is calculated using the weighted-average cost method and (2) product inventory cost is calculated using the specific cost method.

Trade Receivables and Allowance for Doubtful Accounts – We evaluate the collectability of our trade receivables and adequacy of the allowance for doubtful accounts based upon historical experience and any specific customer financial difficulties of which we become aware. For the year ended December 31, 2020, we decreased the allowance for doubtful accounts balance by $129,000 due to the write off of previously allowed for receivables. For the year ended December 31, 2019, we decreased the balance by $23,000 due to collections of previously allowed for receivables. For the year ended December 31, 2018, we increased the balance by $152,000 due to concerns regarding collectability for a specific customer. For the year ended December 31, 2017, the allowance balance was not increased. In 2016, we increased the balance by $90,000 due to an increase in sales in countries where there is a greater risk of default and limited recourse should this occur. We track customer balances and past due amounts to determine if customers may be having financial difficulties. This, along with historical experience and a working knowledge of each customer, helps determine accounts that should be written off. ~~No amounts were~~Amounts written off were $129,000, NaN and NaN in 2020, 2019 and 2018, respectively.

Discontinued Operations – Assets that are sold or ~~2017. During 2016 we wrote off one account~~classified as held for ~~approximately $93,000.~~

~~Notes Receivable~~ ~~– We periodically make changes in or expand~~sale are classified as discontinued operations provided that the disposal represents a strategic shift that has (or will have) a major effect on our ~~custom processing units at the request of the customer. The cost to make these changes is shared by the customer. Upon completion~~operations and financial results (e.g., a disposal of a ~~project~~major geographical area, a ~~non-interest note receivable is recorded with~~major line of business, a major equity method investment or other major parts of an ~~imputed interest rate. There were no notes receivable outstanding as~~entity).

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Table of December 31, 2018. The interest rate used on outstanding notes during December 31, 2018 and 2017 was 4%. The unearned interest was reflected as a discount against the note balance. The Company evaluates the collectability of notes based upon a working knowledge of the customer. The notes are receivable from custom processing customers with whom we maintain a close relationship. Thus, all amounts due under the notes receivable are considered collectible, and no allowance was recorded at December 31, 2018 and 2017, respectively.Contents

Plant, Pipeline and Equipment – Plant, pipeline and equipment are stated at cost. Depreciation is provided over the estimated service lives using the straight-line method. Gains and losses from disposition are included in operations in the period incurred. Maintenance and repairs are expensed as incurred. Major renewals and improvements are capitalized.

Interest costs incurred to finance expenditures during construction phase are capitalized as part of the historical cost of constructing the assets. Construction commences with the development of the design and ends when the assets are ready for use. Capitalized interest costs are included in plant, pipeline and equipment and are depreciated over the service life of the related assets.

Labor costs incurred to self-construct assets are capitalized as part of the historical cost the assets. Construction commences with the development of the design and ends when the assets are ready for use. Capitalized labor costs are included in plant, pipeline and equipment and are depreciated over the service life of the related assets.

Platinum catalyst is included in plant, pipeline and equipment at cost. Amortization of the catalyst is based upon cost less estimated salvage value of the catalyst using the straight line method over the estimated useful life (see Note 8).

Leases – The Company enters into leases as a lessee for rail cars, rail equipment, office space and office equipment in the ordinary course of business. When procuring services, or upon entering into a contract, the Company determines whether an arrangement contains a lease at its inception. As part of that evaluation the Company considers whether there is an implicitly or explicitly identified asset in the arrangement and whether the Company, as the lessee, has the right to control the use of that asset. The Company also reviews all options to extend, terminate, or purchase its right-of-use assets at the inception of the lease and accounts for these options when they are reasonably certain of being exercised. All leases with a term of more than 12 months are recognized as right-of-use (“ROU”) assets and associated lease liabilities in the combined balance sheet. Lease liabilities are measured at the lease commencement date and determined using the present value of the lease payments not yet paid, at the Company’s incremental borrowing rate, which approximates the rate at which the Company would borrow on a secured basis. The interest rate implicit in the lease is generally not determinable in the transactions where the Company is the lessee. The ROU asset equals the lease liability adjusted for any initial direct costs, prepaid rent and lease incentives.

All of the Company’s leases are classified as operating leases. The leases include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company made a policy election to not recognize leases with a lease term of 12 months or less in the combined balance sheet. Lease expense for these leases is recognized on a straight-line basis over the lease term.

Goodwill and Other Intangible Assets – ~~Goodwill represents the future economic benefits arising from other assets acquired in the acquisition of TC that are not individually identified and separately recognized.~~ Goodwill and indefinite-lived intangible assets are tested for impairment at least annually; however, these tests are performed more frequently when events or changes in circumstances indicate that the asset may be impaired. Impairment exists when carrying value exceeds fair value. Estimates of fair value are based on appraisals, market prices for comparable assets, or internal estimates of future net cash flows.

Definite-lived intangible assets consist of customer relationships, licenses, permits and developed ~~technology that were acquired as part of the Acquisition of TC.~~technology. The majority of these assets are being amortized using discounted estimated future cash flows over the term of the related agreements. Intangible assets associated with customer relationships are being amortized using the discounted estimated future cash flows method based upon assumed rates of annual customer attrition. We continually evaluate the reasonableness of the useful lives of these assets. Once these assets are fully amortized, they will be removed from the consolidated balance sheets.

During 2019 we adopted new accounting guidance and removed the second step of the goodwill impairment test. Under step two, an entity was required to determine the fair value of individual assets and liabilities of a reporting unit (including unrecognized assets and liabilities) using the procedure for determining fair values in a business combination. As a result, goodwill impairment is now measured at the amount by which a reporting unit’s carrying amount exceeds its fair value, with any impairment charge limited to the carrying amount of goodwill.

Business Combinations and Related Business Acquisition Costs – Assets and liabilities associated with business acquisitions are recorded at fair value using the acquisition method of accounting. We allocate the purchase price of acquisitions based upon the fair value of each component which may be derived from various observable and unobservable inputs and assumptions. We may use third-party valuation specialists to assist us in this allocation. Initial purchase price allocations are preliminary and subject to revision within the measurement period, not to exceed one year from the date of acquisition. The fair value of property, plant and equipment and intangible assets are based upon the discounted cash flow method that involves inputs that are not observable in the market (Level 3). Goodwill assigned represents the amount of consideration transferred in excess of the fair value assigned to identifiable assets acquired and liabilities assumed.

Business acquisition costs are expensed as incurred and are reported as general and administrative expenses in the consolidated statements of income. We define these costs to include ~~finder's~~finder’s fees, advisory, legal, accounting, valuation, and other professional consulting fees, as well as, travel associated with the evaluation and effort to acquire specific businesses.

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Table of Contents

Investment in AMAK – ~~We account~~Prior to the completion of the sale of our ownership interest in AMAK, we accounted for our investment in AMAK using the equity method of accounting under which we ~~record~~recorded in income our share of ~~AMAK's~~AMAK’s income or loss for each period. The amount recorded iswas also adjusted to reflect the amortization of certain differences between the basis in our investment in AMAK and our share of the net assets of AMAK aswas reflected in ~~AMAK's~~AMAK’s financial statements (see Note ~~10)~~6). Any proceeds received from or payments made to AMAK ~~are~~were recorded as decreases or increases in the balance of our investment.

We assess our investment in AMAK for impairment when events are identified, or there are changes in circumstances that may have an adverse effect on the fair value of the investment. We consider recoverable ore reserves, changes in commodity prices, and the amount and timing of the cash flows to be generated by the production of those reserves, as well as, recent equity transactions within AMAK.

Other Assets – Other assets include a license used in specialty ~~petrochemical~~petrochemicals operations, spare parts inventory, insurance receivables and certain specialty ~~petrochemical~~petrochemicals assets. ~~Beginning January 1, 2017, due to the expansion of our plant assets at SHR and TC, we began inventorying spare parts for the repair and maintenance of our plant, pipeline and equipment.~~ Spare parts are accounted for ~~on the first-in, first-out method (FIFO).~~using FIFO.

Long-Lived Assets Impairment – Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable based on the undiscounted net cash flows to be generated from the ~~asset's~~asset’s use. The amount of the impairment loss to be recorded is calculated by the excess of the ~~asset's~~asset’s carrying value over its fair value. Fair value is generally determined using a discounted cash flow analysis although other factors including the state of the economy are considered.

Revenue Recognition – ~~The Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 606 ("ASC 606"),~~ Revenue ~~from Contracts with Customers,~~ ~~and its amendments~~with a date of the initial application of January 1, 2018. As a result, the Company has changed its accounting policy for revenue recognition as detailed below. ASC 606 outlines a single comprehensive model for an entity to use in accounting for revenue arising from all contracts with customers, except where revenues are in scope of another accounting standard. ASC 606 superseded the revenue

~~recognition requirements in ASC Topic 605, "Revenue~~ Recognition", and most industry specific guidance. ASC Topic 606 sets forth a five-step model for determining when and how revenue is recognized. Under the model, an entity is required to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods and services. ASC 606 also requires certain additional revenue-related disclosures.

The Company applied the modified retrospective approach under ASC 606 which allows for the cumulative effect of adopting the new guidance on the date of initial application. Use of the modified retrospective approach means the Company's comparative periods prior to initial application are not restated. The initial application was applied to all contracts at the date of the initial application. The Company has determined that the adjustments using the modified retrospective approach did not have a material impact on the date of the initial application along with the disclosure of the effect on prior periods.

~~Accounting Policy~~

~~Beginning on January 1, 2018, revenue~~ is measured based on a consideration specified in a contract with a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. In evaluating when a customer has control of the asset we primarily consider whether the transfer of legal title and physical delivery has occurred, whether the customer has significant risks and rewards of ownership, and whether the customer has accepted delivery and a right to payment exists. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of product sales and processing. The Company does not offer material rights of return or service-type warranties.

~~For the year ended December 31, 2017 the Company recognized revenue according to FASB ASC Topic 605 ("ASC 605"), "Revenue Recognition"~~, when: (1) the customer accepted delivery of the product and title had been transferred or when the service was performed and the Company had no significant obligations remaining to be performed; (2) a final understanding as to specific nature and terms of the agreed upon transaction had occurred; (3) price was fixed and determinable; and (4) collection was assured. Product sales generally met these criteria, and revenue was recognized, when the product was delivered or title was transferred to the customer. Sales revenue was presented net of discounts, allowances, and sales taxes. Freight costs billed to customers were recorded as a component of revenue. Revenues received in advance of future sales of products or prior to the performance of services were presented as deferred revenues. Shipping and handling costs were classified as cost of product sales and processing and were expensed as incurred.

~~Nature of goods and services~~

The following is a description of principal activities – separated by reportable segments – from which the Company generates its revenue. For more detailed information about reportable segments, disaggregation of revenues, and contract balance disclosures, see Note 17.

Specialty ~~petrochemical~~Petrochemicals segment

The ~~specialty petrochemical~~Specialty Petrochemicals segment of the Company produces eight high purity hydrocarbons and other petroleum based products including isopentane, normal pentane, isohexane and hexane. These products are used in the production of polyethylene, packaging, polypropylene, expandable polystyrene, poly-iso/urethane foams, crude oil from the Canadian tar sands, and in the catalyst support industry. ~~SHR's~~SHR’s specialty ~~petrochemical~~petrochemicals products are typically transported to customers by rail car, tank truck, iso-container and ship.

Product Sales – The Company sells individual (distinct) products to its customers on a stand-alone basis (point-of-sale) without any further integration. There is no significant modification of any one or more products sold to fulfill another promised product or service within any of the ~~Company's~~Company’s product sale transactions. The amount of consideration received for product sales is stated within the executed invoice with the customer. Payment for prime product sales is typically due and collected 30 to 60 days subsequent to point of sale.

Processing Fees – The ~~Company's~~Company’s services consist of processing customer supplied feedstocks into custom products including, if requested, services for forming, packaging, and arranging shipping. Pursuant to Tolling Agreements the customer retains title to the feedstocks and processed products. The performance obligation in each Tolling Agreement transaction is the processing of customer provided feedstocks into custom products and is satisfied over time. The amount of consideration received for product sales is stated within the executed invoice with the customer. Payment is typically due and collected within 30 days subsequent to point of sale.

Specialty ~~Wax~~Waxes segment

The ~~specialty wax~~Specialty Waxes segment of the Company manufactures and sells specialty polyethylene and poly alpha olefin waxes and also provides custom processing services for customers.

Product Sales – The Company sells individual (distinct) products to its customers on a stand-alone basis (point-of-sale) without any further integration. There is no significant modification of any one or more products sold to fulfill another promised product or service within any of the ~~Company's~~Company’s product sale transactions. The amount of consideration received for product sales is stated within the executed invoice with the customer. Payment is typically due and collected within 30 days subsequent to point of sale.

Processing Fees – The ~~Company's~~Company’s promised services consist of processing customer supplied feedstocks into custom products including, if requested, services for forming, packaging, and arranging shipping. Pursuant to Tolling Agreements and Purchase Order Arrangements, the customer typically retains title to the feedstocks and processed products. The

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performance obligation in each Tolling Agreement transaction and Purchase Order Arrangement is the processing of customer provided feedstocks into custom products and is satisfied over time. The amount of consideration received for product sales is stated within the executed invoice with the customer. Payment is typically due and collected within 30 days subsequent to point of sale.

Shipping and Handling Costs – Shipping and handling costs are classified as cost of product sales and processing and are expensed as incurred.

Retirement Plan – We offer employees the benefit of participating in a 401(k) plan. We match 100% up to 6% of pay with vesting occurring over 2 years. For years ended December 31, ~~2018, 2017,~~2020, 2019, and ~~2016,~~2018, matching contributions of approximately ~~$1,502,000, $1,412,000,~~$1,271,000, $1,321,000, and ~~$1,195,000,~~$1,502,000, respectively, were made on behalf of employees.

Environmental Liabilities – Remediation costs are accrued based on estimates of known environmental remediation exposure. Ongoing environmental compliance costs, including maintenance and monitoring costs, are expensed as incurred.

Other Liabilities – We periodically make changes in or expand our custom processing units at the request of the customer. The cost to make these changes is shared by the customer. Upon completion of a project a note receivable and a deferred liability are recorded to recover the project costs which are then capitalized. At times instead of a note receivable being established, the customer pays an upfront cost. The amortization of other liabilities is recorded as a reduction to depreciation expense over the life of the contract with the customer. As of December 31 of each year, depreciation expense was offset and reduced by approximately $0.8 million, $0.8 million, and ~~$1.0~~$0.8 million, for 2020, 2019, and 2018, ~~2017, and 2016,~~ respectively.

Net Income Per Share – We compute basic income per common share based on the weighted-average number of common shares outstanding. Diluted income per common share is computed based on the weighted-average number of common shares outstanding plus the number of additional common shares that would have been outstanding if potential dilutive common shares, consisting of stock options, unvested restricted stock units, and shares which could be issued upon conversion of debt, had been issued (see Note 18).

Foreign Currency – The functional currency for the Company and each of the ~~Company's~~Company’s subsidiaries is the US dollar (USD). Transaction gains or losses as a result of transactions denominated and settled in currencies other than the USD are reflected in the statements of income as foreign exchange transaction gains or losses. We do not employ any practices to minimize foreign currency risks. The functional and reporting currency of AMAK is the Saudi Riyal (SR). In June 1986 the SR was officially pegged to the USD at a fixed exchange rate of 1 USD to 3.75 SR; therefore, we translate SR into our reporting currency of the USD for income statement and balance sheet purposes using the fixed exchange rate. As of December 31, ~~2018, 2017~~2020, 2019 and ~~2016,~~2018, foreign currency translation adjustments were not significant.

Management Estimates – The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include allowance for doubtful accounts receivable and inventory obsolescence; assessment of impairment of our long-lived assets ~~goodwill,~~and intangible ~~assets and investments,~~assets; litigation liabilities, post-retirement benefit obligations, guarantee obligations, environmental liabilities, ~~income taxes~~and current and deferred ~~tax valuation allowances.~~income taxes. Actual results could differ from these estimates.

In early 2020, the World Health Organization declared the rapidly spreading coronavirus disease (“COVID-19”) outbreak a pandemic. This pandemic has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the Company’s results of operations and financial position at December 31, 2020. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of the financial statements. These estimates may change, as new events occur and additional information is obtained.

Share-Based Compensation – We recognize share-based compensation of stock options granted based upon the fair value of options on the grant date using the Black-Scholes pricing model (see Note 15). Share-based compensation expense recognized during the period is based on the fair value of the portion of share-based payments awards that is ultimately expected to vest. Share-based compensation expense recognized in the consolidated statements of operations for the years ended December 31, ~~2018, 2017,~~2020, 2019, and ~~2016~~2018 includes compensation expense based on the estimated grant date fair value for awards that are ultimately expected to vest, and accordingly has been reduced for estimated forfeitures. Estimated forfeitures at the time of grant are revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

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~~Guarantees –~~ ~~We may enter into agreements which contain features that meet the definition of a guarantee under FASB ASC 460 "Guarantees" (see Note 14). These arrangements create two types of obligations:~~


a)	We have a non-contingent and immediate obligation to stand ready to make payments if certain future triggering events occur. For certain guarantees, a liability is recognized for the stand ready obligation at the inception of the guarantee; and


b)	We have an obligation to make future payments if those certain future triggering events do occur. A liability for the payment under the guarantee is recognized when 1) it becomes probable that one or more future events will occur, triggering the requirement to make payments under the guarantee and 2) when the payment can be reasonably estimated.

Fair Value – The carrying value of cash and cash equivalents, trade receivables, taxes receivable, accounts payable, accrued liabilities, and other liabilities approximate fair value due to the immediate or short-term maturity of these financial instruments. The fair value of variable rate long term debt and notes payable reflect recent market transactions and approximate carrying value. We used other observable inputs that would qualify as Level 2 inputs to make our assessment of the approximate fair value of our cash and cash equivalents, trade receivables, taxes receivable, accounts payable, accrued liabilities, other liabilities, notes payable and variable rate long term debt. ~~The fair value of the derivative instruments are described below.~~

We measure fair value by ASC Topic 820 Fair Value. ASC Topic 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC Topic 820 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard amends numerous accounting pronouncements but does not require any new fair value measurements of reported balances. ASC Topic 820 emphasizes that fair value, among other things, is based on exit price versus entry price, should include assumptions about risk such as nonperformance risk in liability fair values, and is a market-based measurement, not an entity-specific measurement. When considering the assumptions that market participants would use in pricing the asset or liability, ASC Topic 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting ~~entity's~~entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). The fair value hierarchy prioritizes inputs used to measure fair value into three broad levels.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

~~Derivatives~~ – We record derivative instruments as either an asset or liability measured at fair value. Changes in the derivative instrument's fair value are recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative instrument's gains and losses to offset related results on the hedged item in the income statement, to the extent effective, and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting.

Income Taxes – Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company maintains a valuation allowance for a deferred tax asset when it is deemed to be more likely than not that some or all of the deferred tax asset will not be realized.

Our estimate of the potential outcome of any uncertain tax issues is subject to ~~management's~~management’s assessment of relevant risks, facts, and circumstances existing at that time. We use a more likely than not threshold for financial statement recognition and measurement of tax position taken or expected to be taken in a tax return. To the extent that our assessment of such tax position changes, the change in estimate is recorded in the period in which the determination is made. We report tax-related interest and penalties as a component of income tax expense.

On December 22, 2017, Public Law No. 115-97 known as the Tax Cuts and Jobs Act (TCJA) was enacted. The TCJA included a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. federal corporate income tax rate from a maximum of 35 percent to a flat 21 percent for tax years effective January 1, 2018. The TCJA also implemented a territorial tax system, provided for a one-time deemed repatriation tax on unrepatriated foreign earnings, eliminated the alternative minimum tax (AMT), made AMT credit carryforwards refundable, and permitted the acceleration of depreciation for certain assets placed into service after September 27, 2017. In addition the TJCA created prospective changes beginning in 2018, including repeal of the domestic manufacturing deduction, acceleration of tax revenue recognition,

~~capitalization of research and development expenditures, additional limitations on executive compensation and limitations on the deductibility of interest.~~

The Company has elected to recognize the income tax effects of the TCJA in its financial statements in accordance with Staff Accounting Bulletin 118 (SAB 118), which provides guidance for the application of ASC Topic 740 ~~Income Taxes~~, in the reporting period in which the TCJA was signed into law. Under SAB 118 when a Company does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the TCJA it will recognize provisional amounts if a reasonable estimate can be made. If a reasonable estimate cannot be made then no impact is recognized for the effect of the TCJA. SAB 118 permits an up to one year measurement period to finalize the measurement of the impact of the TCJA.

~~Reclassifications~~ ~~– Certain reclassifications have been made to prior year balances to conform with the current year presentation.~~

Subsequent Events – The Company has evaluated subsequent events through March ~~15, 2019,~~9, 2021, the date that the ~~consolidated financial statements~~Consolidated Financial Statements were approved by management.

~~New~~Recently Adopted Accounting Pronouncements

~~In May 2014 the~~Effective January 1, 2020, we adopted Financial Accounting ~~Standards~~Standard Board ~~("FASB"~~(“FASB”) ~~issued~~ Accounting Standards Update ~~("ASU"~~(“ASU”) ~~2014-9,~~ ~~Revenue from Contracts with Customers~~ ~~("ASU 2014-9"). ASU 2014-9 supersedes~~2016-13, Measurement of Credit Losses on Financial Instruments, which changed the ~~revenue~~way entities recognize impairment of most financial assets. Short-term and long-term financial assets, as defined by the standard, are impacted by immediate recognition ~~requirements~~ of ~~FASB Accounting Standards Codification ("ASC") Topic 605,~~ ~~Revenue Recognition~~ ~~and most industry-specific guidance throughout the Accounting Standards Codification, resulting~~estimated credit losses in the ~~creation of FASB ASC Topic 606,~~ ~~Revenue from Contracts with Customers. ASU 2014-9 requires entities to recognize revenue in a way that depicts~~financial statements, reflecting the ~~transfer of promised goods or services to customers in an~~net amount ~~that reflects the consideration to which the entity expects~~expected to be entitled to in exchange for those goods or services. This ASU provides alternative methods of retrospective adoption and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017.collected. The ~~Company completed its assessment of the impact of the~~ adoption of ASU 2014-9 across all revenue streams. This included reviewing current accounting policies and practices to identify potential differences that would result from applying the requirements under the new standard. We completed contract reviews and validated results of applying the new revenue guidance (Note 2). See Revenue Recognition policy note.this standard did not have a material impact on our Consolidated Financial Statements.

Recent Accounting Pronouncements Not Yet Adopted

In ~~February 2016,~~December 2019, the FASB issued ASU No. ~~2016-02, Leases~~2019-12, Income Taxes (Topic ~~842).~~740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This ~~update~~guidance will increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This update isbe effective for ~~annual~~us in the first quarter of 2021 on a prospective basis, and ~~interim reporting periods beginning after December 15, 2018, including interim periods within those fiscal years. Early~~early adoption is permitted. The Company does not expect that the adoption of this guidance will have a material impact on our Consolidated Financial Statements.

In ~~July 2018,~~March 2020, the FASB issued ASU No. ~~2018-11, Targeted Improvements to ASC 842, Leases. ASU 2018-11 provided entities with an alternative modified transition method to elect not to recast~~2020–04, Reference Rate Reform (Topic 848): Facilitation of the ~~comparative periods presented when adopting ASC 842. The new standard provides a number~~Effects of ~~optional practical expedients in transition. The Company expects to elect: (1) the ‘package of practical expedients’~~Reference Rate Reform on Financial Reporting (ASU 2020-04), which ~~permits it not~~provides guidance to ~~reassess under~~alleviate the ~~new standard its prior conclusions about lease identification, lease classification,~~burden in accounting for reference rate reform by allowing certain expedients and ~~initial direct costs~~exceptions in applying generally accepted accounting principles to contracts, hedging relationships, and ~~(2) the use-of-hindsight. In addition, the new standard provides practical expedients for an entity’s ongoing accounting~~other transactions impacted by reference rate reform. The provisions of ASU 2020-04 apply only to those transactions that ~~the Company anticipates making, such as the (1) the election for certain classes of underlying asset~~reference LIBOR or another reference rate expected to ~~not separate non-lease components~~be discontinued due to reference rate reform. This guidance is effective from ~~lease components~~March 12, 2020 through December 31, 2022 and (2) the election for short-term lease recognition exemption for all leases that qualify. The Company will adopt ASU 842 as of January 1, 2019, using the alternative modified transition method. In preparation of adopting ASC 842, the Companyadoption is ~~implementing additional internal controls to enable future preparation of financial information in accordance with ASC 842. The Company has also substantially completed its evaluation of~~optional. We are currently evaluating the impact on the Company’s lease portfolio. The Company believes the largest impact will be on the consolidated balance sheets for the accounting of rail cars, equipment and office leases, which represents a majority of its operating leases it has entered into as a lessee. These leases will be recognized under the new standard as right of use assets (“ROU”) operating lease liabilities. The Company will also be required to provide expanded disclosures for its leasing arrangements. As of December 31, 2018, the Company had approximately $18.1 million of undiscounted future minimum operating lease commitments that are not recognized on its consolidated balance sheets as determined under the current standard. For a lessee, the results of operations are not expected to significantly change after adoption of the new standard. While substantially complete, the Company is still in the process of finalizing its evaluation of the effect of ASU ~~842~~2020-04 on ~~the Company’s financial statements and disclosures, including the determination~~our Consolidated Financial Statements.

F-13

Table of the Company’s incremental borrowing rate for each of the operating leases to estimate the interest rate we would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments. The Company will finalize its accounting assessment and quantitative impact of the adoption during the first quarter of fiscal year 2019.

~~In January 2017 the FASB issued ASU No. 2017-4,~~ ~~Intangibles – Goodwill and Other (Topic 350)~~. The amendments in ASU 2017-4 simplify the measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Instead, under these amendments, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss should not exceed the total amount of goodwill allocated to that reporting

unit. The amendments are effective for public business entities for the first interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The Company has goodwill from prior business combination and performs an annual impairment test or more frequently if changes or circumstances occur that would more-likely-than-not reduce the fair value of the reporting unit below its carrying value. During the year ended December 31, 2018, the Company performed its impairment assessment and determined the fair value of the aggregated reporting units exceed the carrying value, such that the Company's goodwill was not considered impaired. Although the Company cannot anticipate future goodwill impairment assessments, based on the most recent assessment, it is unlikely that an impairment amount would need to be calculated and, therefore, the Company does not anticipate a material impact from these amendments to the Company's financial position and results of operations. The current accounting policies and processes are not anticipated to change, except for the elimination of the Step 2 analysis.

~~In February 2018 the FASB issued ASU No. 2018-2,~~ ~~Income Statement — Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~. ASU 2018-2 was issued to address the income tax accounting treatment of the stranded tax effects within other comprehensive income due to the prohibition of backward tracing due to an income tax rate change that was initially recorded in other comprehensive income due to the enactment of the Tax Cuts and Jobs Act (TCJA) on December 22, 2017, which changed the Company's income tax rate from 35% to 21%. The amendments to the ASU changed US GAAP whereby an entity may elect to reclassify the stranded tax effect from accumulated other comprehensive income to retained earnings. The amendments of the ASU may be adopted in total or in part using a full retrospective or modified retrospective method. The amendments of the ASU are effective for periods beginning after December 15, 2018. The Company believes there will be no material impact to the consolidated financial statements as a result of this update.

~~In June 2018, the FASB issued ASU No. 2018–07,~~ ~~Improvements to Nonemployee Share–Based Payment Accounting~~. ASU 2018–07 simplifies the accounting for share–based payments to nonemployees by aligning it with the accounting for share–based payments to employees, with certain exceptions. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company is assessing the effect of ASU 2018–02 on its consolidated financial statements.

Contents

~~NOTE 3 – ACQUISITION OF B PLANT~~

On May 2, 2016, we purchased the idle BASF facility adjacent to our TC facility in exchange for $2.0 million in cash, transaction costs of approximately $11,000 plus an earnout provision calculated through calendar year 2020 based upon revenue generated by the facility but limited to $1.8 million. The cash payment was funded by working capital. The purchased facility includes production equipment similar to TC's plus equipment that broadens TC's capabilities and potential markets. The 6.5-acre site also includes substantial storage capacity, several rail and truck loading sites and utility tie-ins to TC. We refer to the facility as "B Plant".

We have accounted for the purchase in accordance with the acquisition method of accounting under Financial Accounting Standards Board Accounting Standards Codification Topic 805 "Business Combinations" ("ASC 805"). In accordance with ASC 805, we used our best estimates and assumptions to assign fair value to the tangible assets and liabilities acquired at the acquisition date.

~~The assets and liabilities acquired have been included in our consolidated balance sheets and our consolidated statements of income since the date of acquisition.~~

~~We recorded an $11.5 million bargain purchase gain on the transaction as calculated in the table below (in thousands).~~

Cash paid $ 2,011

Estimated earnout liability 733

Purchase Price $ 2,744

Fixed assets at FMV
Land 980

Site improvements 30

Buildings 1,350

Production equipment 11,933

14,293
Bargain purchase gain $ 11,549

~~The business acquired had been idle for the periods presented thus proforma financial presentation would be identical to our consolidated results. We began operating the new facility in June 2016.~~

NOTE 43 - CONCENTRATIONS OF REVENUES AND CREDIT RISK

We sell our products and services to companies in the chemical, plastics, and petroleum industries. We perform periodic credit evaluations of our customers and generally do not require collateral from our customers. For the ~~year~~years ended December 31, 2020, 2019, and 2018, one customer accounted for ~~17.0%~~15.4%, 15.0%, and 13.5%, respectively, of consolidated product revenue. For the year ended December 31, 2017, one customer accounted for 19.6% of consolidated product revenue. For the year ended December 31, 2016, one customer accounted for 20.1% of consolidated product revenue. The associated accounts receivable balances for ~~those customers~~this customer, ExxonMobil and their affiliates, were approximately ~~$11.0~~$4.1 million and $4.9 million at December 31, ~~2018,~~2020 and ~~$5.8 million at December 31, 2017. The carrying amount of accounts receivable approximates fair value at December 31, 2018, and 2017.~~

~~Accounts receivable serves as collateral for our amended and restated loan agreement (see Note 12).~~2019, respectively.

We market our products in many foreign jurisdictions. For the years ended December 31, ~~2018, 2017~~2020, 2019, and ~~2016, specialty petrochemical product sales~~2018, revenue in foreign jurisdictions accounted for approximately ~~35.4%~~24.0%, ~~20.8%~~21.9%, and ~~23.5%~~25.5% of ~~total product sales~~consolidated revenue, respectively.

SHR utilizes one major supplier ~~for its~~to purchase all our feedstock supply. The feedstock is a commodity product commonly available from other suppliers if needed. ~~The percentage of feedstock purchased from the supplier during 2018, 2017, and 2016 was 100%, 100.0% and 99%, respectively.~~ At December 31, ~~2018,~~2020, and ~~2017,~~2019, we owed the supplier approximately ~~$4.7~~$9.2 million and ~~$8.5~~$12.4 million, respectively, for feedstock purchases.

We hold our cash with various financial institutions that are insured by the Federal Deposit Insurance Corporation up to $250,000. At times during the year, cash balances may exceed this limit. We have not experienced any losses in such accounts and do not believe we are exposed to any significant risk of loss related to cash.

NOTE 54 – TRADE RECEIVABLES

~~Trade receivables, net, at December 31, consisted of the following:~~


Trade receivables, net, at December 31, consisted of the following:
	2020		2019
	(thousands of dollars)
Trade receivables	$	25,601	$	26,749
Less allowance for doubtful accounts	(300)		(429)
Trade receivables, net	$	25,301	$	26,320

2018
2017
(thousands of dollars)
Trade receivables $ 27,564
$ 26,079
Less allowance for doubtful accounts (452 ) (300 )

Trade receivables, net $ 27,112

$ 25,779

~~Trade receivables~~Accounts receivable serves as collateral for our amended and restated loan agreement with a domestic bank (see Note ~~12)~~13).

NOTE 5 – INVENTORIES


Inventories include the following at December 31:
	2020		2019
	(thousands of dollars)
Raw material	$	2,580	$	2,100
Work in process	138		142
Finished products	10,227		11,382
Total inventory	$	12,945	$	13,624

Inventory serves as collateral for our amended and restated loan agreement with a domestic bank (see Note 13).

Inventory included products in transit valued at approximately $3.6 million and $2.9 million at December 31, 2020 and 2019, respectively.

NOTE 6 - INVESTMENT IN AMAK AND DISCONTINUED OPERATIONS

On September 28, 2020, the Company completed the final closing of the previously disclosed sale of its ownership interest in AMAK (the “Share Sale”) to AMAK and certain existing shareholders of AMAK and their assignees (collectively, the “Purchasers”). The Share Sale was completed in multiple closings pursuant to a Share Sale and Purchase Agreement, dated September 22, 2019 (which we refer to herein as the “Purchase Agreement”), among the Company, AMAK, and other Purchasers and resulted in aggregate gross proceeds to the Company of Saudi Riyals (“SAR”) 265 million (approximately $70 million) (before taxes and expenses). As of December 31, 2019, the Company had a non-controlling equity interest of 33.3% in AMAK of approximately $32.9 million.

As a condition to the effectiveness of the Purchase Agreement, the Purchasers advanced 5% of the purchase price (or approximately $3.5 million) in the form of a non-refundable deposit. Pursuant to the Purchase Agreement, (i) with respect to any Purchaser that completed the purchase of all or a portion of the ordinary shares allotted to it under the Purchase Agreement on or before March 31, 2020, the non-refundable deposit paid by such Purchaser (or a portion of such deposit for a partial closing) was credited toward the purchase price of the ordinary shares being purchased and (ii) with respect to any Purchasers that complete the purchase of all or a portion of their allotted ordinary shares after March 31, 2020 but on or

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before September 28, 2020, an amount equal to 50% of the non-refundable deposit paid by such Purchasers was forfeited to the Company as liquidated damages and such amount was not applied to the purchase price paid by the applicable Purchaser.

On March 26, 2020, the Company and one Purchaser completed the first closing of the Share Sale (the “First Closing”). In connection with the First Closing, the Company sold 4,000,000 ordinary shares for aggregate gross proceeds (before taxes and transaction expenses) of SAR 40 million (or approximately $10.7 million) (inclusive of the full amount of the Purchaser’s non-refundable deposit previously paid of $0.5 million). The Company recorded a foreign tax payable of approximately $0.3 million related to the First Closing.

During the third quarter of 2020, the Company completed additional closings of the Share Sale with respect to its remaining ownership interest in AMAK. In connection with these closings, the Company sold a total of 22,467,422 ordinary shares for aggregate gross proceeds (before taxes and transaction expenses) of SAR 224 million (or approximately $59.9 million) (inclusive of $1.5 million which constituted 50% of the non-refundable deposits previously paid by certain Purchasers). As none of the third quarter 2020 closings were completed prior to March 31, 2020, the remaining portion of the initial deposits (approximately $1.5 million) were forfeited to the Company as liquidated damages and were not applied to the purchase price. These amounts are included in income from discontinued operations, net of tax. The Company recorded a foreign tax payable of approximately $1.1 million related to the third quarter 2020 closings.

In connection with the completion of the Share Sale, the Company and AMAK entered into an agreement whereby AMAK agreed to withhold approximately $2.1 million of the purchase price to pay the Company’s estimated tax obligations in Saudi Arabia. The Company is in the process of finalizing and filing the necessary tax returns in the Kingdom of Saudi Arabia. Upon payment, the Company will have a foreign tax credit which can be used to offset U.S. taxes. As of December 31, 2020, approximately $0.2 million of foreign taxes have been paid. The remaining funds withheld by AMAK are included in prepaid expenses and other assets on the Company’s consolidated balance sheets as of December 31, 2020. Subsequent to December 31, 2020, the Company instructed AMAK to pay approximately $1.1 million of the accrued foreign tax payable from the amount held by AMAK to cover the Company’s tax obligations in Saudi Arabia.

As previously disclosed, and as a result of the Company’s investment in AMAK, the Company was required to execute a limited guarantee on October 24, 2010 (the “Guarantee”) of up to 41% of a loan (the “Loan”) by the Saudi Industrial Development Fund (“SIDF”) to AMAK to fund the construction of the AMAK facilities and to provide working capital needs. The provision of personal or corporate guarantees, as applicable, by each shareholder of AMAK was a condition to SIDF providing the Loan. Pursuant to the Purchase Agreement, the Purchasers (other than AMAK) agreed, upon the completion of the Share Sale, to assume the Company’s obligation under the Guarantee (proportionately based upon such Purchaser’s percentage acquisition of ordinary shares in the Share Sale). While a formal written release of the Company from the Guarantee was not obtained from SIDF prior to closing, the Company believes that the Purchasers’ assumption of the Company’s obligation under the Guarantee effectively eliminates the Company’s liability arising under the Guarantee.

Included in discontinued operations are the following:


	Years Ended December 31,
	2020		2019		2018
	(thousands of dollars)
Saudi administration and transaction expenses	$	(2,452)	$	(187)	$	136
Equity in earnings (losses) of AMAK	702		(986)		(901)
Gain (loss) on sale of equity interest	34,926		(1,473)		0
Income (loss) from discontinued operations before taxes	33,176		(2,646)		(765)
Tax (expense) benefit	(6,967)		556		161
Income (loss) from discontinued operations, net of tax	$	26,209	$	(2,090)	$	(604)

AMAK’s financial statements were prepared in the functional currency of AMAK which is the SAR. In June 1986 the SAR was officially pegged to the U. S. Dollar at a fixed exchange rate of 1 USD to 3.75 SAR.

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The summarized results of operations and financial position for AMAK are as follows:


Results of Operations	Nine Months Ended September 30,		Year Ended December 31,
	2020		2019		2018
	(thousands of dollars)
Sales	$	62,633	$	78,350	$	70,234
Cost of sales	(55,728)		(69,620)		(68,084)
Gross profit	6,905		8,730		2,150
Selling, general, and administrative	(4,985)		(13,047)		(7,860)
Operating income (loss)	1,920		(4,317)		(5,710)
Other (expense) income	(346)		558		86
Finance and interest expense	(1,211)		(1,450)		(1,592)
Income (loss) before Zakat and income taxes	363		(5,209)		(7,216)
Zakat and income tax (expense) benefit	(490)		(1,801)		487
Net loss	$	(127)	$	(7,010)	$	(6,729)


Financial Position	September 30,		December 31,
	2020		2019
	(thousands of dollars)
Current assets	$	29,799	$	45,354
Noncurrent assets	209,814		196,564
Total assets	$	239,613	$	241,918

Current liabilities	$	40,919	$	27,645
Long term liabilities	79,122		79,348
Stockholders' equity	119,572		134,925
	$	239,613	$	241,918

The equity in the earnings (losses) of AMAK included in income (loss) from discontinued operations, net of tax, on the consolidated statements of operations for the years ended December 31, 2020, 2019, and 2018, is comprised of the following:


	Nine Months Ended September 30,		Year Ended December 31,
	2020		2019	2018
	(thousands of dollars)
AMAK Net Loss	(127)		(7,010)	(6,729)


Company’s share of loss reported by AMAK	(308)	*	(1,996)	(2,248)
Amortization of difference between Company’s investment in AMAK and Company’s share of net assets of AMAK	1,010		1,010	1,347
Equity in earnings (losses) of AMAK	702		(986)	(901)
* Percentage of Ownership varies during the period.

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NOTE 67 – PREPAID EXPENSES AND OTHER ASSETS

~~Prepaid expenses and other assets at December 31 are summarized as follows:~~


Prepaid expenses and other assets at December 31 are summarized as follows:
	2020		2019
	(thousands of dollars)
Prepaid license	$	403	$	1,209
Prepaid insurance	4,241		0
Spare parts	2,376		1,857
Insurance receivable	0		1,148
Cash held by AMAK (see Note 6)	1,877		0
Other prepaid expenses and assets	301		733
Total	$	9,198	$	4,947

2018 2017
(thousands of dollars)
Prepaid license $ 2,419
$ 1,919
Spare parts 1,597
954
Other prepaid expenses and assets 648
772
Total $ 4,664

$ 3,645

Beginning January 1, 2017, due to the expansion of our plant assets at SHR and TC, we began inventorying spare parts for the repair and maintenance of our plant, pipeline and equipment. Prepaid catalyst has been reclassified into Plant, Pipeline & Equipment to conform to current year reporting.

~~NOTE 7 – INVENTORIES~~

~~Inventories include the following at December 31:~~

2018
2017
(thousands of dollars)
Raw material $ 4,742
$ 3,703
Work in process 173
27
Finished products 11,624
14,720

Total inventory $ 16,539
$ 18,450

~~Inventory serves as collateral for our amended and restated loan agreement with a domestic bank (see Note 12).~~

~~Inventory included products in transit valued at approximately $4.1 million and $3.7 million at December 31, 2018, and 2017, respectively.~~

NOTE 8 – PLANT, PIPELINE AND EQUIPMENT

~~Plant, pipeline and equipment include the following at December 31:~~


Plant, pipeline and equipment include the following at December 31:							Plant, pipeline and equipment include the following at December 31:
	2018			2017				2020		2019
	(thousands of dollars)							(thousands of dollars)
Platinum catalyst	$	1,612		$	1,612		Platinum catalyst	$	1,580	$	1,580
Catalyst	3,131			779			Catalyst	4,325		4,095
Land	5,428			5,428			Land	5,428		5,428
Plant, pipeline and equipment	253,905			186,946			Plant, pipeline and equipment	270,149		258,651
Construction in progress	4,343			50,996			Construction in progress	6,422		5,052
Total plant, pipeline and equipment	268,419			245,761			Total plant, pipeline and equipment	287,904		274,806
Less accumulated depreciation	(73,762		)	(63,240		)	Less accumulated depreciation	(100,800)		(85,887)
Net plant, pipeline and equipment	$	194,657		$	182,521		Net plant, pipeline and equipment	$	187,104	$	188,919

Plant, pipeline and equipment serve as collateral for our amended and restated loan agreement with a domestic bank (see Note ~~12)~~13).

Interest capitalized for construction for ~~2018, 2017~~2020, 2019 and ~~2016~~2018 was approximately ~~$731,000, $937,000~~NaN, NaN and ~~$450,000,~~$0.7 million, respectively.

Labor capitalized for construction for ~~2018, 2017~~2020, 2019 and ~~2016~~2018 was approximately ~~$2,307,000, $4,344,000~~$0.6 million, $0.0 million and ~~$2,889,000,~~$2.3 million, respectively.

Catalyst amortization relating to the platinum catalyst which is included in cost of sales was approximately ~~$59,000, $25,000~~$1.2 million, $1.3 million and ~~$98,000~~$0.1 million for ~~2018, 2017~~2020, 2019 and ~~2016,~~2018, respectively.

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NOTE 9 – LEASES

The components of lease expense were as follows:


		December 31,
($ in thousands)	Classification in the Consolidated Statements of Operations	2020		2019		2018
Operating lease cost (a)	Cost of sales, exclusive of depreciation and amortization	$	4,088	$	4,361	$	0
Operating lease cost (a)	Selling, general and administrative	137		137		0
Total operating lease cost		$	4,225	$	4,498	$	0

Finance lease cost:
Amortization of right-of-use assets	Depreciation	0		0		0
Interest on lease liabilities	Interest Expense	0		0		0
Total finance lease cost		$	0	$	0	$	0

Total lease cost		$	4,225	$	4,498	$	0

(a) Short-term lease costs were approximately $0.5 million, $0.1 million and NaN as of December 31, 2020, 2019 and 2018, respectively.

The Company had 0 variable lease expense during the period.


		December 31,
($ in thousands)	Classification on the Consolidated Balance Sheets	2020		2019
Assets:
Operating	Operating lease assets	$	10,528	$	13,512
Finance	Property, plant, and equipment	0		0
Total leased assets		$	10,528	$	13,512

Liabilities:
Current
Operating	Current portion of operating lease liabilities	$	3,195	$	3,174
Finance	Short-term debt and current portion of long-term debt	0		0
Noncurrent
Operating	Operating lease liabilities	7,333		10,338
Finance	Long-term debt	0		0
Total lease liabilities		$	10,528	$	13,512


	December 31,
($ in thousands)	2020		2019		2018
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases	$	3,713	$	4,389	$	0
Operating cash flows used for finance leases	0		0		0
Financing cash flows used for finance leases	0		0		0
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	206	$	81	$	0
Finance leases	0		0		0


	December 31,
	2020		2019
Weighted-average remaining lease term (in years):
Operating leases	3.7		4.5
Finance leases	0.0		0.0
Weighted-average discount rate:
Operating leases	4.5	%	4.5	%
Finance leases	0	%	0	%

Nearly all of the Company’s lease contracts do not provide a readily determinable implicit rate. For these contracts, the Company’s estimated incremental borrowing rate is based on information available at the inception of the lease.

As of December 31, 2020, maturities of lease liabilities were as follows:


($ in thousands)	Operating Leases		Finance Leases
2020	$	3,590	$	0
2021	3,268		0
2022	2,376		0
2023	1,062		0
2024	991		0
Thereafter	117		0
Total lease payments	$	11,404	$	0
Less: Interest	876		0
Total lease obligations	$	10,528	$	0

NOTE 910 – GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

We ~~performed an~~evaluated our goodwill for impairment ~~analysis~~during the fourth quarter of 2019 in connection with our annual review. As part of our review, we assessed 2019 operating performance and its impact on the operating cash flows of our Specialty Waxes reporting unit. We concluded based on this analysis that the estimates of fair value of ~~Goodwill at December 31, 2018, and 2017, and determined that no~~our Specialty Waxes reporting unit was lower than its book value, including goodwill. As a result, we recorded a non-cash impairment ~~existed.~~charge of $24.2 million in 2019, representing all of the the goodwill previously allocated to this reporting unit.

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Intangible Assets

The following table summarizes the gross carrying amounts and accumulated amortization of intangible assets by major class (in thousands):


	December 31, 2020
Intangible assets subject to amortization (Definite-lived)	Gross		Accumulated Amortization		Net
Customer relationships	$	16,852	$	(7,022)	$	9,830
Non-compete agreements	94		(94)		0
Licenses and permits	1,471		(707)		764
Developed technology	6,131		(3,832)		2,299




Total	$	24,548	$	(11,655)	$	12,893

December 31, 2018
Intangible assets subject to amortization
(Definite-lived)
Gross

Accumulated
Amortization

Net
Customer relationships $ 16,852
$ (4,775 ) $ 12,077
Non-compete agreements 94
(80 ) 14
Licenses and permits 1,471
(495 ) 976
Developed technology 6,131
(2,606 ) 3,525
24,548

(7,956 )
16,592
Intangible assets not subject to amortization
(Indefinite-lived)

Emissions Allowance 197
—
197
Trade name 2,158
—
2,158
Total $ 26,903
$ (7,956 ) $ 18,947


	December 31, 2017								December 31, 2019
Intangible assets subject to amortization (Definite-lived)	Gross		Accumulated Amortization			Net		Intangible assets subject to amortization (Definite-lived)	Gross		Accumulated Amortization		Net
Customer relationships	$	16,852	$	(3,651	)	$	13,201	Customer relationships	$	16,852	$	(5,898)	$	10,954
Non-compete agreements	94		(61		)	33		Non-compete agreements	94		(94)		0
Licenses and permits	1,471		(390		)	1,081		Licenses and permits	1,471		(601)		870
Developed technology	6,131		(1,993		)	4,138		Developed technology	6,131		(3,219)		2,912
	24,548		(6,095		)	18,453
Intangible assets not subject to amortization (Indefinite-lived)
Emissions Allowance	197		—			197
Trade name	2,158		—			2,158

Total	$	26,903	$	(6,095	)	$	20,808	Total	$	24,548	$	(9,812)	$	14,736

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AL MASANE AL KOBRA MINING COMPANY

Balance Sheets - (Continued)


	September 30,	December 31,
	2020	2019
	(Expressed in Saudi Riyals)
Commitments and contingencies (Note 14)	0	0

Shareholders' equity
Share capital	820,000,000	820,000,000
Share premium	(131,808,900)	(74,713,350)
Accumulated deficit	(239,797,363)	(239,319,776)

Total shareholders' equity	448,393,737	505,966,874

	898,549,469	907,191,566

See accompanying notes to financial statements.

December 31,
2018
2017
(Expressed in Saudi Riyals)
Commitments and contingencies (Note 14)

Shareholders' equity
Share capital 820,000
780,000
Share premium —
37,546
Accumulated deficit (213,033 ) (187,800 )

Total shareholders' equity 606,967

629,746

961,441
979,528

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AL MASANE AL KOBRA MINING COMPANY

Statements of Operations

For the nine months ended September 30, 2020 and

years ended December 31, 2019 and 2018


	2020	2019	2018
	(Expressed in Saudi Riyals)
Revenues	234,872,562	293,811,329	263,377,273

Costs of revenues	208,980,004	279,645,705	255,313,296

Operating income	25,892,558	14,165,624	8,063,977

General and administrative expenses	18,693,047	30,355,423	29,475,998

Income (loss) from operations	7,199,511	(16,189,799)	(21,412,021)

Other income (expense)


Finance charges	(4,539,975)	(5,436,532)	(5,969,821)
Other income (expense) (Note 1)	(1,300,258)	2,091,152	323,575

	(5,840,233)	(3,345,380)	(5,646,246)

Income (loss )before Zakat and income tax	1,359,278	(19,535,179)	(27,058,267)

Zakat and income tax (expense) benefit	(1,836,865)	(6,751,156)	1,824,929

Net loss	(477,587)	(26,286,335)	(25,233,338)

See accompanying notes to financial statements.

December 31,
2018 2017 2016
(Expressed in Saudi Riyals)
Revenues 263,377,273
136,629,881
37,202,504

Costs of revenues 255,313,296
162,388,373
101,743,839

Operating income (loss) 8,063,977

(25,758,492 )
(64,541,335 )

General and
administrative expenses 29,475,998
28,299,733
26,957,555

Loss from operations (21,412,021 )
(54,058,225 )
(91,498,890 )

Other income (expense)
Gain on forgiveness of liabilities and
spare parts (Note 8) —
—
65,345,250
Finance charges (5,969,821 ) (6,103,680 ) (6,043,410 )
Other income 323,575
893,524
260,953

(5,646,246 )
(5,210,156 )
59,562,793

Loss before Zakat and income tax (27,058,267 ) (59,268,381 ) (31,936,097 )

Zakat and income tax benefit (expense) 1,824,929
(3,627,193 ) (3,596,244 )

Net loss (25,233,338 )
(62,895,574 )
(35,532,341 )

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AL MASANE AL KOBRA MINING COMPANY

Statements of Changes in Shareholders' Equity


	(Expressed in Saudi Riyals)
				Retained
				Earnings
	Share	Share	Treasury	(Accumulated
	Capital	Premium	Stock at cost	Deficit)	Total

Balance at December 31, 2017	780,000,000	37,546,420	0	(187,800,103)	629,746,317

Issuance of share premium	—	2,453,580	—	—	2,453,580

Conversion of share premium to share capital	40,000,000	(40,000,000)	—	—	0

Net loss	—	—	—	(25,233,338)	(25,233,338)

Balance at December 31, 2018	820,000,000	0	0	(213,033,441)	606,966,559

Share repurchase (Note 1)	—	—	(74,713,350)	—	(74,713,350)

Net loss	—	—	—	(26,286,335)	(26,286,335)

Balance at December 31, 2019	820,000,000	0	(74,713,350)	(239,319,776)	505,966,874

Share repurchase (Note 1)	—	—	(57,095,550)	—	(57,095,550)

Net loss	—	—	—	(477,587)	(477,587)

Balance at September 30, 2020	820,000,000	0	(131,808,900)	(239,797,363)	448,393,737

See accompanying notes to financial statements.

(Expressed in Saudi Riyals)
Retained
Earnings
Share Share (Accumulated
Capital Premium Deficit) Total

Balance at December 31, 2015 740,000,000
—
(89,372,188 ) 650,627,812

Issuance of share capital and premium 40,000,000
37,546,420
—
77,546,420

Net loss —
—
(35,532,341 ) (35,532,341 )

Balance at December 31, 2016 780,000,000

37,546,420

(124,904,529 )
692,641,891

Net loss —
—
(62,895,574 ) (62,895,574 )

Balance at December 31, 2017 780,000,000

37,546,420

(187,800,103 )
629,746,317

Issuance of share premium —
2,453,580
—
2,453,580

Conversion of share premium to share capital 40,000,000
(40,000,000 ) —
—

Net loss —
—
(25,233,338 ) (25,233,338 )

Balance at December 31, 2018 820,000,000
—
(213,033,441 ) 606,966,559

~~AL MASANE AL KOBRA MINING COMPANY~~

~~Statements~~Table of ~~Cash Flows~~

Contents

December 31,
2018
2017
2016
(Expressed in Saudi Riyals)
Cash flows from operating activities:
Net loss (25,233,338 ) (62,895,574 ) (35,532,341 )
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 125,507,864
83,547,586
43,768,238
Accretion of deferred mine closure costs 543,198
524,829
507,081
Amortization of deferred finance costs 2,175,902
1,610,733
2,147,644
Gain on forgiveness of liabilities —
—
(65,345,250 )
Deferred income taxes (7,224,929 ) 417,966
1,718,258
Changes in operating assets and liabilities:
Accounts receivable (8,021,219 ) (8,213,816 ) 28,351,618
Inventories (18,644,188 ) (11,351,752 ) 15,754,952
Advances to contractors and other 563,016
(3,944,995 ) (6,186,357 )
Accounts payable and accrued liabilities 6,084,327
9,638,009
3,511,632
Zakat and income tax liability 1,883,327
1,583,048
679,206
Pre-export advance payment —
—
(9,150,880 )
End-of-service indemnities 1,131,360
1,037,893
(264,797 )

Net cash provided by (used in) operating activities 78,765,320

11,953,927

(20,040,996 )

Cash flows from investing activities:
Additions to property and equipment (28,945,309 ) (31,550,443 ) (29,246,001 )

AL MASANE AL KOBRA MINING COMPANY

Statements of Cash Flows ~~- (Continued)~~

For the nine months ended September 30, 2020 and

years ended December 31, 2019 and 2018


	2020	2019	2018
	(Expressed in Saudi Riyals)
Cash flows from operating activities:
Net loss	(477,587)	(26,286,335)	(25,233,338)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	77,148,251	113,949,259	125,507,864
Accretion of deferred mine closure costs	405,558	562,211	543,198
Amortization of deferred finance costs	1,193,100	1,675,135	2,175,902
Deferred income taxes	(4,217,658)	424,873	(7,224,929)
Forfeiture of non-refundable deposit	1,429,670	0	0
Changes in operating assets and liabilities:
Accounts receivable	20,954,547	(13,408,437)	(8,021,219)
Inventories	(9,740,484)	10,593,780	(18,644,188)
Advances to contractors and other	29,402,704	(30,884,252)	563,016
Accounts payable and accrued liabilities	(1,919,339)	11,661,674	6,084,327
Zakat and income tax liability	4,034,655	5,532,026	1,883,327
End-of-service indemnities	1,149,029	1,231,003	1,131,360

Net cash provided by operating activities	119,362,446	75,050,937	78,765,320

Cash flows from investing activities:
Additions to property and equipment	(126,838,330)	(48,246,282)	(28,945,309)

Cash flows from financing activities:
Issuance of share capital and premium	0	0	2,453,580
Payments on capital lease obligations	(1,714,305)	(1,059,694)	(72,788)
Repurchase of treasury stock	(55,665,879)	(22,151,322)	0
Borrowings from long-term debt	50,000,000	50,000,000	0
Payments on long-term debt	0	(30,000,000)	0
Net advances to shareholders	0	(2,859,341)	(53,015,844)

Net cash used in financing activities	(7,380,184)	(6,070,357)	(50,635,052)

Increase (decrease) in cash and cash equivalents and restricted cash	(14,856,068)	20,734,298	(815,041)

Cash, cash equivalents and restricted cash, beginning of period	52,244,794	31,510,496	32,325,537

Cash, cash equivalents and restricted cash, end of period	37,388,726	52,244,794	31,510,496

Supplemental cash flow information

Cash paid for interest	3,346,875	4,428,545	3,927,778

Cash paid for Zakat and income tax	2,019,868	6,086,073	3,212,813

Supplemental disclosure of non-cash items

Assets acquired through capital lease obligations	0	7,933,140	625,805

Advances to shareholders applied to treasury stock purchase	1,429,671	52,562,028	0

See accopmanying notes to financial statements.

December 31,
2018 2017 2016
(Expressed in Saudi Riyals)
Cash flows from financing activities:
Issuance of share capital and premium 2,453,580
—
75,092,840
Payments on capital lease obligations (72,788 ) —
—
Payments on long-term debt —
(5,000,000 ) —
Net advances from (to) shareholders (53,015,844 ) 403,147
299,231

Net cash provided by (used in) financing activities (50,635,052 )
(4,596,853 )
75,392,071

Increase (decrease) in cash and cash equivalents (815,041 ) (24,193,369 ) 26,105,074

Cash and cash equivalents, beginning of year 32,325,537
56,518,906
30,413,832

Cash and cash equivalents, end of year 31,510,496

32,325,537

56,518,906

Supplemental cash flow information

Cash paid for interest 3,927,778
3,686,000
3,895,766

Cash paid for Zakat and income tax 3,212,813
1,626,179
1,198,780

Supplemental disclosure of non-cash items

Assets acquired through capital lease obligations 625,805
—
—

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Note 1 – Organization and Business

Organization

Al Masane Al Kobra Mining Company (us, we, our, AMAK or the Company) is a Saudi Arabian closed joint stock company approved by the Minister of Commerce and Industry Decree Number 247/Q dated 9/10/1428 (October 21, 2007) and registered in Jeddah under Commercial Registration No. 4030175345 on 7/1/1429 (January 16, 2008). During 2015, the head office was moved from Jeddah to Najran. Accordingly, Najran Commercial Registration No. 5950017523 dated 03/11/1431H (October 11, 2010) was modified to be the main Commercial Registration. ~~Unless the context requires otherwise, references to “we”, “us”, “our”, “AMAK”, and the “Company” are intended to mean Al Masane Al Kobra Mining Company.~~ All amounts are expressed in Saudi Riyals (SR) unless otherwise noted.

During 2009, the authorized capital of the Company was 450,000,000 consisting of 45 million shares of 10SR10 each of which 50% were issued for cash. The remaining 50% were issued for the contribution of mining rights and assets from Trecora Resources (Trecora) subject to Trecora’s liability for a loan in the amount of 41,250,000 due to the Ministry of Finance and National Economy. The mining rights in Al Masane mine were originally granted by Royal Decree Number M/17 effective 1/12/1413 (May 22, 1993) for a period of thirty years, with a right of renewal for a further period of twenty years to Trecora. The mining rights granted Trecora the right of exploitation in Al Masane mine located in Najran, Saudi Arabia, with an area of 44 square kilometers for a surface rental of 10,000 per square kilometer per year, i.e. 440,000 per year. As per the Ministry of Petroleum and Mineral Resources resolution dated 13/9/1429 (13/9/2008) and the ministry subsequent letter dated 2/1/1430 (30/12/2008), the aforementioned rights were transferred to us.

During 2011, the Company increased its authorized share capital by SR50,000,000 to SR500,000,000 and issued 5,000,000 shares of 10 each at a price of SR28 each resulting in a share premium of SR90,000,000. The entire 5,000,000 shares were issued for cash to Arab Mining Company (ARMICO) headquartered in Amman, Jordan.

During 2013, the Company increased its authorized share capital by SR50,000,000 to SR550,000,000 and issued 5,000,000 shares of 10 each at a price of SR30 each resulting in a share premium of SR100,000,000. The shares were issued for cash to existing shareholders.

During 2015, the Company increased its authorized share capital by SR190,000,000 to SR 740,000,000 and issued 19,000,000 shares of 10 each by transferring from share premium accounts.

During 2016, the Company increased its authorized share capital by SR40,000,000 to ~~SR 780,000,000~~SR780,000,000 and issued 4,000,000 shares of 10 each at a price of SR20 each resulting in a share premium of SR35,092,840.

During 2018, the Company increased share premium by SR2,453,580 for shares that were previously issued.

~~During 2018~~ In addition, the Company increased its authorized share capital by SR40,000,000 to SR820,000,000 and issued 4,000,000 shares of 10 each by transferring from share premium accounts.

During the Company’s Extraordinary General Assembly Meeting in October of 2018, the shareholders approved to repurchase up to 2,500,000 shares from the shareholders at a price of SR30 each and to register these shares as treasury shares. In December 2018, the Board unanimously approved this proposal and authorized the CEO to proceed with the repurchase. The Company ~~began advancing~~advanced certain shareholders their portion of these proceeds in ~~anticipation~~2018. During the first quarter of ~~completing~~2019, the Company finalized the transaction and ~~finalizing~~repurchased 2,490,445 shares for approximately SR74,713,000.

On October 2, 2019, the ~~treasury stock repurchase~~Company and certain shareholders of the Company (collectively, the “Purchasers”) entered into a Share Sale and Purchase Agreement (“Purchase Agreement”) with Trecora to purchase their entire equity interest in ~~2019.~~the Company for an aggregate gross purchase price of approximately SR264,700,000. The Purchase Agreement contains various representations, warranties and indemnity obligations of the Purchasers and Trecora. As required by the Purchase Agreement, the Purchasers advanced 5% of the purchase price to Trecora as a non-refundable deposit tha twould be applied to the purchase price. The Company’s share of the advance was approximately, SR2,855,000 and was included in advances to shareholders in the accompanying balance sheets as of December 31, ~~2018,~~2019.

On January 16, 2020, the Purchasers and Trecora entered into an amendment to extend the close date to March 31, 2020 to allow additional time for the parties to obtain certain required governmental approvals. On March 26, 2020, the Company ~~had advanced SR52,562,028~~entered into a second amendment that the Purchasers would complete the purchase of their portion of the shares in multiple closings. Purchasers that completed their portion of the sale after March 31, 2020 but on or before September 28, 2020, would forfeit an amount equal to ~~shareholders.~~50% of their non-refundable deposit as liquidated damages and would not be applied to the purchase price at closing. On April 1, 2020, the Company forfeited SR1,429,726 of their non-refundable deposit and is included in other income (expense) on the accompanying statement of operations.

~~Except~~On August 10, 2020, the Company closed their portion of the Purchase Agreement and purchased 5,709,555 shares from Trecora for ~~Trecora and ARMICO, all other shareholders are Saudi nationals or companies wholly owned by Saudi nationals. Our ownership is~~SR57,095,550. The Company has recorded these shares as ~~follows:~~treasury stock. On September 24, 2020, the remaining

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Shares
Ownership
Percentage
Saudi shareholders 38,349,184
46.8
Trecora (US Company) 27,402,876
33.4
ARMICO (Pan Arab Organization) 16,247,940
19.8

82,000,000
100.00
Purchasers purchased Trecora’s remaining outstanding shares. In connection with the completion of the Purchase Agreement, the Company entered into an agreement with Trecora whereby the Company agreed to withhold approximately SR7,878,000 of the purchase price to pay Trecora’s capital gain tax obligations. These amounts have been shown as restricted cash and the liability is included in Zakat and income tax liabilities on the accompanying balance sheet as of September 30, 2020.


As of September 30, 2020, our ownership is as follows:
	Shares	Ownership Percentage
Saudi shareholders	53,936,081	73.1

ARMICO (Pan Arab Organization)	19,502,500	26.4

Other	361,419	0.5

	73,800,000	100.0

Business and operations

Our principal activity is to produce zinc and copper concentrates and silver and gold doré as per the license Number 993/2 dated 16/7/1428 (July 31, 2007) issued by Saudi Arabian General Investment Authority (SAGIA). We commenced our commercial production on July 1, 2012. During 2015, we received a new mining lease for an area near our current mining area for the Guyan ancient mine.

~~On 16/11/1428 (November 26, 2007), while~~ Over the Company was in the registration process, the Company signed a contract with China National Geological and Mining Corporation (CGM) for underground mine rehabilitation, pre-production activity, and on-going mine development/production and with Nesma & Partners Contracting Company Limited (Nesma) for engineering, procurement, construction, commissioning and hand over of the concentrator surface works and the related infrastructure facilities. The handover of these facilities was finalized on November 28, 2011. In late 2014,years, we ~~renegotiated a more favorable plant operations~~have performed renovations and maintenance contract with CGM. CGM ran our mining operations until November 2015, at which time the Board of Directors cancelled the CGM and Nesma contract and temporarily suspended operations of the Company. See Note 8.

~~This planned, temporary shutdown of the facility was due~~ to ~~the continued depressed commodity price environment as well as needs for renovation and maintenance. Our focus during the renovation focused on improving~~improve recoveries overall and ~~upgrading~~upgrade the precious metals circuit through the installation of SART (sulfidization, acidification, recycling, and thickening) modifications which are expected to lower chemical use, thereby reducing operating costs. ~~In February 2016,~~During 2020 we ~~entered into a new operating~~completed an analysis of our mineral reserve estimates and ~~rehabilitation contract with a different vendor under more favorable terms.~~

~~We resumed operations~~extended the life of the mine and have made capital investments in the ~~first quarter of 2017 and generated enough ore for two shipments in 2017. In 2018, we resumed our schedule of 4 shipments a year.~~Guyan mining area.

Note 2 - Summary of Significant Accounting Policies

The accompanying financial statements have been prepared using U.S. generally accepted accounting principles. The following is a summary of our significant accounting policies:

Cash and cash equivalents

We consider all highly-liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Restricted cash

Restricted cash consists of amounts withheld from non-Saudi shareholders related to the Purchase Agreement for amount sdue to the General Authority of Zakat and Tax (GAZT) in the Kindom of Saudi Arabia for capital gains and income taxes.

Accounts receivable

We evaluate the collectability of our accounts receivable and the adequacy of the allowance for doubtful accounts based upon historical experience and any specific customer financial difficulties of which the Company becomes aware. During the nine months ended September 30, 2020 and years ended December 31, ~~2018, 2017,~~2019 and ~~2016,~~2018, we sold our concentrates and doré pursuant to a sales ~~contract~~contracts with primarily one customer. No amounts have been written off for the nine months ended September 30, 2020 and the years ended December 31, ~~2018, 2017,~~2019 and ~~2016.~~2018. In addition, we determined that an allowance for doubtful accounts was not necessary at September 30, 2020 and December 31, ~~2018 and 2017.~~2019.

Inventories

The components of inventories include mill stockpiles, precious metal doré, chemicals, and mining supplies. Inventories are stated at the lower of weighted-average cost or market. Costs of mill stockpiles inventory include labor and benefits, supplies, energy, depreciation, depletion, amortization, and other necessary costs incurred with the extraction and processing of ore. Corporate general and administrative costs are not included in inventory costs.

Because it is generally impracticable to determine the minerals contained in mill stockpiles by physical count, reasonable estimation methods are employed. The quantity of material delivered to the mill stockpiles is based on surveyed volumes of mined material and daily production records. Expected mineral recovery rates from the mill stockpiles are determined by various metallurgical testing methods.

Property and equipment

Property and equipment is carried at cost less accumulated depreciation. Expenditures for replacements and improvements are capitalized. Costs related to periodic maintenance are expensed as incurred. Depletion of the mining assets is determined using the unit-of-production method based on total estimated proven and probable reserves. Depletion and amortization using the

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unit-of-production method is recorded upon extraction of the ore, at which time it is allocated to inventory cost and then included as a component of cost of goods sold. Other assets are depreciated on a straight-line basis over their estimated useful lives ranging from 3 to 20 years.

Borrowing costs that are directly attributable to the acquisition, construction or production of assets are capitalized as part of the cost of those assets. Assets under construction are capitalized in the construction in progress account. Upon completion, the cost of the related asset is transferred to the appropriate category of property and equipment.

Development costs

Mineral exploration costs, as well as drilling and other costs incurred for the purpose of converting mineral resources to proven and probable reserves or identifying new mineral resources are charged to expense as incurred. Development costs are capitalized beginning after proven and probable reserves have been established. Development costs include costs incurred in mine pre-production activities undertaken to gain access to proven and probable reserves, including shafts, drifts, ramps, permanent excavations, infrastructure and removal of overburden. These costs are deferred net of the proceeds from the sale of any production during the development period and then amortized using an estimated unit-of-production method. If a mine is no longer considered economical, the accumulated costs are charged to the statement of operations in the year in which the determination is made.

Asset impairment

We review and evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the carrying amounts may not be recoverable. Long-lived assets are evaluated for impairment under the two-step model. When events or circumstance suggest impairment of long-lived assets, estimated undiscounted future net cash flows are calculated using future estimated commodity prices, proven and probable reserves, and estimated net proceeds from the disposition of assets on retirement, less operating, sustaining capital, and reclamation costs. If it is determined that an impairment exists, an impairment loss is measured as the amount by which the asset carrying value exceeds its fair value. Fair value is generally determined using valuation techniques such as estimated future cash flows. Because the cash flows used to assess recoverability of our long-lived assets and measure fair value of our mining operations require us to make several estimates and assumptions that are subject to risk and uncertainty, changes in these estimates and assumptions could result in the impairment of our long-lived asset values.

Based on our evaluation, we recorded no impairment losses during the nine months ended September 30, 2020 and the years ended December 31, ~~2018, 2017~~2019 and ~~2016.~~

2018.

End-of-service indemnities

Employee end-of-service benefits are accrued for the benefit of employees under the terms and conditions of Saudi Labor Law and Regulations and their employment contracts. End-of-service indemnities are provided for and accrued in the financial statements based on the respective employees' salaries and length of service.

~~Pre-export Advances~~

At times we receive advances on a pre-export basis against a portion of our inventory on hand prior to shipment. These advances bear interest at 2.5% and are repaid from the proceeds from final concentrate sales. We did not have an outstanding advance liability at December 31, 2018 and 2017.

Foreign currency

Our functional currency is the Saudi Riyal (SR). In June 1986, the Saudi Riyal was officially pegged to the U.S. Dollar at a fixed exchange rate of 1 U.S. Dollar to 3.75 riyals. Foreign currency transactions are translated into Saudi Riyals at the rates of exchange prevailing at the time of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the exchange rates prevailing at that date. Any gains and losses from settlement and translation of foreign currency transactions are included in the statement of operations. There were no material foreign-currency exchange gains or losses or translation adjustments during the nine months ended September 30, 2020 and the years ended December 31, ~~2018, 2017,~~2019 and ~~2016.~~

2018.

Leasing arrangements

We periodically lease operating equipment, facilities, and office buildings. Rentals payable under operating leases are charged to the statements of operations on a straight-line basis over the term of the relevant lease. For any capital leases, the present value of future minimum lease payments at the inception of the lease is reflected as an asset and a liability in the balance sheet. Amounts due within one year are classified as short-term liabilities and the remaining balance as long-term liabilities. Finance charges are charged to the statement of operations.

Operating lease expense amounted to approximately SR2,531,000, SR4,015,000 and SR1,619,000 ~~SR1,454,000~~for the nine months ended September 30, 2020 and ~~SR442,000 for~~ the years ended December 31, 2019 and 2018, ~~2017 and 2016,~~ respectively.

Environmental costs

Environmental costs are expensed or capitalized, depending upon their future economic benefits. Accruals for such expenditures are recorded when it is probable that obligations have been incurred and the costs can reasonably be estimated.

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Ongoing compliance costs are expensed as incurred.

Asset retirement obligations and costs

We record the fair value of our estimated asset retirement obligations ~~(AROs)~~(ARO) associated with tangible long-lived assets in the period in which the obligation is incurred. ~~AROs~~ARO associated with long-lived assets are those for which there is a legal obligation to settle under various laws, statues, or regulations. These obligations, which are initially estimated based on discounted cash flow estimates, are accreted to full value over time through charges to cost of revenues. In addition, asset retirement costs (ARCs) are capitalized as part of the related asset’s carrying value and are depreciated (primarily on a unit-of-production basis) over the asset’s respective useful life.

Our ~~AROs~~ARO consist primarily of costs associated with mine reclamation and closure activities and are included in deferred mine closure costs on the accompanying balance sheets. At least annually, we review our ARO estimates for changes in the projected timing and changes in cost estimates and additional ~~AROs~~ARO incurred during the period.

Zakat and income tax

We are subject to the Regulations of ~~the General Authority of Zakat and Tax (GAZT)~~GAZT in the Kingdom of Saudi Arabia. Under these regulations, Zakat is payable at 2.5% on the basis of the portion of our Zakat base attributable to our Saudi stockholders, and income tax is payable at 20% on the portion of our taxable income attributable to our non-Saudi stockholders. Zakat and income tax are provided on an accrual basis. Any difference in the estimate is recorded when the final assessment is approved, at which time the provision is cleared.

We account for deferred income taxes on non-Saudi owners utilizing an asset and liability method, whereby deferred tax assets and liabilities are recognized based on the tax effects of temporary differences between the financial statements and the income tax basis of assets and liabilities, as measured by the effective tax rate. When appropriate, we evaluate the need for a valuation allowance based on a more likely than not threshold to reduce deferred tax assets to estimated recoverable amounts.

We account for uncertain income tax positions using a threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We report tax-related interest and penalties as a component of Zakat and income tax expense. We recognized no material adjustment for unrecognized income tax liabilities. ~~Zakat and income tax returns for the years from 2010 to 2017 are currently under review with GAZT.~~

~~Reclassifications~~

~~Certain reclassifications have been made to the prior periods to conform with current year presentation.~~

Revenue recognition

The Company’s revenues primary consists of sales of copper and zinc.

We sell our products pursuant to individual sales contracts entered into with a customer who acts as an intermediary and resells our products to end users. The Company considers each sales contract to be a single performance obligation, represented by the delivery of a series of distinct goods that are substantially the same, with the same pattern of transfer to the Company’s customer. The Company concluded this as, based on the nature of its contracts, the customer receives the benefit of mineral sold as it is shipped per the terms of the commercial invoice at each delivery date. In addition, the Company considers that it has a right to consideration from its customers in an amount that corresponds directly to the value transferred to those customers that being the quantity of mineral delivered at the price per unit delivered. Accordingly, the Company recognizes revenue at the amount to which it has the right to invoice (the invoice practical expedient), as it believes that this method is a faithful depiction of the transfer of goods to its customers.

Revenue is recognized when or as the performance obligations are satisfied, when the Company transfers control of the goods and title ~~and risk of loss pass~~passes to the customer. Control is transferred generally upon the completion of loading the material as the point of origin. This is the point which the customer ~~and when collectability is reasonably assured. The passing of~~obtains legal title ~~and risk of loss~~ to the ~~customer is based on terms~~product as well as the ability to direct the use of and obtain substantially all the remaining benefits of ownership of the ~~sales contract, generally upon shipment or delivery of product.~~

assets.

Sales are recorded based on a provisional sales price or a final sales price calculated in accordance with the terms specified in the relevant sales contract. Under the long-established structure of sales agreements prevalent in the industry, the copper and zinc contained in concentrate is generally ~~provisionally~~“provisionally” priced at the time of shipment. The provisional price received at the time of shipment is later adjusted to a ~~final~~“final” price based on quoted monthly average spot prices on the London Metal Exchange (LME) for a specified future month. We record revenues at the time of shipment (when title and risk of loss pass) based on then-current LME prices, and we account for any changes between the sales price recorded at the time of shipment and subsequent changes in the LME prices through the date of final pricing as gains or losses from a derivative embedded in the sales contract (a futures contract initiated at the date of shipment and settled upon the determination of the ~~final price)~~“final price”) which is bifurcated and separately accounted for at fair value. ~~See Note 16.~~

The host contract is the sale of the metals contained in the concentrates at the then-current LME price as defined in the contract. Mark-to-market price fluctuations recorded through the settlement date are reflected in revenues for sales contracts. Our embedded derivatives at September 30, 2020 and December 31, 2019, were not significant to the financial statements.

Revenues from concentrate sales are recorded net of treatment and refining charges. These allowances are a negotiated term of

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each contract. Treatment and refining charges represent payments or price adjustments to smelters and refiners and are either fixed, or in certain cases, vary with the price of metals (referred to as price participation).

Management estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The most significant areas requiring the use of management estimates include mineral reserve estimation; useful asset lives for depreciation and amortization; zakat and income taxes; environmental obligations; reclamation and closure costs; estimates of recoverable materials in mill stockpiles; fair value of embedded derivatives; end-of-service indemnities; and

asset impairment, including estimates used to derive future cash flows associated with those assets. Actual results could differ from these estimates.

In early 2020, the World Health Organization declared the rapidly spreading coronavirus disease (COVID-19) outbreak a pandemic. This pandemic has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the Company’s results of operations and financial position at September 30, 2020. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of the financial statements. These estimates may change, as new events occur and additional information is obtained.

Recent accounting pronouncements

In May 2014 the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). ASU 2014-09 supersedes the revenue recognition requirements of FASB Accounting Standards Codification ("ASC") Topic 605, Revenue Recognition and most industry-specific guidance throughout the Accounting Standards Codification, resulting in the creation of FASB ASC Topic 606, Revenue from Contracts with Customers. ASU 2014-09 requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. For nonpublic companies this ASU provides alternative methods of retrospective adoption and is effective for fiscal years and interim periods beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the impact of these amendments, although it does not expect the amendments to have a significant impact to the Company’s financial position or results of operation.

In February 2016 the FASB issued ASU No. 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset (as defined). The ASU is effective for fiscal years beginning after December 15, ~~2019,~~2020, including interim periods within those fiscal years, with earlier application permitted. Upon adoption, the lessee will apply the new standard retrospectively to all periods presented or retrospectively using a cumulative effect adjustment in the year of adoption. The Company has several lease agreements for which the amendments will require the Company to recognize a lease liability to make lease payments and a right-of-use asset which will represent its right to use the underlying asset for the lease term. As permitted by the amendments, the Company is anticipating electing an accounting policy to not recognize lease assets and lease liabilities for leases with a term of twelve months or less. The Company is currently reviewing the amendments to ensure it is fully compliant by the adoption date and does not expect to early adopt. In addition, the Company will change its current accounting policies to comply with the amendments with such changes as mentioned above.

Reclassifications

Certain reclassifications have been made to the prior periods to conform with the current year presentation.

Subsequent events

We have evaluated events and transactions subsequent to the date of the financial statements for matters requiring recognition or disclosure in the financial statements. The accompanying financial statements consider events through March ~~6, 2019,~~4, 2021, the date on which the financial statements were available to be issued.

Note 3 – Liquidity and Capital Resources

As shown in the financial statements, we have incurred ~~three~~3 consecutive years of net losses however, the Company ~~resumed full operations and had~~has operating income and generated cash provided from ~~operations during the year ended December 31, 2018.~~operations. In addition, during 2020 we ~~expect to update~~have updated our mineral ~~resources~~reserve estimates and extended the life of the mine ~~in 2019~~ with the expectation that the life of mine will be extended another two to three years. We believe that our continued operations, additional debt financing discussed in Note 10, and ~~the~~ adjusted repayment terms of our outstanding debt will provide us the necessary liquidity and capital resources.

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Note 4 – Inventories

~~Inventories consisted of the following at:~~


Inventories consisted of the following at:
	September 30,	December 31,
	2020	2019
Stockpile ore	15,623,461	18,657,218
Ore concentrates	20,557,020	6,294,948
Precious metal dore	2,235,799	4,490,589
Explosives	484,169	326,599
Chemicals and other	6,117,375	5,507,986

	45,017,824	35,277,340

December 31,
2018
2017
Ore concentrates 17,020,657
12,118,132
Stockpile ore 19,134,297
9,417,626
Precious metal dore 2,159,192
—
Explosives 1,134,728
485,668
Chemicals and other 6,422,246
5,205,506

45,871,120

27,226,932

~~As discussed in Note 2, we can receive advances on a pre-export basis on our mill stockpiles.~~

Note 5 – Advances to Contractors and Other

~~Advances to contractors and other consisted of the following at:~~


Advances to contractors and other consisted of the following at:
	September 30,	December 31,
	2020	2019
Advances to contractors	13,668,562	42,672,136
Prepaid expenses	2,251,667	5,185,037
Other miscellaneous advances and receivables	4,730,086	2,195,845

	20,650,315	50,053,018

December 31,
2018
2017
Advances to contractors 15,127,502
11,992,870
Prepaid expenses 1,196,218
4,385,449
Other miscellaneous advances and receivables 2,845,045
3,353,461

19,168,765

19,731,780

Note 6 – Property and Equipment

~~Property~~


Property and equipment, net consisted of the following at:
	September 30,	December 31,
	2020	2019
Buildings	191,974,662	191,838,962
Leasehold improvements	4,051,062	1,838,317
Heavy equipment	146,801,861	136,066,275
Motor vehicles	22,753,563	22,467,300
Civil works	16,288,221	16,288,221
Tailings dam	23,900,160	23,900,160
Plant and machinery	332,014,825	326,974,958
Mining assets – rehabilitation costs	98,894,826	98,894,826
Mining assets – underground development costs	409,899,633	299,224,519
Construction in progress	3,356,625	4,789,313

	1,249,935,438	1,122,282,851

Less accumulated depreciation, depletion and amortization	(566,920,733)	(511,648,419)

	683,014,705	610,634,432

During 2020 and ~~equipment, net consisted of~~2019, additions to Mining Assets - underground development costs relates to capital investments in the ~~following at:~~

December 31,
2018
2017
Buildings 191,041,157
191,041,157
Leasehold improvements 1,838,317
1,838,317
Heavy equipment 118,125,568
110,259,122
Motor vehicles 22,467,300
22,783,108
Civil works 15,662,671
15,582,921
Tailings dam 23,042,594
22,684,394
Plant and machinery 324,372,695
315,029,454
Mining assets – rehabilitation costs 98,894,826
98,894,826
Mining assets – underground development costs 267,128,896
254,832,012
Construction in progress 5,106,409
5,532,817

1,067,680,433

1,038,478,128

Less accumulated depreciation, depletion and amortization (432,824,358 ) (344,676,457 )

634,856,075

693,801,671
Guyan mining area.

Property and equipment serve as collateral for the SIDF loan agreement (see Note 10).

Depreciation, depletion and amortization expense related to property and equipment was approximately, SR55,000,000, SR79,000,000 and SR88,000,000 for the nine months ended September 30, 2020 and ~~SR64,300,000 for~~the years ended December 31, 2019 and 2018, ~~and 2017. During 2016, the mine was temporarily closed for renovation, therefore, no amortization or depletion was recorded on certain mining assets.~~respectively.

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Note 7 – Development Costs

~~Development costs, net consisted of the following at:~~


Development costs, net consisted of the following at:					Development costs, net consisted of the following at:
	December 31,					September 30,	December 31,
	2018		2017			2020	2019
Cost	289,973,237		289,973,237		Cost	289,973,237	289,973,237
Accumulated amortization	(134,691,712	)	(98,445,057	)	Accumulated amortization	(191,033,512)	(168,705,573)

	155,281,525		191,528,180			98,939,725	121,267,664



ý☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Fiscal Year Ended December 31, ~~2018~~2020 OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Transition Period from ___________ to ________



Delaware (State or other jurisdiction of incorporation or organization)			75-1256622 (I.R.S. Employer Identification No.)
1650 Hwy 6 S, Suite 190 Sugar Land, TX (Address of principal executive offices)			77478 (Zip code)



Title of ~~Class~~each class	Trading Symbol(s)	Name of each exchange on which registered
Common ~~stock,~~Stock, par value $0.10 per share	TREC	New York Stock Exchange



Large accelerated filer ☐			Accelerated filer ý
Non-accelerated filer ☐			Smaller reporting company ☐☒
Emerging growth company ☐


PART I
ITEM 1.BUSINESS
			General	1
			Business Segments	1
			Specialty Petrochemicals Operations	2
			Specialty Waxes Operations	3
			Mineral Interests	3
			Environmental	3
			Human Capital Management	4
			COVID-19 Response	4
			Competition	4
			Available Information	4

~~PART I~~
~~ITEM 1. BUSINESS~~
	~~General~~	1
	~~Business Segments~~	1
	~~United States Specialty Petrochemical Operations~~	1
	~~United States Specialty Synthetic Wax Operations~~	3
	~~United States Mineral Interests~~	3
	~~Environmental~~	4
	~~Personnel~~	4
	~~Competition~~	4
	~~Investment in AMAK~~	4
	~~Available Information~~	8

ITEM 1A. RISK FACTORS		8 4

ITEM 1B. UNRESOLVED STAFF COMMENTS				15 13

ITEM 2. PROPERTIES				16 13

ITEM 3. LEGAL PROCEEDINGS				20 14

ITEM 4.MINE SAFETY DISCLOSURES				20 14

PART II
ITEM 5. MARKET FOR ~~REGISTRANT'S~~REGISTRANT ’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES				21 15

ITEM 6. SELECTED FINANCIAL DATA				22 16

ITEM 7. ~~MANAGEMENT'S~~MANAGEMENT ’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
			Forward Looking Statements	23 17
			Overview	24 18
			Business Environment & Risk Assessment	24 18
			Liquidity and Capital Resources	25 19
			Results of Operations	29 21
			~~New~~Recent Accounting ~~Standards~~Pronouncements	38 24
			Critical Accounting Policies	39 25

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK				42 27

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA				42 27

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE				43 27

ITEM 9A. CONTROLS AND PROCEDURES				43 27

ITEM 9B. OTHER INFORMATION				46 30

PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE				46 30

ITEM 11. EXECUTIVE COMPENSATION				46 30

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS				46 30

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE				46 30

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES				46 30

PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES				46 30

ITEM 16. FORM 10-K SUMMARY				33


~~(2)~~	~~TOCCO – Texas Oil & Chemical Co. II, Inc. – Wholly owned subsidiary of TREC and parent of SHR and TC~~


~~(3)~~	~~SHR – South Hampton Resources, Inc. – Specialty petrochemical segment and parent of GSPL~~


~~(4)~~	~~GSPL – Gulf State Pipe Line Co, Inc. – Pipeline support for the specialty petrochemical segment~~


~~(5)~~	~~TC – Trecora Chemical, Inc. – Specialty wax segment~~



	Average Price For 2016-2018		Spot Price as of 12/31/18		Percentage Increase (Decrease)
Gold per ounce	$	1,258.20	$	1,279.00	(1.65	)%
Silver per ounce	$	16.62	$	15.47	6.95	%
Copper per pound	$	2.93	$	2.98	(5.78	)%
Zinc per pound	$	1.32	$	1.25	4.82	%



Zone	Proven Reserves (Mtonnes)	Copper (%)	Zinc (%)	Gold (g/t)	Silver (g/t)
Saadah	0.45	1.5	3.7	0.8	21.0
Al Houra	0.03	0.8	3.8	0.7	21.0
Moyeath	—	—	—	—	—
Total	0.48	1.4	3.7	0.8	21.0

Zone	Probable Reserves (Mtonnes)	Copper (%)	Zinc (%)	Gold (g/t)	Silver (g/t)
Saadah	5.19	1.2	3.4	0.8	23.0
Al Houra	1.90	0.9	3.8	1.2	39.0
Moyeath	0.70	0.8	7.2	1.0	55.0
Total	7.79	1.1	3.9	0.9	29.0

Total proven and probable reserves	8.27
Less production through December 31, 2018	3.37
Remaining proven and probable reserves	4.90



	Average Price in USD
	2014-2016		2015-2017		2016-2018
Gold per ounce	$	1,224.96	$	1,222.06	$	1,258.20
Silver per ounce	$	17.29	$	16.62	$	16.62
Copper per pound	$	2.60	$	2.50	$	2.93
Zinc per pound	$	0.94	$	1.05	$	1.32



Ore Reserves (Probable+Proven) Zone	(Tonnes) (Mtonnes)	Copper (%)	Zinc (%)	Gold (g/t)	Silver (g/t)
Saadah	2.8	0.98	3.39	0.74	25.43
Al Houra	2.8	0.83	3.34	0.90	26.40
Moyeath	0.80	0.77	6.53	0.61	41.61
Total	6.4	0.89	3.78	0.79	27.87



Year	Mine Head Grade		Mill Throughput
	%Cu	%Zn	dmt
2011	1.26	3.02	9,460
2012	1.18	3.39	399,892
2013	1.48	3.19	699,316
2014	1.22	3.15	670,812
2015	1.11	3.69	591,419
2016	—	—	—
2017	1.10	3.22	385,495
2018	1.10	3.27	699,885



Year	Copper Concentrate				Zinc Concentrate
	dmt	%Cu	%Zn	Recovery	dmt	%Zn	%Cu	Recovery
2011	443	16.51	7.51	61.64	377	40.69	3.56	53.64
2012	15,944	23.91	5.46	80.62	20,738	50.03	1.16	76.54
2013	35,140	25.20	4.73	85.68	33,460	49.82	0.83	74.62
2014	28,476	24.20	4.31	84.24	31,600	51.02	0.70	76.26
2015	24,218	22.70	5.13	84.12	35,447	48.46	0.62	78.63
2016	—	—	—	—	—	—	—	—
2017	15,492	19.10	6.20	72.80	16,544	47.20	1.10	63.40
2018	27,508	22.59	5.25	80.78	33,735	49.36	1.27	72.73


													2020			2019			Change			% Change
	2018			2017			Change			%Change			(thousands of dollars)
	(in thousands)
Specialty Petrochemical Product Sales	$	242,763		$	203,515		$	39,248		19.3	%
Processing Fees	6,916			6,866			50			0.7	%
Specialty Petrochemicals Product Sales												Specialty Petrochemicals Product Sales	$	167,054		$	218,743		$	(51,689)		(23.6)	%
Processing												Processing	5,296			5,568			(272)			(4.9)	%
Gross Revenue	$	249,679		$	210,381		$	39,298		18.7	%	Gross Revenue	$	172,350		$	224,311		$	(51,961)		(23.2)	%

Volume of specialty petrochemical sales (thousand gallons)	89,644			83,326			6,318			7.6	%
Volume of prime product sales (thousand gallons)	69,403			63,990			5,413			8.5	%
Volume of Sales (gallons)												Volume of Sales (gallons)
Specialty Petrochemicals Products												Specialty Petrochemicals Products	75,101			84,780			(9,679)			(11.4)	%
Prime Products Sales												Prime Products Sales	61,650			68,099			(6,449)			(9.5)	%
By-product Sales												By-product Sales	13,451			16,681			(3,230)			(19.4)	%

Cost of Sales	$	223,796		$	169,213		$	54,583		32.3	%	Cost of Sales	$	145,166		$	184,666		$	(39,500)		(21.4)	%
Gross Margin	10.4		%	19.6		%	(9.2		)%	(46.9	)%	Gross Margin	15.8		%	17.7		%	(1.9)		%
Total Operating Expense*	73,096			58,740			14,356			24.4	%	Total Operating Expense*	70,224			72,206			(1,982)			(2.7)	%
Natural Gas Expense*	5,645			4,912			733			14.9	%	Natural Gas Expense*	3,737			4,800			(1,063)			(22.1)	%
Operating Labor Costs*	18,040			15,608			2,432			15.6	%	Operating Labor Costs*	16,138			14,222			1,916			13.5	%
Transportation Costs*	29,580			25,282			4,298			17.0	%	Transportation Costs*	22,181			28,270			(6,089)			(21.5)	%
General & Administrative Expense	11,413			10,243			1,170			11.4	%	General & Administrative Expense	10,618			10,650			(32)			(0.3)	%
Depreciation**	8,932			6,310			2,622			41.6	%	Depreciation**	10,611			10,556			55			0.5	%

Capital Expenditures	$	22,431		$	37,569		$	(15,138	)	(40.3	)%	Capital Expenditures	11,334			6,955			4,379			63.0	%



	2017			2016			Change			%Change
	(in thousands)
Specialty Petrochemical Product Sales	$	203,515		$	173,262		$	30,253		17.5	%
Processing Fees	6,866			8,766			(1,900		)	(21.7	)%
Gross Revenue	$	210,381		$	182,028		$	28,353		15.6	%

Volume of specialty petrochemical sales (thousand gallons)	83,326			76,372			6,954			9.1	%
Volume of prime product sales (thousand gallons)	63,990			58,441			5,549			9.5	��%

Cost of Sales	$	169,213		$	146,159		$	23,054		15.8	%
Gross Margin	19.6		%	19.7		%	(0.1		)%	(0.5	)%
Total Operating Expense*	58,740			58,536			204			0.3	%
Natural Gas Expense*	4,912			3,301			1,611			48.8	%
Operating Labor Costs*	15,608			16,094			(486		)	(3.0	)%
Transportation Costs*	25,282			24,138			1,144			4.7	%
General & Administrative Expense	10,243			9,172			1,071			11.7	%
Depreciation**	6,310			5,825			485			8.3	%

Capital Expenditures	$	37,569		$	22,948		$	14,621		63.7	%



	2018			2017			Change			%Change
	(thousands of dollars)
Product Sales	$	27,017		$	23,819		$	3,198		13.4	%
Processing Fees	11,236			10,943			293			2.7	%
Gross Revenue	$	38,253		$	34,762		$	3,491		10.0	%

Volume of wax sales (thousand pounds)	37,264			35,393			1,871			5.3	%

Cost of Sales	36,318			34,369			1,949			5.7	%
Gross Margin	5.1		%	1.1		%	4.0		%	363.6	%
General & Administrative Expense	5,053			4,931			122			2.5	%
Depreciation and Amortization*	5,376			4,589			787			17.1	%
Capital Expenditures	$	2,854		$	14,015		$	(11,161	)	(79.6	)%


	2020			2019			Change			% Change
	(thousands of dollars)
Product Sales	$	25,321		$	24,571		$	750		3.1	%
Processing	10,955			10,078			877			8.7	%
Gross Revenue	$	36,276		$	34,649		$	1,627		4.7	%

Volume of specialty waxes sales (pounds)	36,387			34,369			2,018			5.9	%

Cost of Sales	$	34,782		$	35,778		$	(996)		(2.8)	%
Gross Margin (Loss)	4.1		%	(3.3)		%	7.4		%
General & Administrative Expense*	5,160			4,546			614			13.5	%
Impairment of Goodwill and Certain Intangibles	—			24,152			(24,152)			(100.0)	%
Depreciation and Amortization**	5,522			5,593			(71)			(1.3)	%
Capital Expenditures	1,995			3,124			(1,129)			(36.1)	%


	Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(thousands of dollars)
Operating Lease Obligations	$	14,898	$	3,703	$	6,758	$	3,355	$	1,082
Purchase Obligations	9,799		9,799		—		—		—
Long-Term Debt Obligations	46,563		4,375		42,188		—		—
Total	$	71,260	$	17,877	$	48,946	$	3,355	$	1,082



	2018	2017	Variance
Ore tons processed	699,885	385,495	314,390
Concentrate to the port
Copper	26,070	15,326	10,744
Zinc	31,989	16,606	15,383
	58,059	31,932	26,127

Shipments
Copper	26,286	13,940	12,346
Zinc	31,272	14,080	17,192
	57,558	28,020	29,538


~~(b)~~	~~Management's Annual Report on Internal Control over Financial Reporting.~~


~~(c)~~	~~Attestation Report of the Registered Public Accounting Firm.~~



Exhibit Number		Description
~~3(a)~~2.1		Share Sale and Purchase Agreement, dated as of September 22, 2019, among Trecora Resources, Al Masane Al Kobra Mining Company and the other purchasers named therein (incorporated by reference to Exhibit 2.1 of the Company ’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 (file No. 001-33926))
2.2		Letter Agreement Amendment to the Share Sale and Purchase Agreement, dated November 24, 2019, among Trecora Resources, Al Masane Al Kobra Mining Company and the other purchasers named therein (incorporated by reference to Exhibit 2.2 of the Company ’s Annual Report on Form 10-K for the year ended December 31, 2019 (file No. 001-33926))
2.3		Letter Agreement Amendment to the Share Sale and Purchase Agreement, dated January 16, 2020, among Trecora Resources, Al Masane Al Kobra Mining Company and the other purchasers named therein (Incorporated by reference to Exhibit 2.1 of the Company ’s Current Report on Form 8-K filed on January 22, 2020 (file No. 001-33926))
2.4		Letter Agreement Amendment to the Share Sale and Purchase Agreement, dated March 23, 2020, among Trecora Resources, Al Masane Al Kobra Mining Company and the other purchasers named therein (incorporated by reference to Exhibit 2.2 of the Company ’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (file No. 001-33926))
3.1		Amended and Restated Certificate of Incorporation of Trecora Resources (incorporated by reference to Exhibit 3.1 to the ~~Company's~~Company ’s Current Report on Form 8-K filed on May 21, 2018 ~~(File~~(file No. 001-33926))
~~3(b)~~3.2		Amended and Restated Bylaws of Trecora Resources (incorporated by reference to Exhibit 3.2 to the ~~Company's~~Company ’s Current Report on Form 8-K filed on May 21, 2018 ~~(File~~(file No. 001-33926))
~~10(a)+~~4.1		Description of Securities Registered under Section 12 of the Exchange Act (incorporated by reference to Exhibit 4.1 of the Company ’s Annual Report on Form 10-K for the year ended December 31, 2019 (file No. 001-33926))
10.1+		Employment Contract , dated October 1, 2014, between Trecora Resources and Peter M. Loggenberg, Ph.D. (incorporated by reference to Exhibit 10(c) to the ~~Company's~~Company ’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (file No. 001-33926))
~~10(b)+~~10.2+		Severance Agreement and Covenant not to Compete, Solicit and Disclose , dated October 1, 2014, between Trecora Resources and Subsidiaries and Peter M. Loggenberg, Ph.D. (incorporated by reference to Exhibit 10(d) to the ~~Company's~~Company ’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (file No. 001-33926))
~~10(c)+~~10.3+		First Amendment to Employment Contract, effective as of March 7, 2018, between Trecora Resources and Peter Loggenberg, Ph.D. (incorporated by reference to Exhibit 10(a) to the ~~Company's~~Company ’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 ~~(File~~(file No. 001–33926))
~~10(d)*+~~10.4+		Letter Agreement, dated as of February 21, 2019, between Trecora Resources and Peter M. Loggenberg, Ph.D. (incorporated by reference to Exhibit 10.2 of the Company ’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 (file No. 001-33926))
10.5+		Employment Contract, dated as of December 3, 2018, between Trecora Resources and Patrick D. Quarles
~~10(e)+~~	~~Retirement Agreement, dated as of June 7, 2018, between Trecora Resources and Connie J. Cook~~ (incorporated by reference to Exhibit ~~10.2~~10(d) of the ~~Company’s~~Company ’s Annual Report on Form 10-K for the year ended December 31, 2018 (file No. 001-33926))
10.6+		Letter Agreement, dated as of May 15, 2019, between Trecora Resources and Sami Ahmad (incorporated by reference to Exhibit 10.1 of the Company ’s Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2018 (File~~2019 (file No. 001-33926))
~~10(f)+~~10.7+		~~Consulting Agreement, dated as of July 1, 2018, between~~ Trecora Resources ~~and Connie J. Cook~~Change of Control Severance Plan (incorporated by reference to Exhibit ~~10.3~~10.11 of the ~~Company’s Quarterly~~Company ’s Annual Report on Form ~~10-Q~~10-K for the ~~quarter~~year ended ~~June 30, 2018 (File~~December 31, 2019 (file No. 001-33926))
~~10(g)*+~~10.8+		~~Separation and Release Agreement, dated as of December 14, 2018, between Trecora Resources and Simon Upfill-Brown~~
~~10(h)*+~~	~~Amended and Restated Consulting Agreement, dated as of December 14, 2018, between Trecora Resources and Nicholas N. Carter~~
~~10(i)+~~	Trecora Resources Stock and Incentive Plan, as amended by the First Amendment (incorporated by reference to Appendix C to the ~~Company’s~~Company ’s Definitive Proxy Statement on Schedule 14A filed on April 10, 2018)
~~10(j)+~~10.9+		Second Amendment to the Trecora Resources Stock and Incentive Plan (incorporated by reference to Appendix B to the ~~Company’s~~Company ’s Definitive Proxy Statement on Schedule 14A filed on April 10, 2018)
~~10(k)+~~10.10+		Form of Trecora Resources Stock and Incentive Plan Restricted Stock Unit Agreement (incorporated by reference to Exhibit ~~10(b) to~~10.3 of the ~~Company's~~Company ’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2017~~March 31, 2019 (file No. 001-33926))


~~10(l)+~~Exhibit Number			Description
10.11+			Form of Trecora Resources Stock and Incentive Plan ~~Amended and Restated~~ Restricted Stock Unit Agreement (Time-Based Grants) (incorporated by reference to Exhibit ~~10(c) to~~10.2 of the ~~Company's~~Company ’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2017~~March 31, 2020 (file No. 001-33926))
~~10(m)~~10.12+			~~Articles~~Form of ~~Association of Al Masane Al Kobra Mining Company, dated July 10, 2006~~Trecora Resources Stock and Incentive Plan Restricted Stock Unit Agreement (Performance-Based Grants) (incorporated by reference to Exhibit ~~10(m) to~~10.5 of the ~~Company's Annual~~Company ’s Quarterly Report on Form ~~10-K~~10-Q for the ~~year~~quarter ended ~~December 31, 2009~~June 30, 2020 (file No. 001-33926))
~~10(n)~~10.13+			~~Bylaws of Al Masane Al Kobra Mining~~Arabian American Development Company Non-Employee Director Stock Option Plan adopted April 7, 2008 (incorporated by reference to Exhibit ~~10(n)~~B to the ~~Company's Annual Report on~~Company’s Form ~~10-K for the year ended December 31, 2009~~DEF 14A filed April 30, 2008 (file No. 001-33926))


10.14+*		Summary of Trecora Resources Annual Bonus Program
~~Exhibit~~ ~~Number~~		~~Description~~
~~10(o)~~10.15+*	~~Letter~~Consulting Services Agreement, dated ~~August~~as of March 5, ~~2009,~~2021, between Trecora Resources and ~~the other Al Masane Al Kobra Company shareholders named therein~~Joseph Tanner
10.16°		Second Amended and Restated Natural Gasoline Supply and Handling Agreement, dated as of May 1, 2020, between Martin Operating Partnership L.P. and South Hampton Resources, Inc. (incorporated by reference to Exhibit ~~10.1 to~~10.4 of the ~~Company's~~Company ’s Quarterly Report on Form ~~8-K filed on August 27, 2009~~10-Q for the quarter ended June 30, 2020 (file No. 001-33926))
~~10(p)~~10.17		Limited Guarantee dated October 24, 2010, between Trecora Resources and the Saudi Industrial Development Fund (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed on October 27, 2010 (file No. 001-33926)
~~10(q)~~	Amended and Restated Credit Agreement, dated as of October 1, 2014, among Texas Oil & Chemical Co. II, Inc., as Borrower, certain subsidiaries of the Borrower, as Guarantors, the Lenders from time to time party thereto and Bank of America, N.A., as Administrative Agent, Swingline Lender and an L/C Issuer (incorporated by reference to Exhibit 10.2 to the ~~Company's~~Company ’s Form 8–K filed on October 3, 2014 (file No. 001–33926))
~~10(r)~~10.18		Second Amendment to Amended and Restated Credit Agreement, dated as of March 28, 2017, among Texas Oil & Chemical Co. II, Inc., as Borrower, certain subsidiaries of the Borrower, as Guarantors, the Lenders from time to time party thereto and Bank of America, N.A., as Administrative Agent, Swingline Lender and an L/C Issuer (incorporated by reference to Exhibit 99.1 to the ~~Company's~~Company ’s form 8–K filed on March 30, 2017 (file No. 001-33926))
~~10(s)~~10.19		Third Amendment to Amended and Restated Credit Agreement, dated as of July 25, 2017, among Texas Oil & Chemical Co. II, Inc., as Borrower, certain subsidiaries of the Borrower, as Guarantors, the Lenders from time to time party thereto and Bank of America, N.A., as Administrative Agent, Swingline Lender and an L/C Issuer (incorporated by reference to Exhibit 99.1 to the ~~company's~~company ’s Form 8–K filed on July 27, 2017 (file No. 001–33926))
~~10(t)~~10.20		Fourth Amendment to Amended and Restated Credit Agreement, dated as of July 31, 2018, among Texas Oil & Chemical Co. II, Inc., as Borrower, certain subsidiaries of the Borrower, as Guarantors, the Lenders from time to time party thereto, Citibank, N.A., as an L/C Issuer, and Bank of America, N.A., as Administrative Agent, Swingline Lender and an L/C Issuer (incorporated by reference to Exhibit 10.1 of the ~~Company's~~Company ’s Current Report on Form 8-K dated July 31, 2018 ~~(File~~(file No. 001-33926))
~~10(u)~~10.21		Fifth Amendment to Amended and Restated Credit Agreement, dated as of December 19, 2018, among Texas Oil & Chemical Co. II, Inc., as Borrower, certain subsidiaries of the Borrower, as Guarantors, the Lenders from time to time party thereto, Citibank, N.A., as an L/C Issuer, and Bank of America, N.A., as Administrative Agent, Swingline Lender and an L/C Issuer (incorporated by reference to Exhibit 10.1 of the ~~Company's~~Company ’s Current Report on Form 8-K dated December 14, 2018 ~~(File~~(file No. 001-33926))
2110.22		Sixth Amendment to Amended and Restated Credit Agreement, dated as of March 29, 2019, among Texas Oil & Chemical Co. II, Inc., as Borrower, certain subsidiaries of the borrower, as Guarantors, The Lenders from time to time party thereto, Citibank, N.A., as an L/C Issuer, and Bank of America, N.A. as Administrative agent, Swingline Lender and an L/C Issuer (incorporated by reference to Exhibit 10.1 of the Company ’s Current Report on Form 8-K filed April 2, 2019 (file No. 001-33926))
10.23		Seventh Amendment to Amended and Restated Credit Agreement, dated as of May 8, 2020, among Texas Oil & Chemical Co. II, Inc., as Borrower, certain subsidiaries of the Borrower, as Guarantors, the Lenders from time to time party thereto, Citibank, N.A., as an L/C Issuer, and Bank of America, N.A., as Administrative Agent, Swingline Lender and an L/C Issuer (incorporated by reference to Exhibit 10.1 of the Company ’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 (file No. 001-33926))
10.24		Promissory Note, dated April 30, 2020, by South Hampton Resources, Inc., as Borrower, payable to Bank of America, N.A. (incorporated by reference to Exhibit 10.2 of the Company ’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 (file No. 001-33926))
10.25		Promissory Note, dated April 30, 2020, by Trecora Chemical, Inc., as Borrower, payable to Bank of America, N.A. (incorporated by reference to Exhibit 10.3 of the Company ’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 (file No. 001-33926))
21		Subsidiaries of Trecora Resources (incorporated by reference to Exhibit 21 to the ~~Company's~~Company ’s Annual Report on Form 10-K for the year ended December 31, 2014 ~~(File~~(file No. 001-33926))
23.1*		Consent of Independent Registered Public Accounting Firm, BKM Sowan Horan, LLP
23.2*		Consent of Independent Registered Public Accounting Firm, Mamdouh Al Majed & Faisal Al-Enzi


Exhibit Number			Description
24*			Power of Attorney (set forth on the signature page hereto)
31.1*			Certification of Chief Executive Officer pursuant to Rule 13a–14(a) or 15d–14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes–Oxley Act of 2002
31.2*			Certification of Chief Financial Officer pursuant to Rule 13a–14(a) or 15d–14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes–Oxley Act of 2002
32*			Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS			XBRL Instance Document
101.SCH			XBRL Taxonomy Schema Document
101.CAL			XBRL Taxonomy Calculation Linkbase Document
101.LAB			XBRL Taxonomy Label Linkbase Document
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document
104*			Cover Page Interactive Data File (formatted as inline XBRL and included as Exhibit 101)



Stock Exchange (see Notes 10 & 18)	(65	)	—		(66		)	(65		)	—			(131		)	—		(131		)
Warrants	9		—		(9		)	9			—			—			—		—
Net Income (Loss)	—		—		—			—			(2,332		)	(2,332		)	—		(2,332		)

December 31, 2018	24,626		$	2,463	$	58,294		$	(8	)	$	124,123		$	184,872		$	289	$	185,161



Cash paid	$	2,011
Estimated earnout liability	733
Purchase Price			$	2,744

Fixed assets at FMV
Land	980
Site improvements	30
Buildings	1,350
Production equipment	11,933
			14,293
Bargain purchase gain			$	11,549



~~Name~~	~~Percentage Owned~~
~~Various Saudi shareholders~~	~~46.73~~	%
~~Trecora Resources~~	~~33.41~~	%
~~Armico~~	~~19.86~~	%
~~Total~~	~~100.00~~	%


Accrued liabilities at December 31 are summarized as follows:
	2020		2019
	(thousands of dollars)
Accrued state taxes	$	125	$	0
Accrued payroll	2,282		1,250
Accrued royalties	260		273
Accrued officer compensation	1,053		1,687
Accrued professional expenses	559		1,000
Accrued foreign taxes	1,054		0
Other liabilities	1,524		1,532
Total	$	6,857	$	5,742



Year Ending December 31,	Long-Term Debt
	(thousands of dollars)
2019	4,375
2020	4,375
2021	4,375
2022	4,375
2023	85,812
Total	103,312


Long-term debt and long-term obligations at December 31 are summarized as follows:
	2020		2019
	(thousands of dollars)
Revolving facility	$	0	$	3,000
Term loan facility	46,563		80,938

Loan fees	(468)		(649)

Total long-term debt	46,095		83,289

Less current portion including loan fees	4,194		4,194

Total long-term debt, less current portion including loan fees	$	41,901	$	79,095



	Stock Options and Warrants		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Intrinsic Value (in thousands)
Outstanding at January 1, 2018	1,323,587		$	7.82
Granted	—		—
Expired	—		—
Exercised	(377,757	)	5.21
Forfeited	(200,000	)	3.40
Outstanding at December 31, 2018	745,830		$	10.33	4.6	$	—
Expected to vest	—		$	—	0.0	$	—
Exercisable at December 31, 2018	745,830		$	10.33	4.6	$	—


A summary of the status of the Company’s stock option and warrant awards is as follows:
	Stock Options and Warrants	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Intrinsic Value (in thousands)
Outstanding at January 1, 2020	487,000	$	10.87
Granted	0	0
Expired	0	0
Exercised	0	0
Forfeited	0	0
Outstanding at December 31, 2020	487,000	$	10.87	2.8	$	0
Expected to vest	0	$	0	0.0	$	0
Exercisable at December 31, 2020	487,000	$	10.87	2.8	$	0



	Shares		Weighted Average Grant-Date Fair Value Per Share
Non-vested at January 1, 2018	325,000		$	6.81
Granted	—		—
Forfeited	(200,000	)	3.40
Vested	(125,000	)	12.26
Non-vested at December 31, 2018	—		$	—



	Shares of Restricted Stock Units		Weighted Average Grant Date Price per Share
Outstanding at January 1, 2018	387,702		$	11.39
Granted	226,908		11.45
Forfeited	(103,637	)	11.39
Vested	(105,298	)	11.99
Outstanding at December 31, 2018	405,675		$	11.27
Expected to vest	405,675


The provision (benefit) for income taxes from continuing operations consisted of the following:
	Year ended December 31,
	2020		2019		2018
	(thousands of dollars)
Current federal benefit	$	(19,190)	$	0	$	(74)
Current state expense	86		91		31

Deferred federal expense (benefit)	15,140		(3,564)		(813)
Deferred state expense (benefit)	1		(93)		210

Income tax expense (benefit)	$	(3,963)	$	(3,566)	$	(646)


	Year Ended December 31, 2020
	Specialty Petrochemicals		Specialty Waxes		Corporate		Consolidated
	(in thousands)
Net revenues	$	172,350	$	36,276	$	0	$	208,626
Operating income (loss) before depreciation and amortization	26,438		1,762		(9,114)		19,086
Operating income (loss)	15,827		(3,760)		(9,129)		2,938
Income (loss) from continuing operations before taxes	13,294		(3,606)		(8,685)		1,003
Depreciation and amortization	10,611		5,522		16		16,149
Capital expenditures	11,334		2,017		0		13,351