Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Mar. 12, 2016 | Jun. 30, 2015 | |
Document And Entity Information | |||
Entity Registrant Name | GULF RESOURCES, INC. | ||
Entity Central Index Key | 885,462 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2015 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 51,733,034 | ||
Entity Common Stock, Shares Outstanding | 46,007,120 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,015 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Current Assets | ||
Cash | $ 133,606,392 | $ 146,585,601 |
Accounts receivable | 49,980,358 | 41,997,862 |
Inventories | $ 7,180,800 | 5,367,868 |
Prepayments and deposits | 86,301 | |
Prepaid land leases | $ 49,833 | 51,024 |
Other receivables | 599 | 38,272 |
Deferred tax assets | 3,173 | 864 |
Total Current Assets | 190,821,115 | 194,127,792 |
Non-Current Assets | ||
Property, plant and equipment, net | 127,871,323 | 124,350,781 |
Property, plant and equipment under capital leases, net | 927,218 | 1,339,602 |
Prepaid land leases, net of current portion | 5,197,216 | 733,560 |
Deferred tax assets | 2,367,180 | $ 2,430,417 |
Goodwill | 29,559,174 | |
Total non-current assets | 165,922,111 | $ 128,854,360 |
Total Assets | 356,743,226 | 322,982,152 |
Current Liabilities | ||
Accounts payable and accrued expenses | 9,929,700 | 4,004,728 |
Retention payable | 1,135,956 | 326,959 |
Capital lease obligation, current portion | 196,778 | 205,128 |
Taxes payable | 4,814,003 | 3,545,429 |
Total Current Liabilities | 16,076,437 | 8,082,244 |
Non-Current Liabilities | ||
Capital lease obligation, net of current portion | 2,555,914 | 2,826,495 |
Total Liabilities | 18,632,351 | 10,908,739 |
Stockholders' Equity | ||
PREFERRED STOCK; $0.001 par value; 1,000,000 shares authorized; none outstanding | 0 | 0 |
COMMON STOCK; $0.0005 par value; 80,000,000 shares authorized; 46,276,269 and 38,911,014 shares issued; and 46,007,120 and 38,672,865 shares outstanding as of December 31, 2015 and 2014, respectively | 23,139 | 19,456 |
Treasury stock; 269,149 and 238,149 shares as of December 31, 2015 and 2014 | (599,441) | (561,728) |
Additional paid-in capital | 94,124,065 | 80,380,008 |
Retained earnings unappropriated | 215,286,395 | 183,480,402 |
Retained earnings appropriated | 20,340,436 | 18,078,392 |
Cumulative translation adjustment | 8,936,281 | 30,676,883 |
Total Stockholders' Equity | 338,110,875 | 312,073,413 |
Total Liabilities and Stockholders' Equity | $ 356,743,226 | $ 322,982,152 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
PREFERRED STOCK, par or stated value per share | $ 0.001 | $ 0.001 |
PREFERRED STOCK, shares authorized | 1,000,000 | 1,000,000 |
PREFERRED STOCK, shares outstanding | 0 | 0 |
COMMON STOCK, par value per share | $ 0.0005 | $ 0.0005 |
COMMON STOCK, shares authorized | 80,000,000 | 80,000,000 |
COMMON STOCK, shares issued | 46,276,269 | 38,911,014 |
COMMON STOCK, shares outstanding | 46,007,120 | 38,672,865 |
Treasury stock, shares | 269,149 | 238,149 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
NET REVENUE | ||
Net revenue | $ 162,317,120 | $ 113,660,331 |
OPERATING EXPENSES / INCOME | ||
Cost of net revenue | (109,035,870) | (81,737,610) |
Sales, marketing and other operating expenses | (375,365) | (105,588) |
Research and development cost | (230,590) | (134,292) |
Exploration cost | (325,840) | (488,880) |
Write-off / Impairment on property, plant and equipment | $ (969,638) | (673,705) |
Loss from disposal of property, plant and equipment | (9,866) | |
General and administrative expenses | $ (6,668,838) | (7,161,047) |
Other operating income | 453,731 | 468,878 |
Total Costs and Expenses | (117,152,410) | (89,842,110) |
INCOME FROM OPERATIONS | 45,164,710 | 23,818,221 |
OTHER INCOME (EXPENSES) | ||
Interest expense | (194,036) | (203,296) |
Interest income | 469,271 | 482,885 |
Other income/expense | 275,235 | 279,589 |
INCOME BEFORE TAXES | 45,439,945 | 24,097,810 |
INCOME TAXES | (11,371,908) | (6,226,015) |
NET INCOME | 34,068,037 | 17,871,795 |
COMPREHENSIVE INCOME: | ||
NET INCOME | 34,068,037 | 17,871,795 |
OTHER COMPREHENSIVE INCOME | ||
- Foreign currency translation adjustments | (21,740,602) | (1,077,846) |
COMPREHENSIVE INCOME | $ 12,327,435 | $ 16,793,949 |
EARNINGS PER SHARE | ||
BASIC | $ 0.75 | $ 0.46 |
DILUTED | $ 0.74 | $ 0.46 |
WEIGHTED AVERAGE NUMBER OF SHARES | ||
BASIC | 45,167,288 | 38,694,567 |
DILUTED | 46,109,404 | 39,260,627 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) | Common Stock | Treasury Stock | Additional Paid-In Capital | Retained Earnings Unappropriated | Retained Earnings Appropriated | Cumulative Translation Adjustment | Total |
Begning Balance, Amount at Dec. 31, 2013 | $ 19,383 | $ (500,000) | $ 80,033,981 | $ 166,421,427 | $ 17,265,572 | $ 31,754,729 | $ 294,995,092 |
Begning Balance, Number of shares issued at Dec. 31, 2013 | 38,765,201 | ||||||
Begning Balance, Number of shares outstanding at Dec. 31, 2013 | 38,580,602 | ||||||
Begning Balance, Number of shares treasury stock at Dec. 31, 2013 | 184,599 | ||||||
Translation adjustment | $ (1,077,846) | $ (1,077,846) | |||||
Common stock repurchased, Number of shares outstanding | (53,550) | ||||||
Common stock repurchased, Number of shares treasury stock | 53,550 | (61,728) | (61,728) | ||||
Cashless exercise of stock options, Amount | $ 73 | $ (73) | $ 73 | ||||
Cashless exercise of stock options, Number of shares issued | 145,813 | ||||||
Cashless exercise of stock options, Number of shares outstanding | 145,813 | ||||||
Issuance of stock options to employees | 346,100 | 346,100 | |||||
Net income for year ended | $ 17,871,795 | $ 17,871,795 | |||||
Transfer to statutory common reserve fund | (812,820) | $ 812,820 | |||||
Ending Balance, Amount at Dec. 31, 2014 | $ 19,456 | $ (561,728) | 80,380,008 | 183,480,402 | 18,078,392 | $ 30,676,883 | $ 312,073,413 |
Ending Balance, Number of shares issued at Dec. 31, 2014 | 38,911,014 | ||||||
Ending Balance, Number of shares outstanding at Dec. 31, 2014 | 38,672,865 | ||||||
Ending Balance, Number of shares treasury stock at Dec. 31, 2014 | 238,149 | ||||||
Translation adjustment | (21,740,602) | $ (21,740,602) | |||||
Common stock repurchased, Number of shares outstanding | (31,000) | ||||||
Common stock repurchased, Number of shares treasury stock | 31,000 | (37,713) | (37,713) | ||||
Cashless exercise of stock options, Amount | $ 49 | (49) | $ 49 | ||||
Cashless exercise of stock options, Number of shares issued | 97,244 | ||||||
Cashless exercise of stock options, Number of shares outstanding | 97,244 | ||||||
Issuance of stock options to employees | 374,600 | 374,600 | |||||
Common stock issued for business acquisition, Amount | $ 3,634 | 13,369,506 | 13,373,140 | ||||
Common stock issued for business acquisition, Number of shares issued | 7,268,011 | ||||||
Common stock issued for business acquisition, Number of shares outstanding | 7,268,011 | ||||||
Net income for year ended | 34,068,037 | 34,068,037 | |||||
Transfer to statutory common reserve fund | (2,262,044) | 2,262,044 | |||||
Ending Balance, Amount at Dec. 31, 2015 | $ 23,139 | $ (599,441) | $ 94,124,065 | $ 215,286,395 | $ 20,340,436 | $ 8,936,281 | $ 338,110,875 |
Ending Balance, Number of shares issued at Dec. 31, 2015 | 46,276,269 | ||||||
Ending Balance, Number of shares outstanding at Dec. 31, 2015 | 46,007,120 | ||||||
Ending Balance, Number of shares treasury stock at Dec. 31, 2015 | 269,149 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income | $ 34,068,037 | $ 17,871,795 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Interest on capital lease obligation | 193,162 | 202,656 |
Amortization of prepaid land leases | 774,512 | 680,551 |
Depreciation and amortization | 29,095,648 | 27,642,222 |
Allowance for obsolete and slow-moving inventories | 9,236 | (3,174) |
Write-off / Impairment loss on property, plant and equipment | $ 969,638 | 673,705 |
Loss from disposal of property, plant and equipment | 9,866 | |
Currency translation adjustment on inter-company balances | $ (1,575,397) | (92,412) |
Deferred tax asset | (83,856) | (121,436) |
Stock-based compensation expense | 374,600 | 346,100 |
Changes in assets and liabilities, net of effects of acquisition: | ||
Accounts receivable | 7,387,941 | 2,751,676 |
Inventories | (592,841) | (84,777) |
Prepayment and deposits | 92,400 | (80,673) |
Accounts payable and accrued expenses | (1,847,462) | (1,616,195) |
Retention payable | 841,225 | 117,905 |
Other receivables | 37,713 | (38,272) |
Taxes payable | 656,654 | (1,685,760) |
Net cash provided by operating activities | 70,401,210 | 46,573,777 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Additions of prepaid land leases | $ (683,129) | (664,106) |
Proceeds from sales of property, plant and equipment | 21,514 | |
Purchase of property, plant and equipment | $ (22,858,625) | $ (6,538,611) |
Consideration paid for business acquisition | (66,305,606) | |
Cash acquired from acquisition | 14,074,720 | |
Net cash used in investing activities | (75,772,640) | $ (7,181,203) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Repurchase of common stock | (37,713) | (61,728) |
Repayment of capital lease obligation | (306,683) | (304,806) |
Net cash used in financing activities | (344,396) | (366,534) |
EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (7,263,383) | (269,239) |
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS | (12,979,209) | 38,756,801 |
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR | 146,585,601 | 107,828,800 |
CASH AND CASH EQUIVALENTS - END OF YEAR | 133,606,392 | 146,585,601 |
Cash paid during the year for: | ||
Income taxes | 10,747,472 | 7,604,071 |
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||
Issuance of common stock upon cashless exercise of options | 49 | $ 73 |
Issuance of common stock for acquisition of business | $ 13,373,140 |
1. NATURE OF BUSINESS AND SUMMA
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2015 | |
Accounting Policies [Abstract] | |
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | (a) Basis of Presentation The accompanying audited consolidated financial statements have been prepared by Gulf Resources, Inc. a Nevada corporation and its subsidiaries (collectively, the “Company”). On November 24, 2015, Gulf Resources, Inc., a Delaware corporation consummated a merger with and into its wholly-owned subsidiary, Gulf Resources, Inc., a Nevada corporation. As a result of the reincorporation, the Company is now a Nevada corporation. Upper Class Group Limited was incorporated with limited liability in the British Virgin Islands on July 28, 2006 and was inactive until October 9, 2006 when Upper Class Group Limited acquired all the issued and outstanding stock of Shouguang City Haoyuan Chemical Company Limited (“SCHC”). SCHC is an operating company incorporated in Shouguang City, Shangdong Province, the People’s Republic of China (the “PRC”) on May 18, 2005. SCHC is engaged in manufacturing and trading bromine and crude salt in China. Since the ownership of Upper Class Group Limited and SCHC were the same, the merger was accounted for as a transaction between entities under common control, whereby Upper Class Group Limited recognized the assets and liabilities transferred at their carrying amounts. On December 12, 2006, Gulf Resources, Inc. (formerly Diversifax, Inc.), a public “shell” company, acquired Upper Class Group Limited and its wholly-owned subsidiary, SCHC (together “Upper Class”). Under the terms of the agreement, all stockholders of Upper Class received a total amount of 13,250,000 (restated for the 2-for-1 stock split in 2007 and the 1-for-4 stock split in 2009) shares of voting common stock of Gulf Resources, Inc. in exchange for all shares of Upper Class’ common stock held by all stockholders. Under accounting principles generally accepted in the United States, the share exchange is considered to be a capital transaction in substance, rather than a business combination. That is, the share exchange is equivalent to the issuance of stock by Upper Class for the net monetary assets of Gulf Resources, Inc., accompanied by a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the share exchange will be identical to that resulting from a reverse acquisition, except no goodwill will be recorded. Under reverse takeover accounting, the post reverse acquisition comparative historical financial statements of the legal acquirer, Gulf Resources, Inc., are those of the legal acquiree, Upper Class, which is considered to be the accounting acquirer. Share and per share amounts stated have been retroactively adjusted to reflect the merger. On February 5, 2007, SCHC acquired Shouguang Yuxin Chemical Industry Co., Limited (“SYCI”), a company incorporated in PRC on October 30, 2000. SYCI manufactures chemical products utilized in oil and gas field explorations and as papermaking chemical agents. Under the terms of the merger agreement, all stockholders of SYCI received a total amount of 8,094,059 (restated for the 2-for-1 stock split in 2007 and the 1-for-4 stock split in 2009) shares of voting common stock of Gulf Resources, Inc. in exchange for all shares of SYCI’s common stock held by all stockholders. Also, upon the completion of the merger, Gulf Resources, Inc. paid a $2,550,000 dividend to the original stockholders of SYCI. Since the ownership of Gulf Resources, Inc. and SYCI are substantially the same, the merger was accounted for as a transaction between entities under common control, whereby Gulf Resources, Inc. recognized the assets and liabilities of the Company transferred at their carrying amounts. Share and per share amounts stated have been retroactively adjusted to reflect the merger. On November 11, 2007, Upper Class formed Hong Kong Jiaxing Industrial Limited (formerly known as Jiaxing Technology Limited) (“HKJI”), a wholly-owned subsidiary of Upper Class, in Hong Kong. Upper Class transferred its equity interest in SCHC to HKJI. On February 4, 2015 the Company closed the transactions contemplated by the Agreement between the Company, SCHC and SCRC. On the Closing Date, the Company issued 7,268,011 shares of its common stock, par value $0.0005 per share (the “Shares”), at the closing market price of $1.84 per Share on the Closing Date to the four former equity owners of SCRC .The issuance of the Shares was exempt from registration pursuant to Regulation S of the Securities Act of 1933, as amended. On the Closing Date, the Company entered into a lock-up agreement with the four former equity owners of SCRC. In accordance with the terms of the lock-up agreement, the shareholders have agreed not to sell or transfer the Shares for five years from the date the stock certificates evidencing the Shares are issued. The sellers of SCRC agreed as part of the purchase price to accept 7,268,011 shares of Gulf Resources stock, based on a valuation of $2.00, which was a 73% premium to the price on the day the agreement was reached. For accounting purposes, these shares are now being valued at $1.84, which was the closing price of Gulf Resources' stock on the day of the closing of the agreement. The price difference between the original $2.00 and the current $1.84 is solely for accounting purposes. There has been no change in the number of shares issued. On December 15, 2015, the Company incorporated a subsidiary in the Sichuan Province of the PRC named Daying County Haoyuan Chemical Company Limited (“DCHC”) with a registered Capital of RMB50,000,000. DCHC was established to further explore and develop natural gas and brine resources (including bromine and crude salt) in China. As of filing date, the Company has not contributed any capital and DCHC has not commenced business operations. (b) Nature of the Business The Company manufactures and trades bromine and crude salt through SCHC, and manufactures chemical products for use in the oil industry, paper manufacturing industry and pesticides manufacturing industry through SYCI, and manufactures chemical products used for human and animal antibiotics through SCRC. (c) Basis of Consolidation The consolidated financial statements include the accounts of Gulf Resources, Inc. and its wholly-owned subsidiary, Upper Class Group Limited, a company incorporated in the British Virgin Islands, which owns 100% of Hong Kong Jiaxing Industrial Limited, a company incorporated in Hong Kong (“HKJI”). HKJI owns 100% of Shouguang City Haoyuan Chemical Company Limited ("SCHC") which owns 100% of ShouguangYuxin Chemical Industry Co., Limited (“SYCI”) and Shouguang City Rongyuan Chemical Co, Ltd (“SCRC”). All material intercompany transactions have been eliminated on consolidation. (d) Use of Estimates The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and this requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The most significant accounting estimates with regard to these consolidated financial statements that require the most significant and subjective judgments include, but are not limited to, useful lives of property, plant and equipment, recoverability of long-lived assets, determination of impairment losses, assessment of market value of inventories and provision for inventory obsolescence, allowance for doubtful accounts, recognition and measurement of current and deferred income taxes, valuation allowance for deferred tax assets, and assumptions used for the valuation of share based payments. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions. (e) Cash and Cash Equivalents Cash and cash equivalents consist of all cash balances and highly liquid investments with original maturities of three months or less. Because of short maturity of these investments, the carrying amounts approximate their fair values. (f) Accounts Receivable and Allowance of Doubtful Accounts Accounts receivable is stated at cost, net of allowance for doubtful accounts. The normal credit term extended to customers ranges between 90 and 180 days. The company reviews all receivables that exceed the term. The Company establishes an allowance for doubtful accounts based on management’s assessment of the collectability of trade and other receivables. A considerable amount of judgment is required in assessing the amount of allowance and the Company considers the historical level of credit losses. The Company makes judgments about the credit worthiness of each customer based on ongoing credit evaluations, and monitors current economic trends that might impact the level of credit losses in the future. If the financial condition of the customer begins to deteriorate, resulting in their inability to make payments within credit term provided, a larger allowance may be required. As of December 31, 2015 and 2014, allowances for doubtful accounts were nil. No allowances for doubtful accounts were charged to the income statement for the years ended December 31, 2015 and 2014. (g) Concentration of Credit Risk The Company is exposed to credit risk in the normal course of business, primarily related to accounts receivable and cash and cash equivalents. Substantially all of the Company’s cash and cash equivalents are maintained with financial institutions in the PRC, namely, Industrial and Commercial Bank of China Limited and China Merchants Bank Company Limited, which are not insured or otherwise protected. The Company placed $133,606,392 and $146,585,601 with these institutions as of December 31, 2015 and 2014, respectively. The Company has not experienced any losses in such accounts in the PRC. Concentrations of credit risk with respect to accounts receivable exists as the Company sells a substantial portion of its products to a limited number of customers. However, such concentrations of credit risks are limited since the Company performs ongoing credit evaluations of its customers’ financial condition. About 73.3% and 66.5% of the balances of accounts receivable as of December 31, 2015 and December 31, 2014, respectively, were outstanding for those which are 90 days old or less. For the balances of accounts receivable aged more than 90 days as of December 31, 2015, 98% were settled in the two months ended February 29, 2016. (h) Inventories Inventories are stated at the lower of cost, determined on a first-in first-out cost basis, or market. Costs of work-in-progress and finished goods comprise direct materials, direct labor and an attributable portion of manufacturing overhead. Net realizable value is based on estimated selling price less costs to complete and selling expenses. (i) Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. Expenditures for new facilities or equipment, and major expenditures for betterment of existing facilities or equipment are capitalized and depreciated using the straight-line method at rates sufficient to depreciate such costs less 5% residual value over the estimated productive lives. All other ordinary repair and maintenance costs are expensed as incurred. Mineral rights are recorded at cost less accumulated depreciation and any impairment losses. Mineral rights are amortized ratably over the term of the lease, or the equivalent term under the units (in tonnes) of production method, whichever is shorter. Construction in progress primarily represents direct costs of construction of property, plant and equipment. Costs incurred are capitalized and transferred to property, plant and equipment upon completion, at which time depreciation commences. The Company’s depreciation and amortization policies on property, plant and equipment other than mineral rights and construction in progress are as follows: Useful life (in years) Buildings (including salt pans) 8 - 20 Plant and machinery (including protective shells, transmission channels and ducts) 3 - 8 Motor vehicles 5 Furniture, fixtures and equipment 3 - 8 Property, plant and equipment under capital leases are depreciated over their expected useful lives on the same basis as owned assets, or where shorter, the term of the lease, which is 20 years. (j) Asset Retirement Obligation The Company follows FASB ASC 410, which established a uniform methodology for accounting for estimated reclamation and abandonment costs. FASB ASC 410 requires the fair value of a liability for an asset retirement obligation to be recognized in the period in which the legal obligation associated with the retirement of the long-lived asset is incurred. When the liability is initially recorded, the offset is capitalized by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. To settle the liability, the obligation is paid, and to the extent there is a difference between the liability and the amount of cash paid, a gain or loss upon settlement is recorded. Currently, there are no reclamation or abandonment obligations associated with the land being utilized for exploitation. (k) Recoverability of Long Lived Assets In accordance with ASC 360-10-35 “Impairment or Disposal of Long-lived Assets”, long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable or that the useful lives of those assets are no longer appropriate. The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment. The Company determines the existence of such impairment by measuring the expected future cash flows (undiscounted and without interest charges) and comparing such amount to the carrying amount of the assets. An impairment loss, if one exists, is then measured as the amount by which the carrying amount of the asset exceeds the discounted estimated future cash flows. Assets to be disposed of are reported at the lower of the carrying amount or fair value of such assets less costs to sell. Asset impairment charges are recorded to reduce the carrying amount of the long-lived asset that will be sold or disposed of to their estimated fair values. Charges for the asset impairment reduce the carrying amount of the long-lived assets to their estimated salvage value in connection with the decision to dispose of such assets. For the year ended December 31, 2014, certain property, plant and machinery, with net book values of $673,705, respectively, were replaced during the third phase enhancement project to protective shells for transmission channels and ducts for Factory No 10 and 11, write-offs of the same amounts, were made and included in write-off/impairment on property, plant and equipment. For the year ended December 31, 2015, certain property, plant and machinery, with net book values of $969,638 were replaced during the fourth phase enhancement project to protective shells for transmission channels, the enhancement work to bromine production facilities in Factory No.9 and 11 and the dismantle the Factory No.1 and 9 plant construction equipment due to did not meet the government's safety and environmental standards, write-offs of the same amounts, were made and included in write-off/impairment on property, plant and equipment. (l) Retirement Benefits Pursuant to the relevant laws and regulations in the PRC, the Company participates in a defined contribution retirement plan for its employees arranged by a governmental organization. The Company makes contributions to the retirement scheme at the applicable rate based on the employees’ salaries. The required contributions under the retirement plans are charged to the consolidated income statement on an accrual basis when they are due. The Company’s contributions totaled $980,359 and $707,086 for the years ended December 31, 2015 and 2014, respectively. (m) Mineral Rights The Company follows FASB ASC 805 “Business Combinations” that certain mineral rights are considered tangible assets and that mineral rights should be accounted for based on their substance. Mineral rights are included in property, plant and equipment. (n) Leasing arrangements Rentals payable under operating leases are charged to the statements of income on a straight line basis over the term of the relevant lease. For capital leases, the present value of future minimum lease payments at the inception of the lease is reflected as an asset and a liability in the statement of financial position. Amounts due within one year are classified as short-term liabilities and the remaining balance as long-term liabilities. (o) Reporting Currency and Translation The financial statements of the Company’s foreign subsidiaries are measured using the local currency, Renminbi (“RMB”), as the functional currency; whereas the functional currency and reporting currency of the Company is the United States dollar (“USD” or “$”). As such, the Company uses the “current rate method” to translate its PRC operations from RMB into USD, as required under FASB ASC 830 “Foreign Currency Matters”. The assets and liabilities of its PRC operations are translated into USD using the rate of exchange prevailing at the balance sheet date. The capital accounts are translated at the historical rate. Adjustments resulting from the translation of the balance sheets of the Company’s PRC subsidiaries are recorded in stockholders’ equity as part of accumulated comprehensive income. The statement of income and comprehensive income is translated at average rates during the reporting period. Gains or losses resulting from transactions in currencies other than the functional currencies are recognized in net income for the reporting periods as part of general and administrative expense. Included in the general and administrative expense is a foreign exchange gain of $1,575,397 and a foreign exchange gain of $92,412 for the years ended December 31, 2015 and 2014. The statement of cash flows is translated at average rates during the reporting period, with the exception of issuance of shares and payment of dividends which are translated at historical rates. (p) Foreign Operations All of the Company’s operations and assets are located in PRC. The Company may be adversely affected by possible political or economic events in this country. The effect of these factors cannot be accurately predicted. (q) Revenue Recognition The Company recognizes revenue, net of value-added tax, when persuasive evidence of an arrangement exists, delivery of the goods has occurred, customer acceptance has been obtained, which means the significant risks and ownership have been transferred to the customer, the price is fixed or determinable and collectability is reasonably assured. (r) Income Taxes The Company accounts for income taxes in accordance with the Income Taxes Topic of the FASB ASC, which requires the use of the liability method of accounting for deferred income taxes. Under this method, deferred income taxes are recorded to reflect the tax consequences on future years of temporary differences between the tax basis of assets and liabilities and their reported amounts at each period end. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. The guidance also provides criteria for the recognition, measurement, presentation and disclosures of uncertain tax positions. A tax benefit from an uncertain tax position may be recognized if it is “more likely than not” that the position is sustainable based solely on its technical merits. (s) Exploration Costs Exploration costs, which included the cost of researching for appropriate places to drill wells and the cost of well drilling in search of potential natural brine or other resources, are charged to the income statement as incurred. (t) Contingencies The Company accrues for costs relating to litigation, including litigation defense costs, claims and other contingent matters, including liquidated damage liabilities, when such liabilities become probable and reasonably estimable. Such estimates may be based on advice from third parties or on management’s judgment, as appropriate. Revisions to accruals are reflected in earnings (loss) in the period in which different facts or information become known or circumstances change that affect the Company’s previous assumptions with respect to the likelihood or amount of loss. Amounts paid upon the ultimate resolution of such liabilities may be materially different from previous estimates. (u) Stock-based Compensation Common stock, stock options and stock warrants issued to employees or directors are recorded at their fair values estimated at grant date using the Black-Scholes model and the portion that is ultimately expected to vest is recognized as compensation cost over the requisite service period. Common stock, stock options and stock warrants issued to other than employees or directors are recorded on the basis of their fair value using the Black-Scholes option-pricing model on the basis of the market price of the underlying common stock on the “valuation date,” which for options and warrants related to contracts that have substantial disincentives to non-performance is the date of the contract, and for all other contracts the measurement date is the date that the service is complete. Expense related to the options and warrants is recognized on a straight-line basis over the period in which services are to be received. Where expense must be recognized prior to a valuation date, the expense is computed under the Black-Scholes model on the basis of the market price of the underlying common stock at the end of the period, and any subsequent changes in the market price of the underlying common stock up through the valuation date is reflected in the expense recorded in the subsequent period in which that change occurs. (v) Basic and Diluted Net Income per Share of Common Stock Basic earnings per common share are based on the weighted average number of shares outstanding during the periods presented. Diluted earnings per share are computed using weighted average number of common shares plus dilutive common share equivalents outstanding during the period. Potential common shares that would have the effect of increasing diluted earnings per share are considered to be anti-dilutive, i.e. the exercise prices of the outstanding stock options were greater than the market price of the common stock. Anti-dilutive common stock equivalents which were excluded from the calculation of number of dilutive common stock equivalents amounted to 317,294 and 2,175,088 shares for the years ended December 31, 2015 and 2014, respectively. The following table sets forth the computation of basic and diluted earnings per share: Years ended December 31, 2015 2014 Numerator Net income   $ 34,068,037   $ 17,871,795 Denominator Basic: Weighted-average common shares outstanding during the year 45,167,288 38,694,567 Add: Dilutive effect of stock options 942,116 566,060 Diluted 46,109,404 39,260,627 Net income per share Basic $ 0.75 $ 0.46 Diluted   $ 0.74   $ 0.46 (w) Goodwill Goodwill represents the excess of the purchase price over the net of the fair value of the identifiable tangible and intangible assets acquired and the fair value of liabilities assumed in business acquisitions. Management of the Company evaluates the carrying value of goodwill annually or when a possible impairment is indicated. The Company performs its impairment assessment annually and between annual tests in certain circumstances and determined that there was no impairment of goodwill. Goodwill impairment is assessed using the expected present value of associated future cash flows. (x) New Accounting Pronouncements As of December 31,2015 and for the year then ended, there were no recently adopted accounting pronouncements that had a material effect on the Company’s consolidated financial statements. As of December 31, 2015, there were no recently issued accounting standards not yet adopted which would have a material effect on the Company’s consolidated financial statements through 2017. |
2. BUSINESS ACQUISITION
2. BUSINESS ACQUISITION | 12 Months Ended |
Dec. 31, 2015 | |
Business Combinations [Abstract] | |
2. BUSINESS ACQUISITION | In order to increase the Company’s profit margins, produce more consistent and reliable earnings and lessen dependence on the economically sensitive bromine industry, on January 12, 2015, Gulf Resources, Inc. (the “Company” or “Gulf”) and Shouguang City Haoyuan Chemical Company Limited, a wholly owned subsidiary of the Company (“SCHC”), entered into an Equity Interest Transfer Agreement (the “Agreement”) to acquire 100% of SCRC for a total consideration of $79,678,746 to be settled in cash and in the shares of the commons stock of the Company. On February 4, 2015, the Company closed the transactions contemplated by the Agreement between the Company, SCHC and SCRC. The Closing Date is deemed to be the acquisition date. On the Closing Date, the Company issued 7,268,011 shares of its common stock, par value $0.0005 per share (the “Shares”), at a the closing market price of $1.84 per Share on the Closing Date to the four former equity owners of SCRC. The sellers of SCRC agreed as part of the purchase price to accept 7,268,011 shares of Gulf Resources stock, based on a valuation of $2.00, which was a 73% premium to the price on the day the agreement was reached. For accounting purposes, these shares are being valued at $1.84, which was the closing price of the Company’s stock on the day of the closing of the agreement. There is no change in the number of shares issued. The total purchase consideration consisted of $66,305,606 in cash and $13,373,140 in the shares of the common stock of the Company. The issuance of the Shares was exempt from registration pursuant to Regulation S of the Securities Act of 1933, as amended. On the Closing Date, the Company entered into a lock-up agreement with the four former equity owners of SCRC. In accordance with the terms of the lock-up agreement, the shareholders have agreed not to sell or transfer the Shares for five years from the date the stock certificates evidencing the Shares are issued. The following table represents the fair value of identifiable assets and liabilities of SCRC acquired and goodwill recognized at acquisition date. Cash $ 14,074,720 Accounts receivable 19,365,259 Inventories 1,646,196 Other current assets 82,562 Property, plant and equipment, net 17,891,360 Prepaid land leases, net of current portion 4,800,404 Goodwill 29,559,174 Accounts payable and accrued expenses (8,670,568 ) Taxes payable (963,458 ) Cumulative translation adjustment 1,893,097 Total purchase price $ 79,678,746 The net revenue and net income of SCRC since the acquisition date that are included in the condensed consolidated statement of income for the fiscal year 2015 are $51,274,989 and $12,667,379. Goodwill is not expected to be deductible for tax purpose. Costs of $121,512 related to the acquisition, which included audit fee and valuation fees, have been charged directly to operations and are included in general and administrative expenses in the condensed consolidated statement of income for the fiscal year 2015. The following table shows supplemental information of the results of operations on a pro forma basis for fiscal years 2015 and 2014, as if the acquisition of SCRC had been completed at the beginning of the Company’s fiscal years presented. Year Ended December 31, 2015 2014 Net Revenue $ 168,031,383 $ 160,627,774 Net Income $ 35,538,071 $ 29,699,118 EARNINGS PER SHARE -Basic $ 0.79 $ 0.65 -Diluted $ 0.77 $ 0.64 The pro forma information for all periods presented has been calculated after adjusting for results of SCRC to reflect the business combination accounting effect resulting from this acquisition including the elimination of intercompany sales, depreciation and amortization on the increase in valuation of property, plant and equipment and prepaid land lease. There are no nonrecurring items included in the pro forma results of operations presented. |
3. INVENTORIES
3. INVENTORIES | 12 Months Ended |
Dec. 31, 2015 | |
Inventory Disclosure [Abstract] | |
3. INVENTORIES | Inventories consist of: As of December 31, 2015 2014 Raw materials $ 1,014,917 $ 625,160 Finished goods 5,486,970 4,746,163 Work-in-process 691,604 - Allowance for obsolete and slow-moving inventories (12,691 ) (3,455 )   $ 7,180,800 $ 5,367,868 |
4. PREPAID LAND LEASE
4. PREPAID LAND LEASE | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
4. PREPAID LAND LEASE | The Company prepaid for land leases with lease terms for periods ranging from one to fifty years to use the land on which the office premises, production facilities and warehouses of the Company are situated. The prepaid land lease is amortized on a straight line basis. During the year ended December 31, 2015, amortization of prepaid land lease totaled $774,512, which was recorded as cost of net revenue. During the year ended December 31, 2014, amortization of prepaid land lease totaled $680,551, which was recorded as cost of net revenue. The Company has the rights to use certain parcels of land located in Shouguang, the PRC, through lease agreements signed with local townships or government authority. For parcels of land that are collectively owned by local townships, the Company could not obtain land use rights certificates. The parcels of land of which the Company could not obtain land use rights certificates covers a total of approximately 59.43 square kilometers of aggregate carrying value of $686,073 and approximately 59.39 square kilometers square meters of aggregate carrying value of $742,820 as at December 31, 2015 and 2014, respectively. |
5. PROPERTY, PLANT AND EQUIPMEN
5. PROPERTY, PLANT AND EQUIPMENT, NET | 12 Months Ended |
Dec. 31, 2015 | |
Property, Plant and Equipment [Abstract] | |
5. PROPERTY, PLANT AND EQUIPMENT, NET | Property, plant and equipment, net consist of the following: As of December 31, 2015 2014 At cost: Mineral rights $ 6,131,230 $ 6,506,668 Buildings 68,510,164 53,231,127 Plant and machinery 195,295,877 177,485,689 Motor vehicles 8,847 9,389 Furniture, fixtures and office equipment 4,864,619 4,884,991 Construction in progress 57,596 - Total 274,868,333 242,117,864 Less: accumulated depreciation and amortization (146,997,010 ) (117,767,083 ) Net book value $ 127,871,323 $ 124,350,781 The Company has certain buildings and salt pans erected on parcels of land located in Shouguang, PRC, and such parcels of land are collectively owned by local townships or the government. The Company has not been able to obtain property ownership certificates over these buildings and salt pans. The aggregate carrying values of these properties situated on parcels of the land are $42,526,151 and $37,219,221 as at December 31, 2015 and 2014, respectively. During the year ended December 31, 2014, depreciation and amortization expense totaled $27,287,976 of which $25,811,070 and $1,476,906 were recorded as cost of net revenue and administrative expenses, respectively. During the year ended December 31, 2015, depreciation and amortization expense totaled $28,746,069 of which $27,281,471 and $1,464,598 were recorded as cost of net revenue and administrative expenses, respectively. In the third quarter of 2015, the Company incurred enhancement works in Factories No. 10 and 11 at costs of approximately $10,396,597 to the protective shells to transmission channels and ducts. In the fourth quarter of 2015, the Company incurred enhancement projects to our existing bromine extraction in Factory No. 10 and 11 at costs of approximately $12,088,375. The above enhancement projects have estimated useful lives of 5 to 8 years and are capitalized as buildings and plant and machinery. In the third quarter of 2014, the Company incurred enhancement works in Factories No. 10 and 11 at costs of approximately $6,424,406 to the protective shells to transmission channels and ducts. The above enhancement projects have estimated useful lives of 5 to 8 years and are capitalized as buildings and plant and machinery. For the years ended December 31, 2015 and 2014, ordinary repair and maintenance expenses were $607,688 and $1,050,204, respectively. |
6. PROPERTY, PLANT AND EQUIPMEN
6. PROPERTY, PLANT AND EQUIPMENT UNDER CAPITAL LEASES, NET | 12 Months Ended |
Dec. 31, 2015 | |
Leases [Abstract] | |
6. PROPERTY, PLANT AND EQUIPMENT UNDER CAPITAL LEASES, NET | Property, plant and equipment under capital leases, net consist of the following: As of December 31, 2015 2014 At cost: Buildings $ 126,729 $ 134,489 Plant and machinery 2,382,139 2,528,007 Total 2,508,868 2,662,496 Less: accumulated depreciation and amortization (1,581,650 ) (1,322,894 ) Net book value $ 927,218 $ 1,339,602 The above buildings erected on parcels of land located in Shouguang, PRC, are collectively owned by local townships. The Company has not been able to obtain property ownership certificates over these buildings as the Company could not obtain land use rights certificates on the underlying parcels of land. During the year ended December 31, 2014, depreciation and amortization expense totaled $354,246, which was recorded as cost of sales. During the year ended December 31, 2015, depreciation and amortization expense totaled $349,579, which was recorded as cost of sales. |
7. ACCOUNTS PAYABLE AND ACCRUED
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSE | 12 Months Ended |
Dec. 31, 2015 | |
Payables and Accruals [Abstract] | |
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSE | Accounts payable and accrued expenses consist of the following: As of December 31, 2015 2014 Accounts payable $ 8,835,442 $ 3,181,465 Salary payable 271,369 234,932 Social security insurance contribution payable 114,370 89,232 Other payables 708,519 499,099 Total $ 9,929,700 $ 4,004,728 |
8. DUE TO A RELATED PARTY AND R
8. DUE TO A RELATED PARTY AND RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2015 | |
Related Party Transactions [Abstract] | |
8. DUE TO A RELATED PARTY AND RELATED PARTY TRANSACTIONS | On September 25, 2012, the Company purchased five stories of a commercial building in the PRC, through SYCI, from Shandong Shouguang Vegetable Seed Industry Group Co., Ltd. (the “Seller”) at a cost of approximately $5.7 million in cash, of which Mr. Ming Yang, the Chairman of the Company, had a 99% equity interest in the Seller. The cost of the five stories of the commercial building was valued by an independent appraiser on September 17, 2012 to its fair value and recorded as property, plant and equipment. The Company commenced using the property as the new headquarters for the office in early January, 2013. During the fiscal year 2013, the Company entered into an agreement with the Seller to provide property management services for an annual amount of $100,704 for five years from January 1, 2013 to December 31, 2017. The company recorded in general and administrative expense an amount of $100,704 in the year ended December 31, 2015 and 2014. During the fiscal year 2015 and 2014, the Company borrowed $949,150 and $459,974, and fully repaid later during the same period, from Jiaxing Lighting Appliance Company Limited (Jiaxing Lighting”), in which Mr. Ming Yang, a shareholder and the Chairman of the Company, has a 100% equity interest in Jiaxing Lighting. The amounts due to Jiaxing Lighting were unsecured, interest free and repayable on demand. |
9. TAXES PAYABLE
9. TAXES PAYABLE | 12 Months Ended |
Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
9. TAXES PAYABLE | Taxes payable consists of the following: As of December 31, 2015 2014 Income tax payable   $ 2,400,400 $ 1,388,341 Mineral resource compensation fee payable 255,984 292,026 Value added tax payable 1,030,664 724,915 Land use tax payable 904,354 949,544 Other tax payables 222,601 190,603 Total $ 4,814,003 $ 3,545,429 |
10. CAPITAL LEASE OBLIGATIONS
10. CAPITAL LEASE OBLIGATIONS | 12 Months Ended |
Dec. 31, 2015 | |
Leases [Abstract] | |
10. CAPITAL LEASE OBLIGATIONS | The components of capital lease obligations are as follows: Imputed As of December 31, Interest rate 2015 2014 Total capital lease obligations 6.7% $ 2,752,692 $ 3,031,623 Less: Current portion (196,778 ) (205,128 ) Capital lease obligations, net of current portion $ 2,555,914 $ 2,826,495 Interest expense from capital lease obligations amounted to $193,162 and $202,656, which were charged to the income statements for the year ended December 31, 2015 and 2014. See Note 19 for future minimum lease payments disclosure. |
11. EQUITY
11. EQUITY | 12 Months Ended |
Dec. 31, 2015 | |
Equity [Abstract] | |
11. EQUITY | (a) Authorized shares During the annual general meeting held on June 18, 2013, the shareholders of the Company approved the amendment to the Certificate of Incorporation to decrease the number of the authorized shares of the CompanyÂ’s comment stocks to 80,000,000. The Company has completed the filing of the amendment and restatement of the Certificate of Incorporation with the Secretary of the State of Delaware to decrease the number of authorized shares of the CompanyÂ’s common stock and accordingly 80,000,000 is disclosed as the authorized shares of the CompanyÂ’s common stock in the consolidated balance sheet as of December 31, 2015. (b) Retained Earnings - Appropriated In accordance with the relevant PRC regulations and the PRC subsidiariesÂ’ Articles of Association, the CompanyÂ’s PRC subsidiaries are required to allocate its profit after tax to the following reserve: Statutory Common Reserve Funds SCHC, SYCI and SCRC are required each year to transfer at least 10% of the profit after tax as reported under the PRC statutory financial statements to the Statutory Common Reserve Funds until the balance reaches 50% of the registered share capital. This reserve can be used to make up any loss incurred or to increase share capital. Except for the reduction of losses incurred, any other application should not result in this reserve balance falling below 25% of the registered capital. The Statutory Common Reserve Fund as of December 31, 2015 for SCHC, SYCI and SCRC is 40%, 50% and 8% of its registered capital, respectively. |
12. TREASURY STOCK
12. TREASURY STOCK | 12 Months Ended |
Dec. 31, 2015 | |
Equity [Abstract] | |
12.TREASURY STOCK | In December 2014, the Company repurchased 53,550 shares of common stock of the Company at an average price of $1.15 per share for a total cost of $61,728 under the approval of the Board of Directors. The Company recorded the entire purchase price of the treasury stock as a reduction of equity. In January 2015, the Company repurchased 31,000 shares of common stock of the Company at an average price of $1.22 per share for a total cost of $37,713 under the approval of the Board of Directors. The Company recorded the entire purchase price of the treasury stock as a reduction of equity. |
13. STOCK-BASED COMPENSATION
13. STOCK-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
13. STOCK-BASED COMPENSATION | Pursuant to the Company’s Amended and Restated 2007 Equity Incentive Plan approved in 2011(“Plan”), the aggregate number shares of the Company’s common stock available for grant of stock options and issuance is 4,341,989 shares. On October 5, 2015, during the annual meeting of the Company’s stockholders, the aggregate number of shares reserved and available for grant and issuance pursuant to the Plan was approved to be increased to 10,341,989. As of December 31, 2015, the number of shares of the Company’s common stock available for issuance is 7,005,989. The fair value of each option award below is estimated on the date of grant using the Black-Scholes option-pricing model. The risk free rate is based on the yield-to-maturity in continuous compounding of the US Government Bonds with the time-to-maturity similar to the expected tenor of the option granted, volatility is based on the annualized historical stock price volatility of the Company, and the expected life is based on the estimated average of the life of options using the “simplified” method, as prescribed in FASB ASC 718, due to insufficient historical exercise activity during recent years as a basis from which to estimate future exercise patterns. With more information available on options exercise activity in the past few years, from January 1, 2015 onwards, the Company estimated the expected life based on historical option exercise experience as prescribed by FASB ASC 718. In early March 2014, the Company granted to an independent director an option to purchase 12,500 shares of the Company’s common stock at an exercise price of $2.55 per share and the options vested immediately. The options were valued at $10,200 fair value, with assumed 67.14% volatility, a three-year expiration term with expected tenor of 1.49 years, a risk free rate of 0.21% and no dividend yield. On May 7, 2014, the Company granted to an independent director an option to purchase 12,500 shares of the Company’s common stock at an exercise price of $1.83 per share and the options vested immediately. The options were valued at $7,900 fair value, with assumed 69.24% volatility, a three-year expiration term with expected tenor of 1.49 years, a risk free rate of 0.25% and no dividend yield. On June 30, 2014, the Company granted to an independent director an option to purchase 12,500 shares of the Company’s common stock at an exercise price of $2.15 per share and the options vested immediately. The options were valued at $8,200 fair value, with assumed 64.48% volatility, a three-year expiration term with expected tenor of 1.50 years, a risk free rate of 0.27% and no dividend yield. On November 10, 2014, the Company granted to an independent director an option to purchase 12,500 shares of the Company’s common stock at an exercise price of $1.39 per share and the options vested immediately. The options were valued at $4,600 fair value, with assumed 65.49% volatility, a three-year expiration term with expected tenor of 1.50 years, a risk free rate of 0.32% and no dividend yield. On November 19, 2014, the Company granted to 20 management staff options to purchase 685,000 shares of the Company’s common stock, respectively, at an exercise price of $0.978 per share and the options vested immediately. The options were valued at $311,500 fair value, respectively, with assumed 63.20% volatility, a four-year expiration term with expected tenor of 2 years, a risk free rate of 0.52% and no dividend yield. In early March 2015, the Company granted to an independent director an option to purchase 12,500 shares of the Company’s common stock at an exercise price of $1.66 per share and the options vested immediately. The options were valued at $7,400 fair value, with assumed 73.55% volatility, a three-year expiration term with an expected tenor of 1.49 years, a risk free rate of 0.42% and no dividend yield. On April 8, 2015, the Company granted to 17 management staff options to purchase 275,000 shares of the Company’s common stock, respectively, at an exercise price of $1.428 per share and the options vested immediately. The options were valued at $146,400 fair value, respectively, with assumed 68.70% volatility, a four-year expiration term with an expected tenor of 0.94 years, a risk free rate of 0.20% and no dividend yield. On April 8, 2015, the Company granted to 3 director options to purchase 300,000 shares of the Company’s common stock, respectively, at an exercise price of $1.428 per share and the options vested immediately. The options were valued at $181,400 fair value, respectively, with assumed 65.71% volatility, a four-year expiration term with an expected tenor of 1.30 years, a risk free rate of 0.31% and no dividend yield. On May 7, 2015, the Company granted to an independent director an option to purchase 12,500 shares of the Company’s common stock at an exercise price of $2.550 per share and the options vested immediately. The options were valued at $8,600 fair value, with assumed 69.32% volatility, a three-year expiration term with an expected tenor of 0.97 years, a risk free rate of 0.23% and no dividend yield. On July 1, 2015, the Company granted to an independent director an option to purchase 12,500 shares of the Company’s common stock at an exercise price of $2.07 per share and the options vested immediately. The options were valued at $9,500 fair value, with assumed 67.05% volatility, a three-year expiration term with an expected tenor of 1.33 years, a risk free rate of 0.41% and no dividend yield. On November 10, 2015, the Company granted to an independent director an option to purchase 12,500 shares of the Company’s common stock at an exercise price of $1.88 per share and the options vested immediately. The options were valued at $7,000 fair value, with assumed 65.58% volatility, a three-year expiration term with expected tenor of 1.33 years, a risk free rate of 0.58% and no dividend yield. On November 18, 2015, the Company granted to a consultant to purchase 30,000 shares of the Company’s common stock, respectively, at an exercise price of $1.71 per share and the options vested immediately. The options were valued at $14,300 fair value, respectively, with assumed 71.54% volatility, a three-year expiration term with expected tenor of 0.9 years, a risk free rate of 0.60% and no dividend yield. In the year ended December 31, 2015 and 2014, total compensation costs for options issued recorded in the consolidated statement of income were $374,600 and $346,100. There were no related tax benefits as a full valuation allowance was recorded in the year ended December 31, 2015 and 2014. During the year ended December 31, 2014, 145,813 shares of common stock were issued upon cashless exercise of 223,000 options. During the year ended December 31, 2015, 97,244 shares of common stock were issued upon cashless exercise of 182,500 options. The following table summarizes all Company stock option transactions between January 1, 2014 and December 31, 2015. Number of Option and Warrants Outstanding and exercisable Weighted- Average Exercise price of Option and Warrants Range of Exercise Price per Common Share Balance, December 31, 2013 2,470,971 $3.36 $0.95 - $12.60 Granted and vested during the year ended December 31, 2014 735,000 $1.05 $0.98 - $2.55 Exercised during the year ended December 31, 2014 (223,000 ) $0.95 $0.95 Expired during the year ended December 31, 2014 (238,971 ) $9.56 $2.41 - $12.00 Balance, December 31, 2014 2,744,000 $2.38 $0.95 - $12.60 Granted and vested during the year ended December 31, 2015 655,000 $1.49 $1.43 - $2.55 Exercised during the year ended December 31, 2015 (182,500 ) $1.12 $0.95-$1.66 Expired during the year ended December 31, 2015 (817,500 ) $4.86 $2.06 - $4.97 Balance, December 31, 2015 2,399,000 $1.39 $0.95 - $12.60 Stock and Warrants Options Exercisable and Outstanding Weighted Average Weighted Average Outstanding Remaining Exercise Price of at December 31, 2015 Range of Exercise Prices Contractual Life (Years) Options Currently Outstanding Exercisable and outstanding 2,399,000 $0.95 - $12.60 2.12 $1.39 All options exercisable and outstanding at December 31, 2015 are fully vested. The aggregate intrinsic value of options outstanding and exercisable as of December 31, 2015 was $1,639,182. The total intrinsic value of options exercised during the year ended December 31, 2015 and 2014 was $236,535 and $400,954. |
14. INCOME TAXES
14. INCOME TAXES | 12 Months Ended |
Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
14. INCOME TAXES | The Company utilizes the asset and liability method of accounting for income taxes in accordance with FASB ASC 740-10. (a) United States Gulf Resources, Inc. is subject to the United States of America Tax law at tax rate of 35%. No provision for the US federal income taxes has been made as the Company had no US taxable income for the years ended December 31, 2015 and 2014, and management believes that its earnings are permanently invested in the PRC. (b) BVI Upper Class Group Limited was incorporated in the BVI and, under the current laws of the BVI, it is not subject to tax on income or capital gain in the BVI. Upper Class Group Limited did not generate assessable profit for the years ended 31 December 31, 2015 and 2014. (c) Hong Kong Hong Kong Jiaxing Industrial Limited was incorporated in Hong Kong and is subject to Hong Kong profits tax. The Company is subject to Hong Kong taxation on its activities conducted in Hong Kong and income arising in or derived from Hong Kong. No provision for profits tax has been made as the Company has no assessable income for the years. The applicable statutory tax rates for the years ended December 31, 2015 and 2014 are 16.5%. (d) PRC Enterprise income tax (“EIT”) for SCHC, SYCI and SCRC in the PRC is charged at 25% of the assessable profits. The operating subsidiaries SCHC, SYCI and SCRC are wholly foreign-owned enterprises (“FIE”) incorporated in the PRC and are subject to PRC Foreign Enterprise Income Tax Law. On February 22, 2008, the Ministry of Finance (“MOF”) and the State Administration of Taxation (“SAT”) jointly issued Cai Shui [2008] Circular 1 (“Circular 1”). According to Article 4 of Circular 1, distributions of accumulated profits earned by a FIE prior to January 1, 2008 to foreign investor(s) in 2008 will be exempted from withholding tax (“WHT”) while distribution of the profit earned by an FIE after January 1, 2008 to its foreign investor(s) shall be subject to WHT at 5% effective tax rate. As of December 31, 2015 and 2014, the accumulated distributable earnings under the Generally Accepted Accounting Principles (“GAAP”) of PRC are $260,471,507 and $242,440,917, respectively. Since the Company intends to reinvest its earnings to further expand its businesses in mainland China, its foreign invested enterprises do not intend to declare dividends to their immediate foreign holding companies in the foreseeable future. Accordingly, as of December 31, 2015 and 2014, the Company has not recorded any WHT on the cumulative amount of distributable retained earnings of its foreign invested enterprises in China. As of December 31, 2015 and 2014, the unrecognized WHT are $11,974,695 and $11,008,938, respectively. The Company’s tax returns are subject to the various tax authorities’ examination. The federal, state and local authorities of the United States may examine the Company’s tax returns filed in the United States for three years from the date of filing. The Company’s US tax returns since 2011 are currently subject to examination. Inland Revenue Department of Hong Kong may examine the Company’s tax returns filed in Hong Kong for seven years from date of filing. The Company’s Hong Kong tax returns since incorporation are currently subject to examination. The tax authorities of the PRC may examine the Company’s PRC tax returns for three years from the date of filing. The components of the provision for income taxes from continuing operations are: Years ended December 31, 2015 2014 Current taxes – PRC $ 11,455,764 $ 6,226,000 Deferred tax – PRC (83,856 ) 15 $ 11,371,908 $ 6,226,015 The effective income tax expenses differ from the PRC statutory income tax rate of 25% from continuing operations in the PRC as follows:- Years ended December 31, 2015 2014 Statutory income tax rate   25% 25% Non-deductible items (1% ) - Change in valuation allowance-US federal net operating loss 1% 1% Effective tax rate   25% 26% As of December 31, 2015 and 2014, the Company had US federal net operating loss (“NOL”) of approximately $30.9 million and $29.7 million available to offset against future federal income tax liabilities, respectively. NOL can be carried forward up to 20 years from the year the loss is incurred. NOL will begin to expire after 2019. The Company believes the realization of benefits from these losses remains uncertain due to the Company’s limited operating history and continuing losses. Accordingly, a 100% deferred tax asset valuation allowance has been provided. Differences between the application of accounting principles and tax laws cause differences between the bases of certain assets and liabilities for financial reporting purposes and tax purposes. The tax effects of these differences, to the extent they are temporary, are recorded as deferred tax assets and liabilities. Significant components of the Company’s deferred tax assets and liabilities at December 31, 2015 and 2014 are as follows: As of December 31, 2015 2014 Deferred tax liabilities $ - $ - Deferred tax assets: Allowance for obsolete and slow-moving inventories $ 3,173 $ 864 Impairment on property, plant and equipment 449,879 477,427 Exploration costs 1,917,301 1,952,990 Compensation costs of unexercised stock options 629,162 1,427,296 US federal net operating loss 10,835,000 10,382,000 Total deferred tax assets 13,834,515 14,240,577 Valuation allowance (11,464,162 ) (11,809,296 ) Net deferred tax asset $ 2,370,353 $ 2,431,281 Current deferred tax asset $ 3,173 $ 864 Long-term deferred tax asset $ 2,367,180 $ 2,430,417 The decreases in valuation allowance for the years ended December 31, 2015 was $345,134. The decreases in valuation allowance for the years ended December 31, 2014 was $287,014. There were no unrecognized tax benefits and accrual for uncertain tax positions as of December 31, 2015 and 2014. |
15. BUSINESS SEGMENTS
15. BUSINESS SEGMENTS | 12 Months Ended |
Dec. 31, 2015 | |
Segment Reporting [Abstract] | |
15. BUSINESS SEGMENTS | The Company has three reportable segments: bromine, crude salt and chemical products. The reportable segments are consistent with how management views the markets served by the Company and the financial information that is reviewed by its chief operating decision maker. An operating segmentÂ’s performance is primarily evaluated based on segment operating income, which excludes share-based compensation expense, certain corporate costs and other income not associated with the operations of the segment. These corporate costs (income) are separately stated below and also include costs that are related to functional areas such as accounting, treasury, information technology, legal, human resources, and internal audit. All intersegment transactions have been eliminated. The Company believes that segment operating income, as defined above, is an appropriate measure for evaluating the operating performance of its segments. All the customers are located in PRC. Year Ended December 31, 2015 Bromine * Crude Salt * Chemical Products Segment Total Corporate Total Net revenue (external customers) $ 52,385,491 $ 10,494,939 $ 99,436,690 $ 162,317,120 $ - $ 162,317,120 Net revenue (intersegment) 8,039,156 - - 8,039,156 - 8,039,156 Income from operations before taxes 10,854,711 1,183,755 32,997,870 45,036,336 128,374 45,164,710 Income taxes 2,508,902 500,451 8,362,555 11,371,908 - 11,371,908 Income from operations after taxes 8,345,809 683,304 24,635,315 33,664,428 128,374 33,792,802 Total assets 136,701,878 40,306,628 179,733,958 356,742,464 762 356,743,226 Depreciation and amortization 17,498,441 6,136,889 5,460,318 29,095,648 - 29,095,648 Capital expenditures 20,665,890 2,120,622 72,113 22,858,625 - 22,858,625 Goodwill - - 29,559,174 29,559,174 - 29,559,174 Year Ended December 31, 2014 Bromine * Crude Salt * Chemical Products Segment Total Corporate Total Net revenue (external customers) $ 57,949,824 $ 10,752,226 $ 44,958,281 $ 113,660,331 $ - $ 113,660,331 Net revenue (intersegment) 3,013,295 - - 3,013,295 - 3,013,295 Income (loss) from operations before taxes 9,500,428 719,226 14,432,851 24,652,505 (834,284 ) 23,818,221 Income taxes 2,214,988 370,974 3,640,053 6,226,015 - 6,226,015 Income (loss) from operations after taxes 7,285,440 348,252 10,792,798 18,426,490 (834,284 ) 17,592,206 Total assets 195,539,637 51,632,485 75,748,241 322,920,363 61,789 322,982,152 Depreciation and amortization 18,011,790 6,076,042 3,554,390 27,642,222 - 27,642,222 Capital expenditures 5,414,738 1,123,873 - 6,538,611 - 6,538,611 * Certain common production overheads, operating and administrative expenses and asset items (mainly cash and certain office equipment) of bromine and crude salt segments in SCHC were split by reference to the average selling price and production volume of respective segment. Years ended December 31, Reconciliations 2015 2014 Total segment operating income $ 45,036,336 $ 24,652,505 Corporate costs (1,447,023 ) (926,696 ) Unrealized translation difference 1,575,397 92,412 Income from operations 45,164,710 23,818,221 Other income 275,235 279,589 Income before taxes $ 45,439,945 $ 24,097,810 The following table shows the major customer(s) (10% or more) for the year ended December 31, 2015. Number Customer Bromine (000Â’s) Crude Salt (000Â’s) Chemical Products (000Â’s) Total Revenue (000Â’s) Percentage of Total Revenue (%) 1 Shandong Morui Chemical Company Limited $ 7,989 $ 2,703 $ 7,431 $ 18,123 11.2% TOTAL $ 7,989 $ 2,703 $ 7,431 $ 18,123 11.2% The following table shows the major customer(s) (10% or more) for the year ended December 31, 2014. Number Customer Bromine (000Â’s) Crude Salt (000Â’s) Chemical Products (000Â’s) Total Revenue (000Â’s) Percentage of Total Revenue (%) 1 Shandong Morui Chemical Company Limited $ 8,519 $ 2,576 $ 6,477 $ 17,572 15.5% TOTAL $ 8,519 $ 2,576 $ 6,477 $ 17,572 15.5% |
16. MAJOR SUPPLIERS
16. MAJOR SUPPLIERS | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
16. MAJOR SUPPLIERS | During the year ended December 31, 2015, the Company purchased 57.6% of its raw materials from its top five suppliers. At December 31, 2015, amounts due to those suppliers included in accounts payable were $3,460,249. During the year ended December 31, 2014, the Company purchased 89.4% of its raw materials from its top five suppliers. At December 31, 2014, amounts due to those suppliers included in accounts payable were $2,794,998. |
17. CUSTOMER CONCENTRATION
17. CUSTOMER CONCENTRATION | 12 Months Ended |
Dec. 31, 2015 | |
Risks and Uncertainties [Abstract] | |
17. CUSTOMER CONCENTRATION | The Company sells a substantial portion of its products to a limited number of customers. During the year ended December 31, 2015, the Company sold 31.7% of its products to its top five customers. At December 31, 2015, amount due from these customers were $21,872,942. During the year ended December 31, 2014, the Company sold 43.3% of its products to its top five customers. At December 31, 2014, amount due from these customers were $23,035,195. |
18. FAIR VALUE OF FINANCIAL INS
18. FAIR VALUE OF FINANCIAL INSTRUMENTS | 12 Months Ended |
Dec. 31, 2015 | |
Fair Value Disclosures [Abstract] | |
18. FAIR VALUE OF FINANCIAL INSTRUMENTS | The carrying values of financial instruments, which consist of cash, accounts receivable and accounts payable and other payables, approximate their fair values due to the short-term nature of these instruments. There were no material unrecognized financial assets and liabilities as of December 31, 2015 and 2014. |
19. CAPITAL COMMITMENT AND OPER
19. CAPITAL COMMITMENT AND OPERATING LEASE COMMITMENTS | 12 Months Ended |
Dec. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
19. CAPITAL COMMITMENT AND OPERATING LEASE COMMITMENTS | As of December 31, 2015, the Company leased a real property adjacent to Factory No. 1, with the related production facility, channels and ducts, other production equipment and the buildings located on the property, under capital lease. The future minimum lease payments required under capital lease, together with the present value of such payments, are included in the table show below. The Company has leased ten pieces of land under non-cancelable operating leases, which are fixed in rentals and expired through December 2021, December 2022, December 2023, December 2030, December 2031, December 2032, December 2040, February 2059, August 2059 and June 2060, respectively. The Company accounts for the leases as operating leases. The following table sets forth the CompanyÂ’s contractual obligations as of December 31, 2015: Capital Lease Obligations Operating Lease Obligations Property Management Fees Purchase Obligations Payable within: the next 12 months $ 289,058 $ 953,635 $ 96,075 $ 57,596 the next 13 to 24 months 289,058 975,297 96,075 - the next 25 to 36 months 289,058 995,062 - - the next 37 to 48 months 289,058 1,018,711 - - the next 49 to 60 months 289,058 1,040,415 - - thereafter 2,890,580 18,671,332 - - Total $ 4,335,870 $ 23,654,452 $ 192,150 $ 57,596 Less: Amount representing interest (1,583,178) Present value of net minimum lease payments $ 2,752,692 Rental expenses related to operating leases of the Company amounted to $1,072,767 and $978,047 were charged to the income statements for the years ended December 31, 2015 and 2014, respectively. |
1. NATURE OF BUSINESS AND SUM26
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2015 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The accompanying audited consolidated financial statements have been prepared by Gulf Resources, Inc. a Nevada corporation and its subsidiaries (collectively, the “Company”). On November 24, 2015, Gulf Resources, Inc., a Delaware corporation consummated a merger with and into its wholly-owned subsidiary, Gulf Resources, Inc., a Nevada corporation. As a result of the reincorporation, the Company is now a Nevada corporation. Upper Class Group Limited was incorporated with limited liability in the British Virgin Islands on July 28, 2006 and was inactive until October 9, 2006 when Upper Class Group Limited acquired all the issued and outstanding stock of Shouguang City Haoyuan Chemical Company Limited (“SCHC”). SCHC is an operating company incorporated in Shouguang City, Shangdong Province, the People’s Republic of China (the “PRC”) on May 18, 2005. SCHC is engaged in manufacturing and trading bromine and crude salt in China. Since the ownership of Upper Class Group Limited and SCHC were the same, the merger was accounted for as a transaction between entities under common control, whereby Upper Class Group Limited recognized the assets and liabilities transferred at their carrying amounts. On December 12, 2006, Gulf Resources, Inc. (formerly Diversifax, Inc.), a public “shell” company, acquired Upper Class Group Limited and its wholly-owned subsidiary, SCHC (together “Upper Class”). Under the terms of the agreement, all stockholders of Upper Class received a total amount of 13,250,000 (restated for the 2-for-1 stock split in 2007 and the 1-for-4 stock split in 2009) shares of voting common stock of Gulf Resources, Inc. in exchange for all shares of Upper Class’ common stock held by all stockholders. Under accounting principles generally accepted in the United States, the share exchange is considered to be a capital transaction in substance, rather than a business combination. That is, the share exchange is equivalent to the issuance of stock by Upper Class for the net monetary assets of Gulf Resources, Inc., accompanied by a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the share exchange will be identical to that resulting from a reverse acquisition, except no goodwill will be recorded. Under reverse takeover accounting, the post reverse acquisition comparative historical financial statements of the legal acquirer, Gulf Resources, Inc., are those of the legal acquiree, Upper Class, which is considered to be the accounting acquirer. Share and per share amounts stated have been retroactively adjusted to reflect the merger. On February 5, 2007, SCHC acquired Shouguang Yuxin Chemical Industry Co., Limited (“SYCI”), a company incorporated in PRC on October 30, 2000. SYCI manufactures chemical products utilized in oil and gas field explorations and as papermaking chemical agents. Under the terms of the merger agreement, all stockholders of SYCI received a total amount of 8,094,059 (restated for the 2-for-1 stock split in 2007 and the 1-for-4 stock split in 2009) shares of voting common stock of Gulf Resources, Inc. in exchange for all shares of SYCI’s common stock held by all stockholders. Also, upon the completion of the merger, Gulf Resources, Inc. paid a $2,550,000 dividend to the original stockholders of SYCI. Since the ownership of Gulf Resources, Inc. and SYCI are substantially the same, the merger was accounted for as a transaction between entities under common control, whereby Gulf Resources, Inc. recognized the assets and liabilities of the Company transferred at their carrying amounts. Share and per share amounts stated have been retroactively adjusted to reflect the merger. On November 11, 2007, Upper Class formed Hong Kong Jiaxing Industrial Limited (formerly known as Jiaxing Technology Limited) (“HKJI”), a wholly-owned subsidiary of Upper Class, in Hong Kong. Upper Class transferred its equity interest in SCHC to HKJI. On February 4, 2015 the Company closed the transactions contemplated by the Agreement between the Company, SCHC and SCRC. On the Closing Date, the Company issued 7,268,011shares of its common stock, par value $0.0005 per share (the “Shares”), at the closing market price of $1.84 per Share on the Closing Date to the four former equity owners of SCRC .The issuance of the Shares was exempt from registration pursuant to Regulation S of the Securities Act of 1933, as amended. On the Closing Date, the Company entered into a lock-up agreement with the four former equity owners of SCRC. In accordance with the terms of the lock-up agreement, the shareholders have agreed not to sell or transfer the Shares for five years from the date the stock certificates evidencing the Shares are issued. The sellers of SCRC agreed as part of the purchase price to accept 7,268,011 shares of Gulf Resources stock, based on a valuation of $2.00, which was a 73% premium to the price on the day the agreement was reached. For accounting purposes, these shares are now being valued at $1.84, which was the closing price of Gulf Resources' stock on the day of the closing of the agreement. The price difference between the original $2.00 and the current $1.84 is solely for accounting purposes. There has been no change in the number of shares issued. On December 15, 2015, the Company incorporated a subsidiary in the Sichuan Province of the PRC named Daying County Haoyuan Chemical Company Limited (“DCHC”) with a registered Capital of RMB50,000,000. DCHC was established to further explore and develop natural gas and brine resources (including bromine and crude salt) in China. As of filing date, the Company has not contributed any capital and DCHC has not commenced business operations. |
Nature of the Business | The Company manufactures and trades bromine and crude salt through SCHC, and manufactures chemical products for use in the oil industry, paper manufacturing industry and pesticides manufacturing industry through SYCI, and manufactures chemical products used for human and animal antibiotics through SCRC. |
Basis of Consolidation | The consolidated financial statements include the accounts of Gulf Resources, Inc. and its wholly-owned subsidiary, Upper Class Group Limited, a company incorporated in the British Virgin Islands, which owns 100% of Hong Kong Jiaxing Industrial Limited, a company incorporated in Hong Kong (“HKJI”). HKJI owns 100% of Shouguang City Haoyuan Chemical Company Limited ("SCHC") which owns 100% of ShouguangYuxin Chemical Industry Co., Limited (“SYCI”) and Shouguang City Rongyuan Chemical Co, Ltd (“SCRC”). All material intercompany transactions have been eliminated on consolidation. |
Use of Estimates | The CompanyÂ’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and this requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The most significant accounting estimates with regard to these consolidated financial statements that require the most significant and subjective judgments include, but are not limited to, useful lives of property, plant and equipment, recoverability of long-lived assets, determination of impairment losses, assessment of market value of inventories and provision for inventory obsolescence, allowance for doubtful accounts, recognition and measurement of current and deferred income taxes, valuation allowance for deferred tax assets, and assumptions used for the valuation of share based payments. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions. |
Cash and Cash Equivalents | Cash and cash equivalents consist of all cash balances and highly liquid investments with original maturities of three months or less. Because of short maturity of these investments, the carrying amounts approximate their fair values. |
Accounts Receivable and Allowance of Doubtful Accounts | Accounts receivable is stated at cost, net of allowance for doubtful accounts. The normal credit term extended to customers ranges between 90 and 180 days. The company reviews all receivables that exceed the term. The Company establishes an allowance for doubtful accounts based on managementÂ’s assessment of the collectability of trade and other receivables. A considerable amount of judgment is required in assessing the amount of allowance and the Company considers the historical level of credit losses. The Company makes judgments about the credit worthiness of each customer based on ongoing credit evaluations, and monitors current economic trends that might impact the level of credit losses in the future. If the financial condition of the customer begins to deteriorate, resulting in their inability to make payments within credit term provided, a larger allowance may be required. As of December 31, 2015 and 2014, allowances for doubtful accounts were nil. No allowances for doubtful accounts were charged to the income statement for the years ended December 31, 2015 and 2014. |
Concentration of Credit Risk | The Company is exposed to credit risk in the normal course of business, primarily related to accounts receivable and cash and cash equivalents. Substantially all of the CompanyÂ’s cash and cash equivalents are maintained with financial institutions in the PRC, namely, Industrial and Commercial Bank of China Limited and China Merchants Bank Company Limited, which are not insured or otherwise protected. The Company placed $133,606,392 and $146,585,601 with these institutions as of December 31, 2015 and 2014, respectively. The Company has not experienced any losses in such accounts in the PRC. Concentrations of credit risk with respect to accounts receivable exists as the Company sells a substantial portion of its products to a limited number of customers. However, such concentrations of credit risks are limited since the Company performs ongoing credit evaluations of its customersÂ’ financial condition. About 73.3% and 66.5% of the balances of accounts receivable as of December 31, 2015 and December 31, 2014, respectively, were outstanding for those which are 90 days old or less. For the balances of accounts receivable aged more than 90 days as of December 31, 2015, 98% were settled in the two months ended February 29, 2016. |
Inventories | Inventories are stated at the lower of cost, determined on a first-in first-out cost basis, or market. Costs of work-in-progress and finished goods comprise direct materials, direct labor and an attributable portion of manufacturing overhead. Net realizable value is based on estimated selling price less costs to complete and selling expenses. |
Property, Plant and Equipment | Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. Expenditures for new facilities or equipment, and major expenditures for betterment of existing facilities or equipment are capitalized and depreciated using the straight-line method at rates sufficient to depreciate such costs less 5% residual value over the estimated productive lives. All other ordinary repair and maintenance costs are expensed as incurred. Mineral rights are recorded at cost less accumulated depreciation and any impairment losses. Mineral rights are amortized ratably over the term of the lease, or the equivalent term under the units (in tonnes) of production method, whichever is shorter. Construction in progress primarily represents direct costs of construction of property, plant and equipment. Costs incurred are capitalized and transferred to property, plant and equipment upon completion, at which time depreciation commences. The CompanyÂ’s depreciation and amortization policies on property, plant and equipment other than mineral rights and construction in progress are as follows: Useful life (in years) Buildings (including salt pans) 8 - 20 Plant and machinery (including protective shells, transmission channels and ducts) 3 - 8 Motor vehicles 5 Furniture, fixtures and equipment 3 - 8 Property, plant and equipment under capital leases are depreciated over their expected useful lives on the same basis as owned assets, or where shorter, the term of the lease, which is 20 years. |
Asset Retirement Obligation | The Company follows FASB ASC 410, which established a uniform methodology for accounting for estimated reclamation and abandonment costs. FASB ASC 410 requires the fair value of a liability for an asset retirement obligation to be recognized in the period in which the legal obligation associated with the retirement of the long-lived asset is incurred. When the liability is initially recorded, the offset is capitalized by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. To settle the liability, the obligation is paid, and to the extent there is a difference between the liability and the amount of cash paid, a gain or loss upon settlement is recorded. Currently, there are no reclamation or abandonment obligations associated with the land being utilized for exploitation. |
Recoverability of Long Lived Assets | In accordance with ASC 360-10-35 “Impairment or Disposal of Long-lived Assets”, long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable or that the useful lives of those assets are no longer appropriate. The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment. The Company determines the existence of such impairment by measuring the expected future cash flows (undiscounted and without interest charges) and comparing such amount to the carrying amount of the assets. An impairment loss, if one exists, is then measured as the amount by which the carrying amount of the asset exceeds the discounted estimated future cash flows. Assets to be disposed of are reported at the lower of the carrying amount or fair value of such assets less costs to sell. Asset impairment charges are recorded to reduce the carrying amount of the long-lived asset that will be sold or disposed of to their estimated fair values. Charges for the asset impairment reduce the carrying amount of the long-lived assets to their estimated salvage value in connection with the decision to dispose of such assets. For the year ended December 31, 2014, certain property, plant and machinery, with net book values of $673,705, respectively, were replaced during the third phase enhancement project to protective shells for transmission channels and ducts for Factory No 10 and 11, write-offs of the same amounts, were made and included in write-off/impairment on property, plant and equipment. For the year ended December 31, 2015, certain property, plant and machinery, with net book values of $969,638 were replaced during the fourth phase enhancement project to protective shells for transmission channels, the enhancement work to bromine production facilities in Factory No.9 and 11 and the dismantle the Factory No.1 and 9 plant construction equipment due to did not meet the government's safety and environmental standards, write-offs of the same amounts, were made and included in write-off/impairment on property, plant and equipment. |
Retirement Benefits | Pursuant to the relevant laws and regulations in the PRC, the Company participates in a defined contribution retirement plan for its employees arranged by a governmental organization. The Company makes contributions to the retirement scheme at the applicable rate based on the employeesÂ’ salaries. The required contributions under the retirement plans are charged to the consolidated income statement on an accrual basis when they are due. The CompanyÂ’s contributions totaled $980,359 and $707,086 for the years ended December 31, 2015 and 2014, respectively. |
Mineral Rights | The Company follows FASB ASC 805 “Business Combinations” that certain mineral rights are considered tangible assets and that mineral rights should be accounted for based on their substance. Mineral rights are included in property, plant and equipment. |
Leasing arrangements | Rentals payable under operating leases are charged to the statements of income on a straight line basis over the term of the relevant lease. For capital leases, the present value of future minimum lease payments at the inception of the lease is reflected as an asset and a liability in the statement of financial position. Amounts due within one year are classified as short-term liabilities and the remaining balance as long-term liabilities. |
Reporting Currency and Translation | The financial statements of the Company’s foreign subsidiaries are measured using the local currency, Renminbi (“RMB”), as the functional currency; whereas the functional currency and reporting currency of the Company is the United States dollar (“USD” or “$”). As such, the Company uses the “current rate method” to translate its PRC operations from RMB into USD, as required under FASB ASC 830 “Foreign Currency Matters”. The assets and liabilities of its PRC operations are translated into USD using the rate of exchange prevailing at the balance sheet date. The capital accounts are translated at the historical rate. Adjustments resulting from the translation of the balance sheets of the Company’s PRC subsidiaries are recorded in stockholders’ equity as part of accumulated comprehensive income. The statement of income and comprehensive income is translated at average rates during the reporting period. Gains or losses resulting from transactions in currencies other than the functional currencies are recognized in net income for the reporting periods as part of general and administrative expense. Included in the general and administrative expense is a foreign exchange gain of $1,575,397 and a foreign exchange gain of $92,412 for the years ended December 31, 2015 and 2014. The statement of cash flows is translated at average rates during the reporting period, with the exception of issuance of shares and payment of dividends which are translated at historical rates. |
Foreign Operations | All of the CompanyÂ’s operations and assets are located in PRC. The Company may be adversely affected by possible political or economic events in this country. The effect of these factors cannot be accurately predicted. |
Revenue Recognition | The Company recognizes revenue, net of value-added tax, when persuasive evidence of an arrangement exists, delivery of the goods has occurred, customer acceptance has been obtained, which means the significant risks and ownership have been transferred to the customer, the price is fixed or determinable and collectability is reasonably assured. |
Income Taxes | The Company accounts for income taxes in accordance with the Income Taxes Topic of the FASB ASC, which requires the use of the liability method of accounting for deferred income taxes. Under this method, deferred income taxes are recorded to reflect the tax consequences on future years of temporary differences between the tax basis of assets and liabilities and their reported amounts at each period end. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. The guidance also provides criteria for the recognition, measurement, presentation and disclosures of uncertain tax positions. A tax benefit from an uncertain tax position may be recognized if it is “more likely than not” that the position is sustainable based solely on its technical merits. |
Exploration Costs | Exploration costs, which included the cost of researching for appropriate places to drill wells and the cost of well drilling in search of potential natural brine or other resources, are charged to the income statement as incurred. |
Contingencies | The Company accrues for costs relating to litigation, including litigation defense costs, claims and other contingent matters, including liquidated damage liabilities, when such liabilities become probable and reasonably estimable. Such estimates may be based on advice from third parties or on managementÂ’s judgment, as appropriate. Revisions to accruals are reflected in earnings (loss) in the period in which different facts or information become known or circumstances change that affect the CompanyÂ’s previous assumptions with respect to the likelihood or amount of loss. Amounts paid upon the ultimate resolution of such liabilities may be materially different from previous estimates. |
Stock-based Compensation | Common stock, stock options and stock warrants issued to employees or directors are recorded at their fair values estimated at grant date using the Black-Scholes model and the portion that is ultimately expected to vest is recognized as compensation cost over the requisite service period. Common stock, stock options and stock warrants issued to other than employees or directors are recorded on the basis of their fair value using the Black-Scholes option-pricing model on the basis of the market price of the underlying common stock on the “valuation date,” which for options and warrants related to contracts that have substantial disincentives to non-performance is the date of the contract, and for all other contracts the measurement date is the date that the service is complete. Expense related to the options and warrants is recognized on a straight-line basis over the period in which services are to be received. Where expense must be recognized prior to a valuation date, the expense is computed under the Black-Scholes model on the basis of the market price of the underlying common stock at the end of the period, and any subsequent changes in the market price of the underlying common stock up through the valuation date is reflected in the expense recorded in the subsequent period in which that change occurs. |
Basic and Diluted Net Income per Share of Common Stock | Basic earnings per common share are based on the weighted average number of shares outstanding during the periods presented. Diluted earnings per share are computed using weighted average number of common shares plus dilutive common share equivalents outstanding during the period. Potential common shares that would have the effect of increasing diluted earnings per share are considered to be anti-dilutive, i.e. the exercise prices of the outstanding stock options were greater than the market price of the common stock. Anti-dilutive common stock equivalents which were excluded from the calculation of number of dilutive common stock equivalents amounted to 317,294 and 2,175,088 shares for the years ended December 31, 2015 and 2014, respectively. The following table sets forth the computation of basic and diluted earnings per share: Years ended December 31, 2015 2014 Numerator Net income   $ 34,068,037   $ 17,871,795 Denominator Basic: Weighted-average common shares outstanding during the year 45,167,288 38,694,567 Add: Dilutive effect of stock options 942,116 566,060 Diluted 46,109,404 39,260,627 Net income per share Basic $ 0.75 $ 0.46 Diluted   $ 0.74   $ 0.46 |
Goodwill | Goodwill represents the excess of the purchase price over the net of the fair value of the identifiable tangible and intangible assets acquired and the fair value of liabilities assumed in business acquisitions. Management of the Company evaluates the carrying value of goodwill annually or when a possible impairment is indicated. The Company performs its impairment assessment annually and between annual tests in certain circumstances and determined that there was no impairment of goodwill. Goodwill impairment is assessed using the expected present value of associated future cash flows. |
New Accounting Pronouncements | As of December 31,2015 and for the year then ended, there were no recently adopted accounting pronouncements that had a material effect on the CompanyÂ’s consolidated financial statements. As of December 31, 2015, there were no recently issued accounting standards not yet adopted which would have a material effect on the CompanyÂ’s consolidated financial statements through 2017. |
1. NATURE OF BUSINESS AND SUM27
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Accounting Policies [Abstract] | |
Schedule of property plant and equipment useful life | Useful life (in years) Buildings (including salt pans) 8 - 20 Plant and machinery (including protective shells, transmission channels and ducts) 3 - 8 Motor vehicles 5 Furniture, fixtures and equipment 3 - 8 |
Schedule of computation of basic and diluted earnings per share | Years ended December 31, 2015 2014 Numerator Net income   $ 34,068,037   $ 17,871,795 Denominator Basic: Weighted-average common shares outstanding during the year 45,167,288 38,694,567 Add: Dilutive effect of stock options 942,116 566,060 Diluted 46,109,404 39,260,627 Net income per share Basic $ 0.75 $ 0.46 Diluted   $ 0.74   $ 0.46 |
2. BUSINESS ACQUISITION (Tables
2. BUSINESS ACQUISITION (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Business Acquisition Tables | |
Schedule of fair value of identifiable assets and liabilities | Cash $ 14,074,720 Accounts receivable 19,365,259 Inventories 1,646,196 Other current assets 82,562 Property, plant and equipment, net 17,891,360 Prepaid land leases, net of current portion 4,800,404 Goodwill 29,559,174 Accounts payable and accrued expenses (8,670,568 ) Taxes payable (963,458 ) Cumulative translation adjustment 1,893,097 Total purchase price $ 79,678,746 The following table shows supplemental information of the results of operations on a pro forma basis for fiscal years 2015 and 2014, as if the acquisition of SCRC had been completed at the beginning of the CompanyÂ’s fiscal years presented. Year Ended December 31, 2015 2014 Net Revenue $ 168,031,383 $ 160,627,774 Net Income $ 35,538,071 $ 29,699,118 EARNINGS PER SHARE -Basic $ 0.79 $ 0.65 -Diluted $ 0.77 $ 0.64 |
3. INVENTORIES (Tables)
3. INVENTORIES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | As of December 31, 2015 2014 Raw materials $ 1,014,917 $ 625,160 Finished goods 5,486,970 4,746,163 Work-in-process 691,604 - Allowance for obsolete and slow-moving inventories (12,691 ) (3,455 )   $ 7,180,800 $ 5,367,868 |
5. PROPERTY, PLANT AND EQUIPM30
5. PROPERTY, PLANT AND EQUIPMENT, NET (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Property, Plant and Equipment [Abstract] | |
Property, plant and equipment | As of December 31, 2015 2014 At cost: Mineral rights $ 6,131,230 $ 6,506,668 Buildings 68,510,164 53,231,127 Plant and machinery 195,295,877 177,485,689 Motor vehicles 8,847 9,389 Furniture, fixtures and office equipment 4,864,619 4,884,991 Construction in progress 57,596 - Total 274,868,333 242,117,864 Less: accumulated depreciation and amortization (146,997,010 ) (117,767,083 ) Net book value $ 127,871,323 $ 124,350,781 |
6. PROPERTY, PLANT AND EQUIPM31
6. PROPERTY, PLANT AND EQUIPMENT UNDER CAPITAL LEASES, NET (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Property Plant And Equipment Under Capital Leases Net Tables | |
Property, plant and equipment under capital leases | As of December 31, 2015 2014 At cost: Buildings $ 126,729 $ 134,489 Plant and machinery 2,382,139 2,528,007 Total 2,508,868 2,662,496 Less: accumulated depreciation and amortization (1,581,650 ) (1,322,894 ) Net book value $ 927,218 $ 1,339,602 |
7. ACCOUNTS PAYABLE AND ACCRU32
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSE (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Payables and Accruals [Abstract] | |
Accounts payable and accrued expenses | As of December 31, 2015 2014 Accounts payable $ 8,835,442 $ 3,181,465 Salary payable 271,369 234,932 Social security insurance contribution payable 114,370 89,232 Other payables 708,519 499,099 Total $ 9,929,700 $ 4,004,728 |
9. TAXES PAYABLE (Tables)
9. TAXES PAYABLE (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
Schedule of Taxes payable | As of December 31, 2015 2014 Income tax payable   $ 2,400,400 $ 1,388,341 Mineral resource compensation fee payable 255,984 292,026 Value added tax payable 1,030,664 724,915 Land use tax payable 904,354 949,544 Other tax payables 222,601 190,603 Total $ 4,814,003 $ 3,545,429 |
10. CAPITAL LEASE OBLIGATIONS (
10. CAPITAL LEASE OBLIGATIONS (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Leases [Abstract] | |
Capital lease obligations | Imputed As of December 31, Interest rate 2015 2014 Total capital lease obligations 6.7% $ 2,752,692 $ 3,031,623 Less: Current portion (196,778 ) (205,128 ) Capital lease obligations, net of current portion $ 2,555,914 $ 2,826,495 |
13. STOCK-BASED COMPENSATION (T
13. STOCK-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of stock option transactions | Number of Option and Warrants Outstanding and exercisable Weighted- Average Exercise price of Option and Warrants Range of Exercise Price per Common Share Balance, December 31, 2013 2,470,971 $3.36 $0.95 - $12.60 Granted and vested during the year ended December 31, 2014 735,000 $1.05 $0.98 - $2.55 Exercised during the year ended December 31, 2014 (223,000 ) $0.95 $0.95 Expired during the year ended December 31, 2014 (238,971 ) $9.56 $2.41 - $12.00 Balance, December 31, 2014 2,744,000 $2.38 $0.95 - $12.60 Granted and vested during the year ended December 31, 2015 655,000 $1.49 $1.43 - $2.55 Exercised during the year ended December 31, 2015 (182,500 ) $1.12 $0.95-$1.66 Expired during the year ended December 31, 2015 (817,500 ) $4.86 $2.06 - $4.97 Balance, December 31, 2015 2,399,000 $1.39 $0.95 - $12.60 |
Schedule Stock and Warrants Options Outstanding | Stock and Warrants Options Exercisable and Outstanding Weighted Average Weighted Average Outstanding Remaining Exercise Price of at December 31, 2015 Range of Exercise Prices Contractual Life (Years) Options Currently Outstanding Exercisable and outstanding 2,399,000 $0.95 - $12.60 2.12 $1.39 |
14. INCOME TAXES (Tables)
14. INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
Schedule of components of the provision for income taxes | Years ended December 31, 2015 2014 Current taxes – PRC $ 11,455,764 $ 6,226,000 Deferred tax – PRC (83,856 ) 15 $ 11,371,908 $ 6,226,015 |
Schedule of income tax expenses reconciliation | Years ended December 31, 2015 2014 Statutory income tax rate   25% 25% Non-deductible items (1% ) - Change in valuation allowance-US federal net operating loss 1% 1% Effective tax rate   25% 26% |
Schedule of deferred tax assets and liabilities | As of December 31, 2015 2014 Deferred tax liabilities $ - $ - Deferred tax assets: Allowance for obsolete and slow-moving inventories $ 3,173 $ 864 Impairment on property, plant and equipment 449,879 477,427 Exploration costs 1,917,301 1,952,990 Compensation costs of unexercised stock options 629,162 1,427,296 US federal net operating loss 10,835,000 10,382,000 Total deferred tax assets 13,834,515 14,240,577 Valuation allowance (11,464,162 ) (11,809,296 ) Net deferred tax asset $ 2,370,353 $ 2,431,281 Current deferred tax asset $ 3,173 $ 864 Long-term deferred tax asset $ 2,367,180 $ 2,430,417 |
15. BUSINESS SEGMENTS (Tables)
15. BUSINESS SEGMENTS (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Segment Reporting [Abstract] | |
Schedule of segment operating income | Year Ended December 31, 2015 Bromine * Crude Salt * Chemical Products Segment Total Corporate Total Net revenue (external customers) $ 52,385,491 $ 10,494,939 $ 99,436,690 $ 162,317,120 $ - $ 162,317,120 Net revenue (intersegment) 8,039,156 - - 8,039,156 - 8,039,156 Income from operations before taxes 10,854,711 1,183,755 32,997,870 45,036,336 128,374 45,164,710 Income taxes 2,508,902 500,451 8,362,555 11,371,908 - 11,371,908 Income from operations after taxes 8,345,809 683,304 24,635,315 33,664,428 128,374 33,792,802 Total assets 136,701,878 40,306,628 179,733,958 356,742,464 762 356,743,226 Depreciation and amortization 17,498,441 6,136,889 5,460,318 29,095,648 - 29,095,648 Capital expenditures 20,665,890 2,120,622 72,113 22,858,625 - 22,858,625 Goodwill - - 29,559,174 29,559,174 - 29,559,174 Year Ended December 31, 2014 Bromine * Crude Salt * Chemical Products Segment Total Corporate Total Net revenue (external customers) $ 57,949,824 $ 10,752,226 $ 44,958,281 $ 113,660,331 $ - $ 113,660,331 Net revenue (intersegment) 3,013,295 - - 3,013,295 - 3,013,295 Income (loss) from operations before taxes 9,500,428 719,226 14,432,851 24,652,505 (834,284 ) 23,818,221 Income taxes 2,214,988 370,974 3,640,053 6,226,015 - 6,226,015 Income (loss) from operations after taxes 7,285,440 348,252 10,792,798 18,426,490 (834,284 ) 17,592,206 Total assets 195,539,637 51,632,485 75,748,241 322,920,363 61,789 322,982,152 Depreciation and amortization 18,011,790 6,076,042 3,554,390 27,642,222 - 27,642,222 Capital expenditures 5,414,738 1,123,873 - 6,538,611 - 6,538,611 |
Schedule of segment costs | Years ended December 31, Reconciliations 2015 2014 Total segment operating income $ 45,036,336 $ 24,652,505 Corporate costs (1,447,023 ) (926,696 ) Unrealized translation difference 1,575,397 92,412 Income from operations 45,164,710 23,818,221 Other income 275,235 279,589 Income before taxes $ 45,439,945 $ 24,097,810 |
Schedule of major customers | The following table shows the major customer(s) (10% or more) for the year ended December 31, 2015. Number Customer Bromine (000Â’s) Crude Salt (000Â’s) Chemical Products (000Â’s) Total Revenue (000Â’s) Percentage of Total Revenue (%) 1 Shandong Morui Chemical Company Limited $ 7,989 $ 2,703 $ 7,431 $ 18,123 11.2% TOTAL $ 7,989 $ 2,703 $ 7,431 $ 18,123 11.2% The following table shows the major customer(s) (10% or more) for the year ended December 31, 2014. Number Customer Bromine (000Â’s) Crude Salt (000Â’s) Chemical Products (000Â’s) Total Revenue (000Â’s) Percentage of Total Revenue (%) 1 Shandong Morui Chemical Company Limited $ 8,519 $ 2,576 $ 6,477 $ 17,572 15.5% TOTAL $ 8,519 $ 2,576 $ 6,477 $ 17,572 15.5% |
19. CAPITAL COMMITMENT AND OP38
19. CAPITAL COMMITMENT AND OPERATING LEASE COMMITMENTS (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of contractual obligations | Capital Lease Obligations Operating Lease Obligations Property Management Fees Purchase Obligations Payable within: the next 12 months $ 289,058 $ 953,635 $ 96,075 $ 57,596 the next 13 to 24 months 289,058 975,297 96,075 - the next 25 to 36 months 289,058 995,062 - - the next 37 to 48 months 289,058 1,018,711 - - the next 49 to 60 months 289,058 1,040,415 - - thereafter 2,890,580 18,671,332 - - Total $ 4,335,870 $ 23,654,452 $ 192,150 $ 57,596 Less: Amount representing interest (1,583,178) Present value of net minimum lease payments $ 2,752,692 |
1. NATURE OF BUSINESS AND SUM39
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 12 Months Ended |
Dec. 31, 2015 | |
Buildings [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, useful life | 8 years |
Buildings [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, useful life | 20 years |
Plant and machinery [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, useful life | 3 years |
Plant and machinery [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, useful life | 8 years |
Motor vehicles [Member] | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, useful life | 5 years |
Furniture, fixtures and equipment [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, useful life | 3 years |
Furniture, fixtures and equipment [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Property, plant and equipment, useful life | 8 years |
1. NATURE OF BUSINESS AND SUM40
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Numerator | ||
Net income | $ 34,068,037 | $ 17,871,795 |
Denominator | ||
Basic: Weighted-average common shares outstanding during the year | 45,167,288 | 38,694,567 |
Add: Dilutive effect of stock options | 942,116 | 566,060 |
Diluted | 46,109,404 | 39,260,627 |
Net income per share | ||
Basic | $ 0.75 | $ 0.46 |
Diluted | $ 0.74 | $ 0.46 |
1. NATURE OF BUSINESS AND SUM41
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Accounting Policies [Abstract] | ||
Concentration of credit risk amount | $ 133,606,392 | $ 146,585,601 |
Concentrations of credit risk, percentage | 73.30% | 66.50% |
Plant and machinery, net book value | $ 969,638 | $ 673,705 |
Retirement benefit | 980,359 | 707,086 |
Foreign exchange gain | 1,575,397 | 92,412 |
Anti-dilutive common stock equivalents amount | $ 317,294 | $ 2,175,088 |
2. BUSINESS ACQUISITION (Detail
2. BUSINESS ACQUISITION (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Business Acquisition Details | ||
Cash | $ 14,074,720 | |
Accounts receivable | 19,365,259 | |
Inventories | 1,646,196 | |
Other current assets | 82,562 | |
Property, plant and equipment, net | 17,891,360 | |
Prepaid land leases, net of current portion | 4,800,404 | |
Goodwill | 29,559,174 | |
Accounts payable and accrued expenses | (8,670,568) | |
Taxes payable | (963,458) | |
Cumulative translation adjustment | 1,893,097 | |
Total purchase price | $ 79,678,746 |
2. BUSINESS ACQUISITION (Deta43
2. BUSINESS ACQUISITION (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Business Acquisition Details | ||
Net Revenue | $ 168,031,383 | $ 160,627,774 |
Net Income | $ 35,538,071 | $ 29,699,118 |
EARNINGS PER SHARE | ||
-Basic | $ 0.79 | $ 0.65 |
-Diluted | $ 0.77 | $ 0.64 |
2. BUSINESS ACQUISITION (Deta44
2. BUSINESS ACQUISITION (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Net revenue | $ 168,031,383 | $ 160,627,774 |
NetIncomeLoss | 35,538,071 | $ 29,699,118 |
SCRC [Member] | ||
Net revenue | 51,274,989 | |
NetIncomeLoss | 12,667,379 | |
Costs related to the acquisition | $ 121,512 |
3. INVENTORIES (Details)
3. INVENTORIES (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 1,014,917 | $ 625,160 |
Finished goods | 5,486,970 | $ 4,746,163 |
Work-in-process | 691,604 | |
Allowance for obsolete and slow-moving inventories | 691,604 | $ (3,455) |
Inventories | $ 7,180,800 | $ 5,367,868 |
4. PREPAID LAND LEASE (Details
4. PREPAID LAND LEASE (Details Narrative) | 12 Months Ended | |
Dec. 31, 2015USD ($)km² | Dec. 31, 2014USD ($)km² | |
Notes to Financial Statements | ||
Amortization of prepaid land lease | $ 774,512 | $ 680,551 |
Area of land | km² | 59.43 | 59.39 |
Aggregate carrying value | $ 686,073 | $ 742,820 |
5. PROPERTY, PLANT AND EQUIPM47
5. PROPERTY, PLANT AND EQUIPMENT, NET (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Property, Plant and Equipment [Abstract] | ||
Mineral rights | $ 6,131,230 | $ 6,506,668 |
Buildings | 68,510,164 | 53,231,127 |
Plant and machinery | 195,295,877 | 177,485,689 |
Motor vehicles | 8,847 | 9,389 |
Furniture, fixtures and office equipment | 4,864,619 | $ 4,884,991 |
Construction in progress | 57,596 | |
Total | 274,868,333 | $ 242,117,864 |
Less: Accumulated depreciation and amortization | (146,997,010) | (117,767,083) |
Net book value | $ 127,871,323 | $ 124,350,781 |
5. PROPERTY, PLANT AND EQUIPM48
5. PROPERTY, PLANT AND EQUIPMENT, NET (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Property, Plant and Equipment [Abstract] | ||
Property ownership carrying value | $ 42,526,151 | $ 37,219,221 |
Depreciation and amortization expense | 28,746,069 | 27,287,976 |
Cost of net revenue | 27,281,471 | 25,811,070 |
Cost of administrative expenses | 1,464,598 | 1,476,906 |
Ordinary repair and maintenance expenses | $ 607,688 | $ 1,050,204 |
6. PROPERTY, PLANT AND EQUIPM49
6. PROPERTY, PLANT AND EQUIPMENT UNDER CAPITAL LEASES, NET (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Total | $ 2,508,868 | $ 2,662,496 |
Less: accumulated depreciation and amortization | (1,581,650) | (1,322,894) |
Net book value | 927,218 | 1,339,602 |
Buildings [Member] | ||
Total | 126,729 | 134,489 |
Plant and machinery | ||
Total | $ 2,382,139 | $ 2,528,007 |
6. PROPERTY, PLANT AND EQUIPM50
6. PROPERTY, PLANT AND EQUIPMENT UNDER CAPITAL LEASES, NET (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Leases [Abstract] | ||
Depreciation and amortization cost of sales | $ 349,579 | $ 354,246 |
7. ACCOUNTS PAYABLE AND ACCRU51
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSE (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Accounts Payable And Accrued Expense Details | ||
Accounts payable | $ 8,835,442 | $ 3,181,465 |
Salary payable | 271,369 | 234,932 |
Social security insurance contribution payable | 114,370 | 89,232 |
Other payables | 708,519 | 499,099 |
Total | $ 9,929,700 | $ 4,004,728 |
8. DUE TO A RELATED PARTY AND52
8. DUE TO A RELATED PARTY AND RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Related Party Transactions [Abstract] | ||
General and administrative expense | $ 100,704 | $ 100,704 |
Proceeds from long term borrowing | $ 949,150 | $ 459,974 |
Equity interest of Mr. Ming Yang | 99.00% | 99.00% |
9. TAXES PAYABLE (Details)
9. TAXES PAYABLE (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Next13To24Months | ||
Income tax payable | $ 2,400,400 | $ 1,388,341 |
Mineral resource compensation fee payable | 255,984 | 292,026 |
Value added tax payable | 1,030,664 | 724,915 |
Land use tax payable | 904,354 | 949,544 |
Other tax payables | 222,601 | 190,603 |
Total | $ 4,814,003 | $ 3,545,429 |
10. CAPITAL LEASE OBLIGATIONS54
10. CAPITAL LEASE OBLIGATIONS (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Capital Lease Obligations Details | ||
Imputed interest rate on capital lease obligations | 6.70% | 6.70% |
Total capital lease obligations | $ 2,752,692 | $ 3,031,623 |
Less: Current portion | (196,778) | (205,128) |
Capital lease obligations, net of current portion | $ 2,555,914 | $ 2,826,495 |
10. CAPITAL LEASE OBLIGATIONS55
10. CAPITAL LEASE OBLIGATIONS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Capital Lease Obligations Details Narrative | ||
Interest expense from capital lease obligations | $ 193,162 | $ 202,656 |
11. EQUITY (Details Narrative)
11. EQUITY (Details Narrative) - shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Equity Details Narrative | ||
COMMON STOCK, shares authorized | 80,000,000 | 80,000,000 |
Statutory Common Reserve Funds Description | SCHC , SYCI and SCRC are required each year to transfer at least 10% of the profit after tax as reported under the PRC statutory financial statements to the Statutory Common Reserve Funds until the balance reaches 50% of the registered share capital. | |
Statutory Common Reserve Fund | The Statutory Common Reserve Fund as of December 31, 201 5 for SCHC, SYCI and SCRC is 40%, 50% and 8% of its registered capital, respectively. |
12. TREASURY STOCK (Details Nar
12. TREASURY STOCK (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Treasury Stock Details Narrative | ||
Repurchase of common stock, shares | (37,713) | (61,728) |
Repurchase of common stock, amount | $ (37,713) | $ (61,728) |
Repurchase of common stock, average price | $ 1.22 | $ 1.15 |
13. STOCK-BASED COMPENSATION (D
13. STOCK-BASED COMPENSATION (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of Option and Warrants Outstanding, Beginning balance | 2,744,000 | 2,470,971 |
Number of Option and Warrants Outstanding, Granted | 655,000 | 735,000 |
Number of Option and Warrants Vested during the period | 655,000 | 735,000 |
Number of Option and Warrants exercised in period | (182,500) | (223,000) |
Number of Option and Warrants expired | (817,500) | (238,971) |
Number of Option and Warrants Outstanding, Ending Balance | 2,399,000 | 2,744,000 |
Weighted- Average Exercise price of Option and Warrants, outstanding beginning of period | $ 2.38 | $ 3.36 |
Weighted- Average Exercise price of Option and Warrants, granted in period | $ 1.49 | $ 1.05 |
Weighted- Average Exercise price of Option and Warrants, vested in period | 1.49 | 1.05 |
Weighted- Average Exercise price of Option and Warrants, exercised in period | $ 1.12 | $ 0.95 |
Weighted- Average Exercise price of Option and Warrants, expired in period | 4.86 | 9.56 |
Weighted- Average Exercise price of Option and Warrants, outstanding end of period | $ 1.39 | $ 2.38 |
Range of Exercise Price per Common Share, Beginning Balance | 0.95 - $12.60 | 0.95 - $12.60 |
Range of Exercise Price per Common Share, Granted and Vested | 1.43 - $2.55 | 0.98 - $2.55 |
Range of Exercise Price per Common Share, Exercised | $ 1.12 | $ 0.95 |
Range of Exercise Price per Common Share, Expired | 2.06 - $4.97 | 2.41 - $12.00 |
Range of Exercise Price per Common Share, Ending Balance | 0.95 - $12.60 | 0.95 - $12.60 |
Minimum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Weighted- Average Exercise price of Option and Warrants, exercisable beginning of period | $ 0.95 | |
Weighted- Average Exercise price of Option and Warrants, exercisable end of period | $ 0.95 | |
Maximum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Weighted- Average Exercise price of Option and Warrants, exercisable beginning of period | $ 12.60 | |
Weighted- Average Exercise price of Option and Warrants, exercisable end of period | $ 12.60 |
13. STOCK-BASED COMPENSATION 59
13. STOCK-BASED COMPENSATION (Details 1) - $ / shares | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Share-based Compensation [Abstract] | |||
Outstanding | 2,399,000 | 2,744,000 | 2,470,971 |
Range of Exercise Prices, Lower Limit | $ 0.95 | ||
Range of Exercise Prices, Upper Limit | $ 12.60 | ||
Weighted Average Remaining Contractual Life (Years) | 2 years 1 month 13 days | ||
Weighted Average Exercise Price of Options Currently Outstanding | $ 1.39 | $ 2.38 | $ 3.36 |
13. STOCK-BASED COMPENSATION 60
13. STOCK-BASED COMPENSATION (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Share-based Compensation [Abstract] | ||
Aggregate intrinsic value of options outstanding and exercisable | $ 1,639,182 | |
Intrinsic value of options exercised | $ 236,535 | $ 400,954 |
Issued common stock upon cashless exercise, shares | 182,500 | 223,000 |
Issued common stock upon cashless exercise, option | $ 145,813 | $ 97,244 |
14. INCOME TAXES (Details)
14. INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Tax Disclosure [Abstract] | ||
Current taxes - PRC | $ 11,455,764 | $ 6,226,000 |
Deferred taxe - PRC | (83,856) | 15 |
Income taxes | $ 11,371,908 | $ 6,226,015 |
14. INCOME TAXES (Details 1)
14. INCOME TAXES (Details 1) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Tax Disclosure [Abstract] | ||
Statutory income tax rate | 25.00% | 25.00% |
Non-deductible items | (1.00%) | 0.00% |
Change in valuation allowance-US federal net operating loss | 1.00% | 1.00% |
Effective tax rate | 25.00% | 26.00% |
14. INCOME TAXES (Details 2)
14. INCOME TAXES (Details 2) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Income Tax Disclosure [Abstract] | ||
Deferred tax liabilities | $ 0 | $ 0 |
Deferred tax assets: | ||
Allowance for obsolete and slow-moving inventories | 3,173 | 864 |
Impairment on property, plant and equipment | 449,879 | 477,427 |
Exploration costs | 1,917,301 | 1,952,990 |
Compensation costs of unexercised stock options | 629,162 | 1,427,296 |
US federal net operating loss | 10,835,000 | 10,382,000 |
Total deferred tax assets | 13,834,515 | 14,240,577 |
Valuation allowance | (11,464,162) | (11,809,296) |
Net deferred tax asset | 2,370,353 | 2,431,281 |
Current deferred tax asset | 3,173 | 864 |
Long-term deferred tax asset | $ 2,367,180 | $ 2,430,417 |
14. INCOME TAXES (Details Narra
14. INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Statutory tax rates | 25.00% | 25.00% |
Accumulated distributable earnings | $ 260,471,507 | $ 242,440,917 |
Unrecognized withholding tax | 11,974,695 | 11,008,938 |
US federal net operating loss | 30,900,000 | 29,700,000 |
Increases Decrease in valuation allowance | $ 345,134 | $ 287,014 |
HONG KONG [Member] | ||
Statutory tax rates | 16.50% | 16.50% |
15. BUSINESS SEGMENTS (Details)
15. BUSINESS SEGMENTS (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Segment Reporting Information [Line Items] | ||
Net revenue (external customers) | $ 162,317,120 | $ 113,660,331 |
Net revenue (intersegment) | 8,039,156 | 3,013,295 |
Income from operations before taxes | 45,164,710 | 23,818,221 |
Income taxes | 11,371,908 | 6,226,015 |
Income from operations after taxes | 33,792,802 | 17,592,206 |
Total assets | 356,743,226 | 322,982,152 |
Depreciation and amortization | 29,095,648 | 27,642,222 |
Capital expenditures | 22,858,625 | 6,538,611 |
Goodwill | 29,559,174 | |
Bromine Segment [Member] | ||
Segment Reporting Information [Line Items] | ||
Net revenue (external customers) | 52,385,491 | 57,949,824 |
Net revenue (intersegment) | 8,039,156 | 3,013,295 |
Income from operations before taxes | 10,854,711 | 9,500,428 |
Income taxes | 2,508,902 | 2,214,988 |
Income from operations after taxes | 8,345,809 | 7,285,440 |
Total assets | 136,701,878 | 195,539,637 |
Depreciation and amortization | 17,498,441 | 18,011,790 |
Capital expenditures | $ 20,665,890 | 5,414,738 |
Goodwill | ||
Crude Salt Segment [Member] | ||
Segment Reporting Information [Line Items] | ||
Net revenue (external customers) | $ 10,494,939 | $ 10,752,226 |
Net revenue (intersegment) | ||
Income from operations before taxes | $ 1,183,755 | $ 719,226 |
Income taxes | 500,451 | 370,974 |
Income from operations after taxes | 683,304 | 348,252 |
Total assets | 40,306,628 | 51,632,485 |
Depreciation and amortization | 6,136,889 | 6,076,042 |
Capital expenditures | $ 2,120,622 | 1,123,873 |
Goodwill | ||
Chemical Products Segment [Member] | ||
Segment Reporting Information [Line Items] | ||
Net revenue (external customers) | $ 99,436,690 | $ 44,958,281 |
Net revenue (intersegment) | ||
Income from operations before taxes | $ 32,997,870 | $ 14,432,851 |
Income taxes | 8,362,555 | 3,640,053 |
Income from operations after taxes | 24,635,315 | 10,792,798 |
Total assets | 179,733,958 | 75,748,241 |
Depreciation and amortization | 5,460,318 | $ 3,554,390 |
Capital expenditures | 72,113 | |
Goodwill | 29,559,174 | |
Segment Total [Member] | ||
Segment Reporting Information [Line Items] | ||
Net revenue (external customers) | 162,317,120 | $ 113,660,331 |
Net revenue (intersegment) | 8,039,156 | 3,013,295 |
Income from operations before taxes | 45,036,336 | 24,652,505 |
Income taxes | 11,371,908 | 6,226,015 |
Income from operations after taxes | 33,664,428 | 18,426,490 |
Total assets | 356,742,464 | 322,920,363 |
Depreciation and amortization | 29,095,648 | 27,642,222 |
Capital expenditures | 22,858,625 | $ 6,538,611 |
Goodwill | $ 29,559,174 | |
Corporate [Member] | ||
Segment Reporting Information [Line Items] | ||
Net revenue (external customers) | ||
Net revenue (intersegment) | ||
Income from operations before taxes | $ 128,374 | $ (834,284) |
Income taxes | ||
Income from operations after taxes | $ 128,374 | $ (834,284) |
Total assets | $ 762 | $ 61,789 |
Depreciation and amortization | ||
Capital expenditures | ||
Goodwill |
15. BUSINESS SEGMENTS (Details
15. BUSINESS SEGMENTS (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Business Segments Details 1 | ||
Total segment operating income | $ 45,036,336 | $ 24,652,505 |
Corporate costs | (1,447,023) | (926,696) |
Unrealized translation difference | 1,575,397 | 92,412 |
Income from operations | 45,164,710 | 23,818,221 |
Other income | 275,235 | 279,589 |
Income before taxes | $ 45,439,945 | $ 24,097,810 |
15. BUSINESS SEGMENTS (Detail67
15. BUSINESS SEGMENTS (Details 2) - Shandong Maroi Chemical Company Limited [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Revenue, Major Customer [Line Items] | ||
Revenue from major customer | $ 18,123 | $ 17,572 |
Percentage of Total Revenue (%) | 11.20% | 15.50% |
Bromine Segment [Member] | ||
Revenue, Major Customer [Line Items] | ||
Revenue from major customer | $ 7,989 | $ 8,519 |
Crude Salt Segment [Member] | ||
Revenue, Major Customer [Line Items] | ||
Revenue from major customer | 2,703 | 2,576 |
Chemical Products Segment [Member] | ||
Revenue, Major Customer [Line Items] | ||
Revenue from major customer | $ 7,431 | $ 6,477 |
16. MAJOR SUPPLIERS (Details Na
16. MAJOR SUPPLIERS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Major Suppliers Details Narrative | ||
Top five suppliers percentage raw materials supplied | 57.60% | 89.40% |
Amount due top five suppliers | $ 3,460,249 | $ 2,794,998 |
17. CUSTOMER CONCENTRATION (Det
17. CUSTOMER CONCENTRATION (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Amounts due from major customers | $ 21,872,942 | $ 23,035,195 |
Top 5 customers | ||
Percent products sold to top five customers | 31.70% | 43.30% |
19. CAPITAL COMMITMENT AND OP70
19. CAPITAL COMMITMENT AND OPERATING LEASE COMMITMENTS (Details) | Dec. 31, 2015USD ($) |
Capital Lease Obligations Payable within: | |
the next 12 months | $ 289,058 |
the next 13 to 24 months | 289,058 |
the next 25 to 36 months | 289,058 |
the next 37 to 48 months | 289,058 |
the next 49 to 60 months | 289,058 |
thereafter | 2,890,580 |
Total | 4,335,870 |
Less: Amount representing interest | (1,583,178) |
Present value of net minimum lease payments | 2,752,692 |
Operating Lease Obligations | |
the next 12 months | 953,635 |
the next 13 to 24 months | 975,297 |
the next 25 to 36 months | 995,062 |
the next 37 to 48 months | 1,018,711 |
the next 49 to 60 months | 1,040,415 |
thereafter | 18,671,332 |
Total | 23,654,452 |
Property Management Fees | |
the next 12 months | 96,075 |
the next 13 to 24 months | $ 96,075 |
the next 25 to 36 months | |
the next 37 to 48 months | |
the next 49 to 60 months | |
thereafter | |
Total | $ 192,150 |
Exploration Project Expenditure | |
the next 12 months | $ 57,596 |
the next 13 to 24 months | |
the next 25 to 36 months | |
the next 37 to 48 months | |
the next 49 to 60 months | |
thereafter | |
Total | $ 57,596 |
19. CAPITAL COMMITMENT AND OP71
19. CAPITAL COMMITMENT AND OPERATING LEASE COMMITMENTS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Capital Commitment And Operating Lease Commitments Details Narrative | ||
Rental expenses related to operating leases | $ 1,072,767 | $ 978,047 |