Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Apr. 14, 2020 | Jun. 28, 2019 | |
Document And Entity Information | |||
Entity Registrant Name | GULF RESOURCES, INC. | ||
Entity Central Index Key | 0000885462 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
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 | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Interactive Data Current | Yes | ||
Entity Incorporation, State or Country Code | NV | ||
Entity File Number | 001-34499 | ||
Entity Public Float | $ 27,000,000 | ||
Entity Common Stock, Shares Outstanding | 9,517,427 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2019 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Current Assets | ||
Cash | $ 100,301,986 | $ 178,998,935 |
Accounts receivable | 4,877,106 | 0 |
Inventories, net | 690,087 | 0 |
Prepayments and deposits | 1,332,970 | 8,096,636 |
Prepaid land leases | 0 | 235,459 |
Other receivables | 559 | 12,506 |
Total Current Assets | 107,202,708 | 187,343,536 |
Non-Current Assets | ||
Property, plant and equipment, net | 137,994,949 | 82,282,630 |
Finance lease right-of-use assets | 179,526 | 250,757 |
Operating lease right-of-use assets | 8,817,884 | 0 |
Prepaid land leases, net of current portion | 9,115,276 | 9,639,009 |
Deferred tax assets | 15,940,642 | 19,030,858 |
Total Non-Current Assets | 172,048,277 | 111,203,254 |
Total Assets | 279,250,985 | 298,546,790 |
Current Liabilities | ||
Payable and accrued expenses | 1,106,048 | 905,258 |
Retention payable | 3,805,483 | 332,416 |
Taxes payable-current | 779,623 | 1,188,687 |
Finance lease liability, current portion | 198,506 | 197,480 |
Operating lease liabilities, current portion | 416,604 | 0 |
Total Current Liabilities | 6,306,264 | 2,623,841 |
Non-Current Liabilities | ||
Finance lease liability, net of current portion | 1,905,772 | 2,069,545 |
Operating lease liabilities, net of current portion | 7,931,849 | 0 |
Total Non-Current Liabilities | 9,837,621 | 2,069,545 |
Total Liabilities | 16,143,885 | 4,693,386 |
Commitment and Contingencies | ||
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; 9,562,444 and 9,410,588 shares issued; and 9,516,614 and 9,360,758 shares outstanding as of December 31, 2019 and December 31, 2018 | 23,904 | 23,525 |
Treasury stock; 45,830 and 49,830 shares as of December 31, 2019 and December 31, 2018 at cost | (510,329) | (554,870) |
Additional paid-in capital | 95,043,388 | 95,020,808 |
Retained earnings unappropriated | 159,808,400 | 185,608,445 |
Retained earnings appropriated | 24,233,544 | 24,233,544 |
Accumulated other comprehensive loss | (15,491,807) | (10,478,048) |
Total Stockholders' Equity | 263,107,100 | 293,853,404 |
Total Liabilities and Stockholders' Equity | $ 279,250,985 | $ 298,546,790 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2019 | Dec. 31, 2018 |
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 | 9,562,444 | 9,410,588 |
Common stock, shares outstanding | 9,516,614 | 9,360,758 |
Treasury stock, shares | 45,830 | 49,830 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
NET REVENUE | ||
Net Revenue | $ 10,596,521 | $ 2,594,941 |
OPERATING EXPENSE | ||
Cost of net revenue | (5,430,269) | (1,310,272) |
Sales, marketing and other operating expenses | (12,434) | (66,111) |
Write-off/impairment on property, plant and equipment | 0 | (1,397,313) |
Loss on demolition of factory | 0 | (18,644,473) |
Direct labor and factory overheads incurred during plant shutdown | (15,175,280) | (21,081,692) |
Write-off of prepaid land lease | 0 | (4,004,788) |
Impairment for goodwill | 0 | (27,966,050) |
General and administrative expenses | (13,272,921) | (11,268,800) |
Other operating loss | 0 | (407,973) |
Total Costs and Expenses | (33,890,904) | (86,147,472) |
LOSS FROM OPERATIONS | (23,294,383) | (83,552,531) |
OTHER INCOME (EXPENSE) | ||
Interest expense | (145,445) | (160,422) |
Interest income | 446,770 | 661,112 |
LOSS BEFORE INCOME TAXES | (22,993,058) | (83,051,841) |
INCOME TAX (EXPENSE) BENEFIT | (2,806,987) | 13,087,855 |
NET LOSS | (25,800,045) | (69,963,986) |
COMPREHENSIVE LOSS: | ||
NET LOSS | (25,800,045) | (69,963,986) |
OTHER COMPREHENSIVE LOSS | ||
Foreign currency translation adjustments | (5,013,759) | (18,641,006) |
COMPREHENSIVE LOSS | $ (30,813,804) | $ (88,604,992) |
LOSS PER SHARE: | ||
BASIC AND DILUTED | $ (2.73) | $ (7.45) |
WEIGHTED AVERAGE NUMBER OF SHARES: | ||
BASIC AND DILUTED | 9,465,432 | 9,360,758 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) | Common Stock | Treasury Stock | Additional Paid-In Capital | Retained Earnings Unappropriated | Retained Earnings Appropriated | Accumulated Other Comprehensive Income (Loss) | Total |
Shares issued at Dec. 31, 2017 | 9,410,588 | ||||||
Balance, shares at Dec. 31, 2017 | 9,360,758 | 49,830 | |||||
Balance, amount at Dec. 31, 2017 | $ 23,525 | $ (554,870) | $ 94,524,608 | $ 255,572,431 | $ 24,233,544 | $ 8,162,958 | $ 381,962,196 |
Translation adjustment | (18,641,006) | (18,641,006) | |||||
Issuance of stock options to employees and directors | 496,200 | 496,200 | |||||
Net loss | (69,963,986) | (69,963,986) | |||||
Shares issued at Dec. 31, 2018 | 9,410,588 | ||||||
Balance, shares at Dec. 31, 2018 | 9,360,758 | 49,830 | |||||
Balance, amount at Dec. 31, 2018 | $ 23,525 | $ (554,870) | 95,020,808 | 185,608,445 | 24,233,544 | (10,478,048) | 293,853,404 |
Translation adjustment | (5,013,759) | (5,013,759) | |||||
Shares issued from treasury stock for services, shares | 4,000 | (4,000) | |||||
Shares issued from treasury stock for services, amount | $ 44,541 | (22,941) | 21,600 | ||||
Cashless exercise of stock options, shares issued | 151,856 | ||||||
Cashless exercise of stock options, shares outstanding | 151,856 | ||||||
Cashless exercise of stock options, amount | $ 379 | (379) | 0 | ||||
Issuance of stock options to employees and directors | 45,900 | 45,900 | |||||
Net loss | (25,800,045) | (25,800,045) | |||||
Shares issued at Dec. 31, 2019 | 9,562,444 | ||||||
Balance, shares at Dec. 31, 2019 | 9,516,614 | 45,830 | |||||
Balance, amount at Dec. 31, 2019 | $ 23,904 | $ (510,329) | $ 95,043,388 | $ 159,808,400 | $ 24,233,544 | $ (15,491,807) | $ 263,107,100 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (25,800,045) | $ (69,963,986) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||
Interest on finance lease obligation | 144,881 | 159,839 |
Amortization of prepaid land leases | 0 | 761,713 |
Depreciation and amortization | 14,060,927 | 17,443,318 |
Allowance for obsolete and slow-moving inventories | 0 | 21,248 |
Write-off/impairment loss on property, plant and equipment | 0 | 1,397,313 |
Write-off of prepaid land lease | 0 | 4,004,788 |
Loss on demolition of factory | 0 | (18,644,473) |
Impairment for goodwill | 0 | (27,966,050) |
Unrealized translation difference | (421,657) | (1,315,454) |
Deferred tax asset | 2,746,770 | (13,087,855) |
Stock-based compensation expense - options | 45,900 | 496,200 |
Shares issued from treasury stock for services | 21,600 | 0 |
Changes in assets and liabilities: | ||
Accounts receivable | (5,070,180) | 30,241,680 |
Other receivables | 11,794 | (11,289) |
Inventories | (700,476) | 1,192,262 |
Prepayments and deposits | 14,166 | (81,469) |
Payable and accrued expenses | (102,963) | (106,163) |
Retention payable | 0 | (597,991) |
Taxes payable | (374,575) | 175,994 |
Operating lease | 114,746 | 0 |
Net cash (used in) provided by operating activities | (15,309,112) | 17,340,671 |
CASH FLOWS USED IN INVESTING ACTIVITIES | ||
Additions of prepaid land leases | 0 | (680,975) |
Purchase of property, plant and equipment | (60,611,949) | (35,273,307) |
Net cash used in investing activities | (60,611,949) | (35,954,282) |
CASH FLOWS USED IN FINANCING ACTIVITIES | ||
Repayment of capital lease obligation | (275,509) | (294,295) |
Net cash used in financing activities | (275,509) | (294,295) |
EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (2,500,379) | (10,999,918) |
NET DECREASE IN CASH AND CASH EQUIVALENTS | (78,696,949) | (29,907,824) |
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR | 178,998,935 | 208,906,759 |
CASH AND CASH EQUIVALENTS - END OF YEAR | 100,301,986 | 178,998,935 |
Cash paid during the period for: | ||
Income taxes | 0 | 0 |
Operating right-of-use assets obtained in exchange for lease obligations | 8,241,818 | 0 |
SUPPLEMENTAL DISCLOSURE OF CASH NON-CASH INVESTING AND FINANCING ACTIVITIES | ||
Purchase of property, plant and equipment included in retention payable | 3,515,132 | 0 |
Par value of common stock issued upon cashless exercise of options | $ 379 | $ 0 |
1. NATURE OF BUSINESS AND SUMMA
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | (a) Basis of Presentation and Consolidation The accompanying audited consolidated financial statements have been prepared by Gulf Resources, Inc. (“Gulf Resources”). a Nevada corporation and its subsidiaries (collectively, the “Company”). 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 Shouguang Yuxin Chemical Industry Co., Limited (“SYCI”) and Daying County Haoyuan Chemical Company Limited (“DCHC”). All material intercompany transactions have been eliminated on consolidation. (b) Nature of Business The Company manufactures and trades bromine and crude salt through its wholly-owned subsidiary, Shouguang City Haoyuan Chemical Company Limited (“SCHC”) and manufactures chemical products for use in the oil industry, pesticides, paper manufacturing industry and for human and animal antibiotics through its wholly-owned subsidiary, Shouguang Yuxin Chemical Industry Co., Limited (“SYCI”) in the People’s Republic of China (“PRC”). DCHC was established to further explore and develop natural gas and brine resources (including bromine and crude salt) in the PRC. DCHC’s business commenced trial operation in January 2019 but suspended production temporarily in May 2019 as required by the government to obtain project approval (see Note 1 (b)(iii)). (i) Bromine and Crude Salt Segments On September 1, 2017, the Company received notification from the Government of Yangkou County, Shouguang City of PRC that production at all its factories should be halted with immediate effect in order for the Company to perform rectification and improvement in accordance with the county’s new safety and environmental protection requirements. The Company worked closely with the county authorities to develop rectification plans for both its bromine and crude salt businesses and agreed on a plan in October 2017. In the fiscal year ended December 31, 2018, the Company incurred $16,243,677 in the rectification and improvements of plant and equipment of the bromine and crude salt factories resulting in a cumulative amount of $34,182,329 incurred as of December 31, 2018 recorded in the plant, property and equipment in the consolidated balance sheet. No such costs were incurred in the year ended December 31, 2019 and the Company does not expect to incur any additional capital expenditures in the rectification of its bromine and crude salt factories in respect of meeting the county’s new safety and environmental protection requirement. In the first quarter of 2018, six out of its ten bromine factories completed their rectification process within factory areas (i.e. excluding crude salt field area) and were approved and scheduled for production commencement by April 2018 as verbally indicated by the local government. The remaining four factories were still undergoing rectification at that time. Three factories (Factory no. 3, Factory no. 4 and Factory no. 11) had to be demolished in September 2018 as required by the government and rectification for Factory no. 10 was completed in November 2018. In 2018, the Shandong Provincial government required the local government to conduct “four rating and one comprehensive evaluation” for all of the chemical companies within its jurisdiction. This has delayed the production commencement schedule of the six bromine and crude salt factories in which rectification work was completed. On June 29 2018, the Company received a formal notice (dated June 25, 2018) jointly issued by various provincial government agencies in Shandong Province (the “Notice”) forwarded by the Weifang City Special Operations Leading Group Office of Safe Production, Transformation and Upgrading of Chemical Industry. In the Notice, the provincial government agencies set forth further requirements and procedures covering the following four aspects for the chemical industrial enterprises: project approval, planning approval, land use rights approval and environmental protection assessment approval. Those standards and procedures apply to all chemical industrial enterprises in Shandong Province including the Company’s bromine plants that have not completed project approval procedures, planning approval procedures, land use rights approval procedures and environmental protection assessment procedures. The Company believes that the government will not grant approval to the Company to allow its bromine and crude salt plants to resume operations until the Company has fully complied with the aforesaid rules set forth in the Notice. The Shouguang City Bromine Association, on behalf of all the bromine plants in Shouguang, has started discussions with the local government agencies. The local governmental agencies confirmed the facts that their initial requirements for the bromine industry did not include the project approval, the planning approval and the land use rights approval and that those three additional approvals were new requirements of the provincial government. The Company understood from the local government that it has been coordinating with several government agencies to solve these three outstanding approval issues in a timely manner and that all the affected bromine plants are not allowed to commence production prior to obtaining those approvals. In April 2019, Factory No.1, Factory No.5 and Factory No.7 (Factory no. 5 is considered part of Factory no.7 and both are managed as one factory since 2010) restarted operations upon receipt of verbal notification from local government of Yangkou County. On May 7, 2019, the Company renamed its Subdivision Factory No. 1 to Factory No. 4; and Factory No. 5 (which was previously considered part of Factory No. 7) to Factory No. 7. On November 25, 2019, the government of Shouguang City issued a notice ordering all bromine facilities in Shouguang City, including the Company’s bromine facilities, including Factory No.1 and Factory No.7, to temporarily stop production from December 16, 2019 to February 10, 2020. Subsequently, due to an outbreak of a novel coronavirus (COVID-19) in China, the local government ordered these bromine facilities to postpone the commencement of production. On February 27, 2020, the Company received an approval issued by the local governmental authority which allows the Company to resume production after the winter temporary closure. It received another approval from the Shouguang Yangkou People’s Government dated March 5, 2020 to resume production at its bromine factories No.1, No. 4, No.7 and No. 9 in order to meet the needs of bromide products for epidemic prevention and control. Company factories No.7 and No.1 had started trial production in the middle of March, 2020, and these two factories started its commercial production on April 3,2020. The Company is not certain when the issuance of the approval documents will be effected. The Company believes that this is another step by the government to improve the environment. It further believes the goal of the government is not to close all plants, but rather to codify the regulations related to project approval, land use, planning approval and environmental protection assessment approval so that illegal plants are not able to open in the future and so that plants close to population centers do not cause serious environmental damage. In addition, the Company believes that the Shandong provincial government wants to assure that each of its regional and county governments has applied the Notice in a consistent manner. The Company believes the issues related to the remaining bromine and crude salt factories including No.2, No.8, No.10 which have passed inspection are almost resolved. The Company is actively working with the local government to obtain the documentation for approval of project, planning, land use rights and environmental protection evaluation. (ii) Chemical Segment On November 24, 2017, the Company received a letter from the Government of Yangkou County, Shouguang City notifying the Company to relocate its two chemical production plants located in the second living area of the Qinghe Oil Extraction to the Bohai Marine Fine Chemical Industrial Park (“Bohai Park”). This is because the two plants are located in a residential area and their production activities will impact the living environment of the residents. This is as a result of the country’s effort to improve the development of the chemical industry, manage safe production and curb environmental pollution accidents effectively, and ensure the quality of the living environment of residents. All chemical enterprises which do not comply with the requirements of the safety and environmental protection regulations will be ordered to shut down. The Company believes this relocation process will cost approximately $60 million in total. The Company incurred relocation costs comprising prepaid land lease and professional fees related to the design of the new chemical factory in the amount of $10,320,017 and 10,489,930, which were recorded in the prepaid land leases and property, plant and equipment in the consolidated balance sheets as of December 31, 2019 and December 31, 2018. The Company does not anticipate that the Company’s new chemical factory to be significantly impacted by the Notice. The Company has secured from the government the land use rights for its chemical plants located at the Bohai Park and presented a completed construction design draft and other related documents to the local authorities for approval. On January 6 , 2020, the Company received the environmental protection approval by the government of Shouguang City, Shandong Province for the proposed Yuxin Chemical factory. The environmental protection approval was the last approval required before commencing construction. With this approval, Gulf Resources plans to begin construction in May 2020. (iii) Natural Gas Segment In January 2017, the Company completed the first brine water and natural gas well field construction in Daying located in Sichuan Province and commenced trial production in January 2019. On May 29, 2019, the Company received a verbal notice from the government of Tianbao Town ,Daying County, Sichuan Province, whereby the Company is required to obtain project approval for its well located in Daying, including the whole natural gas and brine water project, and approvals for safety production inspection, environmental protection assessment, and to solve the related land issue. Until these approvals have been received, the Company has to temporarily halt trial production at its natural gas well in Daying. At present, some documents have been submitted and the Company is still waiting for approval. (c) 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 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. (d) 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. (e) Accounts receivable and Allowance for 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 240 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, 2019 and December 31, 2018, There were no allowances for doubtful accounts. No allowances for doubtful accounts were charged to the consolidated statements of loss for years ended December 31, 2019 and 2018. (f) 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, China Merchants Bank Company Limited and Sichuan Rural Credit Union, which are not insured or otherwise protected. The Company placed $100,301,986 and $178,998,935 with these institutions as of December 31, 2019 and 2018, 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 and extends credit terms as and when appropriate. Accounts receivable of $4,877,106 as of December 31, 2019 was fully collected in the period January through March in 2020. (g) Inventories Inventories are stated at the lower of cost, determined on a first-in first-out cost basis, or net realizable value. 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. (h) 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, when available for intended use, 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 of production method, whichever is shorter. Construction in process primarily represents direct costs of construction of property, plant and equipment. Costs incurred are capitalized and transferred to property, plant and equipment upon completion and depreciation will commence when the completed assets are placed in service. The Company’s depreciation and amortization policies on property, plant and equipment, other than mineral rights and construction in process, 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 the finance lease 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. Producing oil and gas properties are depreciated on a unit-of-production basis over the proved developed reserves. Common facilities that are built specifically to service production directly attributed to designated oil and gas properties are depreciated based on the proved developed reserves of the respective oil and gas properties on a pro-rata basis. Common facilities that are not built specifically to service identified oil and gas properties are depreciated using the straight-line method over their estimated useful lives. Costs associated with significant development projects are not depreciated until commercial production commences and the reserves related to those costs are excluded from the calculation of depreciation. (i) Asset Retirement Obligation The Company follows Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”), 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 by the bromine and crude salt factories. Also, for the two chemical plants that are to be relocated, currently, there are no obligations to restore the land to its original condition. (j) Recoverability of Long-lived Assets In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360-10-35 ”Impairment or Disposal of Long-lived Assets” 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, 2019, the Company determined that there were no events or circumstances indicating possible impairment of its long-lived assets. Upon the receipt of the closure notice from the People’s Government of Yangkou Town, Shouguang City in September 2018 (See Note 1(b)), the Company demolished the affected factories. As a result, the Company wrote off net book value of the affected factories’ property, plant and equipment in the amount of $18,644,473 which was recorded in the loss on demolition of factories in the consolidated statements of loss for the fiscal year ended December 31, 2018. The Company will negotiate with the local villages over compensation for the payment already made for the land leases and mineral rights of these factories. However, the Company is uncertain of the amount that it could recover and when this could be accomplished. Therefore, the Company wrote off the mineral rights of the affected factories of $1,284,832 included in the write-off/impairment on property, plant and equipment in the consolidated statements of loss for the fiscal year ended December 31, 2018 and $52,926 of prepaid land lease recorded in other operating loss in the consolidated statements of loss for fiscal year ended December 31, 2018. The Company incurred dismantling fees in the amount of $273,757 recorded in other operating loss in the consolidated statements of loss for fiscal year ended December 31, 2018. In addition, the Company recorded a write-off of $112,481 included in the write-off/impairment of property, plant and equipment for certain wells and equipment damaged by flood from a typhoon that occurred in August 2018. (k) 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 plan at the applicable rate based on the employees’ salaries. The required contributions under the retirement plans are charged to the consolidated statement of loss on an accrual basis when they are due. The Company’s contributions totaled $1,035,687 and $1,216,096 for the years ended December 31, 2019 and 2018, respectively. (l) 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. (m) Leases The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. Finance leases are included in finance lease ROU assets and finance lease liabilities in the consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease and finance lease ROU assets and liabilities are recognized at January 1, 2019 based on the present value of lease payments over the lease term discounted using the rate implicit in the lease. In cases where the implicit rate is not readily determinable, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has elected not to recognize operating lease ROU assets and liabilities arising from short-term lease. (n) Basic and Diluted Earnings 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 103,392 and 51,747 shares for the years ended December 31, 2019 and 2018, respectively. These awards could be dilutive in the future if the market price of the common stock increases and is greater than the exercise price of these awards. Because the Company reported a net loss for the years ended December 31, 2019 and 2018, common stock equivalents including stock options and warrants were anti-dilutive, therefore the amounts reported for basic and diluted loss per share were the same. (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 other comprehensive income/(loss). The consolidated statement of income/(loss) and comprehensive income/(loss) 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/(loss) for the reporting periods as part of general and administrative expense. Included in the general and administrative expense is a foreign exchange gain of $421,657 and $1,315,454 for the years ended December 31, 2019 and 2018. The consolidated statement of cash flows is translated at the average rate during each quarter, 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 Net revenue is net of discount and value added tax and comprises the sale of bromine, crude salt and chemical products. Revenue is recognized at a point in time when the control of the promised goods is transferred to the customers in an amount that reflects the consideration that the Company expects to receive from the customers in exchange for those goods. The acknowledgement of receipt of goods by the customers is when control of the product is deemed to be transferred. Invoicing occurs upon acknowledgement of receipt of the goods by the customers. Customers have no rights to return the goods upon acknowledgement of receipt of goods. Revenue from contracts with customers is disaggregated in Note 15. (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. Deferred tax assets and liabilities are measured using tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. The deferred income tax effects of a change in tax rates are recognized in the period of enactment. 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. Interests and penalties associated with unrecognized tax benefits are included within the (benefit from) provision for income tax in the consolidated statement of profit (loss). (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. Once the commercial viability of a project has been confirmed, all subsequent costs are capitalized. For oil and gas properties, the successful efforts method of accounting is adopted. The Company carries exploratory well costs as an asset when the well has found a sufficient quantity of reserves to justify its completion as a producing well and where the Company is making sufficient progress assessing the reserves and the economic and operating viability of the project. Exploratory well costs not meeting these criteria are charged to expenses. Exploratory wells that discover potentially economic reserves in areas where major capital expenditure will be required before production would begin and when the major capital expenditure depends upon the successful completion of further exploratory work remain capitalized and are reviewed periodically for impairment. (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 The Company accounts for stock-based compensation under the provisions of FASB ASC 718, Compensation Stock Compensation, In June 2018, the FASB Compensation Stock Compensation (Topic I 8), Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this Update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Prior to this Update, Topic 718 applied only to share-based transactions to employees. Consistent with the accounting requirement for employee share-based payment awards, nonemployee share-based payment awards within the scope of Topic 718 are measured at grant-date fair value of the equity instruments that an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. The Company has elected to account for the forfeiture of stock-based awards as they occur. (v) New Accounting Pronouncements Recent accounting pronouncements adopted In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments in this Update specify the accounting for leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from operating leases. The Company adopted the standard effective January 1, 2019 under the optional transition method which allows an entity to apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment, if any, to the opening balance of retained earnings in the period of adoption. The Company elected the available practical expedients. As a result of the adoption of this standard, the Company recognized operating lease ROU assets of $8,817,884, operating lease liabilities of $8,348,453, with the remaining balance paid in the consolidated financial statements as of and for the year ended December 31, 2019 with no cumulative-effect adjustment to retained earnings as of January 1, 2019. In June 2018, the FASB issued ASU No.2018-07, Compensation- Stock Compensation (Topic 718). Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this update expand the scope of Topic 718 to inc |
2. INVENTORIES
2. INVENTORIES | 12 Months Ended |
Dec. 31, 2019 | |
Inventory Disclosure [Abstract] | |
2. INVENTORIES | Inventories consist of: December 31, 2019 December 31, 2018 Raw materials $ 20,928 $ - Finished goods 669,159 65,169 Allowance for obsolete and slow-moving inventory - (65,169 ) $ 690,087 $ - |
3. PREPAID LAND LEASE
3. PREPAID LAND LEASE | 12 Months Ended |
Dec. 31, 2019 | |
Prepaid Land Lease | |
3. PREPAID LAND LEASE | The Company has the rights to use certain parcels of land located in Shouguang, Shandong , PRC, through lease agreements signed with local townships or the government authority. The production facilities and warehouses of the Company are located on these parcels of land. The lease term ranges from ten to fifty years. Some of the lease contracts were paid in one lump sum upfront and some are paid annually at the beginning of each anniversary date. These leases have no purchase option at the end of the lease term and were classified as operating leases prior to and as of January 1, 2019 when the new lease standard was adopted. Prior to January 2019, the prepaid land lease was amortized on a straight line basis. As of January 1, 2019, all the leases in which term has commenced and were in use were classified as operating lease right-of-use assets (“ROU”). See Note 6. In December 2017, the Company paid a one lump sum upfront amount of $9,115,276 for a 50-year lease of a parcel of land at Bohai Marine Fine Chemical Industrial Park (“Bohai”) for the new chemical factory to be built. There is no purchase option at the end of the lease term. This was classified as an operating lease prior to and as of January 1, 2019. The land use certificate was issued on October 25, 2019. The lease term expires on August 12, 2069. As of December 31, 2019, the construction of the chemical factory has not commenced. The amount paid was recorded as prepaid land leases, net of current portion in the consolidated balance sheet as of Dec 31, 2019 and 2018. No amortization of this prepaid land lease was recorded as of December 31, 2019. Amortization will commence when the factory is completed and placed in service. During the year ended December 31, 2018, amortization of prepaid land leases totaled $761,713, which amounts were recorded as direct labor and factory overheads incurred during plant shutdown. For parcels of land that are collectively owned by local townships, the Company cannot obtain land use rights certificates. The parcels of land of which the Company cannot obtain land use rights certificates cover a total of approximately 38.6 square kilometers with an aggregate carrying value in prepaid land lease of $599,747 as at December 31, 2018. |
4. PROPERTY, PLANT AND EQUIPMEN
4. PROPERTY, PLANT AND EQUIPMENT, NET | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
4. PROPERTY, PLANT AND EQUIPMENT, NET | Property, plant and equipment, net consist of the following: December 31, December 31, At cost: Mineral rights $ 2,764,462 $ 2,809,977 Buildings 59,880,567 60,866,462 Plant and machinery 234,669,007 161,178,816 Motor vehicles 6,129 6,230 Furniture, fixtures and office equipment 3,235,736 3,289,010 Construction in process 1,204,742 6,535,808 Total 301,760,643 234,686,303 Less: Accumulated depreciation and amortization (146,330,705) (134,681,628 ) Impairment (17,434,989) (17,722,045 ) Net book value $ 137,994,949 $ 82,282,630 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 authority. 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 $ 19,894,947 and $20,409,998 as at December 31, 2019 and December 31, 2018, respectively. During the year ended December 31, 2019, depreciation and amortization expense totaled $13,991,583 of which $ 10,796,085, $848,345 and $2,347,153 were recorded in direct labor and factory overheads incurred during plant shutdown, administrative expenses and cost of net revenue. During the year ended December 31, 2018, depreciation and amortization expense totaled $17,176,306, of which $16,209,588 and $966,718 were recorded in direct labor and factory overheads incurred during plant shutdown and administrative expenses, respectively in the consolidated statement of income (loss). |
5. FINANCE LEASE RIGHT-OF-USE A
5. FINANCE LEASE RIGHT-OF-USE ASSETS | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
5. FINANCE LEASE RIGHT-OF-USE ASSETS | Property, plant and equipment under finance leases, net consist of the following: December 31, December 31, At cost: Buildings $ 117,956 $ 119,899 Plant and machinery 2,157,848 2,193,375 Total 2,275,804 2,313,274 Less: Accumulated depreciation and amortization (2,096,278) (2,062,517 ) Net book value $ 179,526 $ 250,757 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, 2019, depreciation and amortization expense totaled $69,344, respectively, which was recorded in direct labor and factory overheads incurred during plant shutdown. During the year ended December 31, 2018, depreciation and amortization expense totaled $267,012, respectively, which was recorded in direct labor and factory overheads incurred during plant shutdown. |
6. OPERATING LEASE RIGHT-OF-USE
6. OPERATING LEASE RIGHT-OF-USE ASSETS | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
6. OPERATING LEASE RIGHT-OF-USE ASSETS | As of December 31, 2019, the total operating lease ROU assets was $8,817,884. The total operating lease cost for the years ended December 31, 2019 and 2018 was $889,683 and $1,046,486. The Company has the rights to use certain parcels of land located in Shouguang, the PRC, through lease agreements signed with local townships or the government authority (See Note 3). For parcels of land that are collectively owned by local townships, the Company cannot obtain land use rights certificates. The parcels of land of which the Company cannot obtain land use rights certificates covers a total of approximately 38.6 square kilometers with an aggregate operating lease right-of-use assets amount of $8,326,861 as at December 31, 2019. |
7. PAYABLE AND ACCRUED EXPENSES
7. PAYABLE AND ACCRUED EXPENSES | 12 Months Ended |
Dec. 31, 2019 | |
Payables and Accruals [Abstract] | |
7. OTHER PAYABLE AND ACCRUED EXPENSES | Payable and accrued expenses consist of the following: December 31, December 31, 2019 2018 Salary payable $ 310,097 $ 241,343 Social security insurance contribution payable 105,750 140,326 Other payable-related party (see Note 8) 89,424 90,900 Deposit on subscription of a subsidiary’s share 144,798 - Accrued expense for construction 97,913 104,246 Accrued expense-others 358,066 328,443 Total $ 1,106,048 $ 905,258 The deposit on subscription of a subsidiary’s share of $144,798 as of December 31, 2019 relates to sale of non-controlling interests in DCHC. |
8. RELATED PARTY TRANSACTIONS
8. RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2019 | |
Related Party Transactions [Abstract] | |
8. RELATED PARTY TRANSACTIONS | During the fiscal years 2019 and 2018, the Company borrowed $419,995 and $355,212, 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. The amounts due to Jiaxing Lighting were unsecured, interest free and repayable on demand. There was no balance owing to Jiaxing Lighting as of December 31, 2019 and 2018. On September 25, 2012, the Company purchased five floors 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. During the first quarter of 2018, the Company entered into an agreement with the Seller, a related party, to provide property management services for an annual amount of approximately $89,425 for five years from January 1, 2018 to December 31, 2022. The expense associated with this agreement for the year ended December 31, 2019 was approximately $89,425.The expense associated with this agreement for the year ended December 31, 2018 was approximately $90,897. |
9. TAXES PAYABLE
9. TAXES PAYABLE | 12 Months Ended |
Dec. 31, 2019 | |
Taxes Payable [Abstract] | |
9. TAXES PAYABLE | December 31, December 31, 2019 2018 Land use tax payable $ 779,623 $ 1,188,687 |
10. LEASE LIABILITIES-FINANCE A
10. LEASE LIABILITIES-FINANCE AND OPERATING LEASE | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
10. LEASE LIABILITIES-FINANCE AND OPERATING LEASE | The components of finance lease liabilities were as follows: Imputed December 31, December 31, Interest rate 2019 2018 Total finance lease liability 6.7% $ 2,104,278 $ 2,267,025 Less: Current portion (198,506 ) (197,480 ) Finance lease liability, net of current portion $ 1,905,772 $ 2,069,545 Interest expenses from finance lease obligations amounted to $144,880 and $159,839 for the years ended December 31, 2019 and 2018, respectively, which were charged to the consolidated statement of loss. The components of operating lease liabilities as follows: Imputed December 31, December 31, Interest rate 2019 2018 Total Operating lease liabilities 4.89% $ 8,348,453 $ - Less: Current portion (416,604 ) - Operating lease liabilities, net of current portion $ 7,931,849 $ - The weighted average remaining operating lease term at December 31, 2019 was 22.3 years and the weighted average discounts rate was 4.89%, This discount rates used are based on the base rate quoted by the People’s Bank of China and vary with the remaining term of the lease. Maturities of lease liabilities were as follows: Finance lease Operating Lease Payable within: the next 12 months $ 269,049 $ 772,866 the next 13 to 24 months 269,049 786,584 the next 25 to 36 months 269,049 637,294 the next 37 to 48 months 269,049 644,149 the next 49 to 60 months 269,049 641,946 thereafter 1,614,295 11,442,172 Total 2,959,540 14,925,011 Less: Amount representing interest (855,262 ) (6,576,558 ) Present value of net minimum lease payments $ 2,104,278 $ 8,348,453 |
11. EQUITY
11. EQUITY | 12 Months Ended |
Dec. 31, 2019 | |
Equity [Abstract] | |
11. EQUITY | Reverse Stock Split and Authorized Shares On January 27, 2020, the Company completed a 1-for-5 reverse stock split of the company’s common stock, such that for each five shares outstanding prior to the stock split there was one share outstanding after the reverse stock split. All shares of common stock referenced in this report have been adjusted to reflect the stock split figures. There is no change to the authorized shares of the Company' common stock which remain at 80,000,000. Retained Earnings - Appropriated In accordance with the relevant PRC regulations and the PRC subsidiaries’ Articles of Association, the Company’s PRC subsidiaries are required to allocate its profit after tax to the following reserve: Statutory Common Reserve Funds SCHC, SYCI and DCHC 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, 2019 for SCHC, SYCI and DCHC is 16%, 14% and 0% of its registered capital respectively. Retained earnings - Unappropriated SCHC transferred approximately $84 million ( equivalent to RMB590 million) from its undistributed profit to its paid in capital during the year ended December 31, 2019. |
12. TREASURY STOCK
12. TREASURY STOCK | 12 Months Ended |
Dec. 31, 2019 | |
Equity [Abstract] | |
12. TREASURY STOCK | In January 2019, the Company issued 4,000 shares of common stock from the treasury shares to one of its consultants. The shares were valued at the closing market price on the date of the agreement and recorded as general and administrative expense in the consolidated statement of loss and comprehensive loss for the year ended December 31, 2019. The shares issued were deducted from the treasury shares at weighted average cost and the excess of the cost over the closing market price was charged to additional paid-in-capital. On September 13, 2019, the Company received a staff deficiency notice from The Nasdaq Stock Market informing the Company that it has failed to comply with Nasdaq’s shareholder approval requirements relating to shares issued to this consultant. A total of 8,000 restricted shares issued to this consultant from treasury will be canceled. On January 14, 2020, the Company reissued the shares from the 2019 Omnibus Equity Incentive Plan adopted by the board of directors of the Company and approved by the stockholders at the annual stockholders meeting held on December 18, 2019. On January 23, 2020, the Company received a letter from the Nasdaq Stock Market Listing Qualifications Staff (the “Staff”) notifying that the Company has regained compliance with the shareholder approval requirements set forth in Nasdaq Listing Rule 5635(c) in connection with shares issued to a consultant based on the Staff’s review of the Company’s submitted materials. |
13. STOCK-BASED COMPENSATION
13. STOCK-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2019 | |
Share-based Payment Arrangement [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 868,398 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 increased to 2,068,398. As of December 31, 2019, the number of shares of the Company’s common stock available for issuance under the Plan is 990,198. The fair value of each option award 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 historical option exercise pattern. On December 3, 2018, the Company granted to 17 members of the management staff options to purchase 99,400 shares of the Company’s common stock, at an exercise price of $3.565 per share and the options vested immediately. The options were valued at $121,000 fair value, with assumed 39.91% volatility, a four-year expiration term with an expected tenor of 1.64 years, a risk free rate of 2.78% and no dividend yield. On December 3, 2018, the Company granted to our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer options to purchase 240,000 shares of the Company’s common stock, at an exercise price of $3.565 per share and the options vested immediately. The options were valued at $354,700 fair value, with assumed 41.72% volatility, a four-year expiration term with an expected tenor of 2.62 years, a risk free rate of 2.83% and no dividend yield. On December 3, 2018, the Company granted to four independent directors and a consultant options to purchase 16,000 shares of the Company’s common stock at an exercise price of $3.565 per share and the options vested immediately. The options were valued at $20,500 fair value, with assumed 38.87% volatility, a three-year expiration term with expected tenor of 1.97 years, a risk free rate of 2.82% and no dividend yield. On April 1, 2019, the Company granted to one employee options to purchase 30,000 shares of the Company’s common stock, at an exercise price of $4.55 per share and the options vested immediately. The options were valued at $45,900 fair value, with assumed 45.26% volatility, a four-year expiration term with an expected tenor of 1.60 years, a risk free rate of 2.37% and no dividend yield. For the year ended December 31, 2019 and 2018, total compensation costs for options issued recorded in the consolidated statement of (loss) were $45,900 and $496,200. There were no related tax benefits as a full valuation allowance was recorded in the years ended December 31, 2019 and 2018. The following table summarizes all Company stock option transactions between January 1, 2019 and December 31, 2019. Number of Option Weighted- Average Exercise price of Option Range of Balance, January 1, 2019 503,600 $4.85 $3.55 - $24 Granted and vested 30,000 $4.55 $4.55 Exercised (379,400) $3.65 $3.57 - $4.56 Expired/cancelled (19,100) $11.20 $7.20 - $24.00 Balance, December 31, 2019 135,100 $7.21 $3.57 - $9.9 Stock and Warrants Options Exercisable and Outstanding Weighted Average Remaining Outstanding at December 31, 2019 Range of Exercise Prices Contractual Life (Years) Exercisable and outstanding 135,100 $3.57 - $9.9 1.55 All options exercisable and outstanding at December 31, 2019 are fully vested. As of December 31, 2019, there was no unrecognized compensation cost related to outstanding stock options, The aggregate intrinsic value of options outstanding and exercisable as of December 31, 2019 was $0.The aggregate intrinsic value is calculated as the difference between the exercise price of the underlining options and the stock price of $2.55 and $3.90 for the Company's common stock on December 31, 2019 and 2018. The aggregate intrinsic value of options exercised during the years ended December 31, 2019 and 2018 was $922,429 and $119,059. During the year ended December 31, 2019, 151,856 shares of common stock were issued upon cashless exercise of 379,400 options. |
14. INCOME TAXES
14. INCOME TAXES | 12 Months Ended |
Dec. 31, 2019 | |
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. 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. (a) United States (“US”) Gulf Resources, Inc. may be subject to the United States of America Tax laws at a tax rate of 21%. 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, 2019 and 2018, and management believes that its earnings are permanently invested in the PRC. (b) British Virgin Islands (“BVI”) Upper Class Group Limited, a subsidiary of Gulf Resources, Inc., 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 December 31, 2019 and 2018. (c) Hong Kong HKJI, a subsidiary of Upper Class Group Limited, was incorporated in Hong Kong and 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 income tax has been made as it has no taxable income for the years ended December 31, 2019 and 2018. The applicable statutory tax rates for the years ended December 31, 2019 and 2018 are 16.5%. There is no dividend withholding tax in Hong Kong. (d) PRC Enterprise income tax (“EIT”) for SCHC, SYCI and DCHC in the PRC is charged at 25% of the assessable profits. The operating subsidiaries SCHC, SYCI and DCHC are wholly foreign-owned enterprises (“FIE”) incorporated in the PRC and are subject to PRC Local Income Tax Law. The PRC tax losses may be carried forward to be utilized against future taxable profit for ten years for High-tech enterprises and small and medium-sized enterprises of science and technology and for five years for other companies. Tax losses of the operating subsidiaries of the Company may be carried forward for five years. On February 22, 2008, the Ministry of Finance (“MOF”) and the State Administration of Taxation (“SAT”) jointly issued CaiShui [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, 2019 and December 31, 2018, the accumulated distributable earnings under the Generally Accepted Accounting Principles (GAAP”) of PRC that are subject to WHT are $124,616,722 and $240,563,868, 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, 2019 and December 31, 2018, the Company has not recorded any WHT on the cumulative amount of distributable retained earnings of its foreign invested enterprises that are subject to WHT in China. As of December 31, 2019 and December 31, 2018, the unrecognized WHT are $5,254,560 and $11,035,843, respectively. The Company’s income 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 income tax returns filed in the United States for three years from the date of filing. The Company’s US income tax returns since 2016 are currently subject to examination. Inland Revenue Department of Hong Kong (“IRD”) may examine the Company’s income tax returns filed in Hong Kong for seven years from date of filing. For the years 2012 through 2018, HKJI did not report any taxable income. It did not file any income tax returns during these years except for 2014 and 2018. For companies which do not have taxable income, IRD typically issues notification to companies requiring them to file income tax returns once in every four years. The tax returns for 2014 and 2018 are currently subject to examination. The components of the provision for income tax (expense) income tax benefit from continuing operations are: Years Ended December 31, 2019 2018 Current taxes – PRC $ - $ - Deferred taxes – PRC 5,865,830 13,302,779 Change in valuation allowance (8,672,817) (214,924) $ (2,806,987) $ 13,087,855 The effective income tax benefit (expense) rate differs from the PRC statutory income tax rate of 25% from continuing operations in the PRC as follows: Years Ended December 31, Reconciliations 2019 2018 Statutory income tax rate 25 % 25 % Non-taxable & Non deductible items 1 % (9 %) Change in valuation allowance (38 %) - Effective income tax benefit (expense) rate (12 %) 16 % As of December 31, 2019 and 2018, the Company had a US federal net operating loss (“NOL”) of approximately $2,100,000 and $566,000. The NOL can be carried forward up to 20 years from the year the losses were recorded. The timing and manner in which the Company can utilize operating loss carryforwards in any year may be limited by provisions of the Internal Revenue Code regarding changes in ownership of corporations. Such limitation may have an impact on the ultimate realization of its carry forwards and future tax deductions. In addition, 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, a 100% deferred tax asset valuation allowance was recorded for these net operating losses. Significant components of the Company’s deferred tax assets and liabilities at December 31, 2019 and December 31, 2018 are as follows: December 31, December 31, 2019 2018 Deferred tax liabilities $ — $ — Deferred tax assets: Allowance for obsolete and slow-moving inventories $ — $ 16,292 Impairment on property, plant and equipment 2,974,542 3,696,332 Impairment on prepaid land lease 826,673 840,284 Exploration costs 1,784,583 1,813,965 Compensation costs of unexercised stock options 171,672 194,016 PRC tax losses 18,737,005 12,663,985 US federal net operating loss 432,000 119,000 Total deferred tax assets 24,926,475 19,343,874 Valuation allowance (8,985,833 ) (313,016 ) Net deferred tax asset $ 15,940,642 $ 19,030,858 The increase in valuation allowance for the year ended December 31, 2019 is $8,672,817. The increase in valuation allowance for the year ended December 31, 2018 is $214,924. The increase in valuation allowance in the year ended December 31, 2019 is mainly attributable to valuation allowance recorded for the deferred tax assets related to a portion of the PRC tax losses that more likely than not will expire before it could be utilized and the exploration costs which more likely than not will not be realized. There were no unrecognized tax benefits and accrual for uncertain tax positions as of December 31, 2019 and 2018. There were no amounts accrued for penalties and interest for the years ended December 31, 2019 and 2018. There were no change in unrecognized tax benefits during the years ended December 31, 2019 and 2018. |
15. BUSINESS SEGMENTS
15. BUSINESS SEGMENTS | 12 Months Ended |
Dec. 31, 2019 | |
Segment Reporting [Abstract] | |
15. BUSINESS SEGMENTS | An operating segment’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 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. 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, 2019 Bromine* Crude Salt* Chemical Products Natural Gas Segment Total Corporate Total Net revenue (external customers) $ 10,022,027 $ 522,758 $ — $ 51,736 $ 10,596,521 $ — $ 10,596,521 Net revenue (intersegment) — — — — — — — Loss from operations before income tax expense (15,609,979 ) 446,900 (2,823,298 ) (188,949 ) (23,069,126 ) (225,257 ) (23,294,383 ) Income tax (expense) benefit (3,181,343 ) (247,250 ) 621,606 — (2,806,987 ) — (2,806,987 ) Loss from operations after income tax (expense) benefit (18,791,322 ) (694,150 ) (2,201,692 ) (188,949 ) (25,876,113 ) (225,257 ) (26,101,370 ) Total assets 142,568,684 23,352,060 111,506,728 1,732,380 279,159,852 91,133 279,250,985 Depreciation and amortization 9,625,334 3,833,288 459,613 142,692 14,060,927 — 14,060,927 Capital expenditures 57,607,104 3,004,845 — — 60,611,949 — 60,611,949 Year Ended December 31, 2018 Bromine * Crude Salt * Chemical Products Natural Gas Segment Total Corporate Total Net revenue $ — $ 1,981,573 $ 613,368 $ — $ 2,594,941 $ — $ 2,594,941 Net revenue (intersegment) — — — — — — — Income (loss) from operations before income taxes benefit (40,504,752 ) (8,336,305 ) (34,757,750 ) (204,517) (83,803,324 ) 250,793 (83,552,531 ) Income taxes benefit 10,304,897 1,902,111 880,847 — 13,087,855 — 13,087,855 Income (loss) from operations after income taxes benefit (30,199,855 ) (6,434,194 ) (33,876,903 ) (204,517) (70,715,469 ) 250,793 (70,464,676 ) Total assets 115,233,773 37,254,518 144,172,070 1,883,419 298,543,780 3,010 298,546,790 Depreciation and amortization 11,979,985 4,983,636 479,697 — 17,443,318 — 17,443,318 Capital expenditures 31,904,288 2,145,440 1,192,963 30,616 35,273,307 — 35,273,307 * 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 the respective segment. Years Ended December 31, Reconciliations 2019 2018 Total segment operating loss $ (23,069,126) $ (83,803,324) Corporate costs (646,914) (1,064,661) Unrealized gain on translation of intercompany balance 421,657 1,315,454 Loss from operations (23,294,383) (83,552,531) Other income, net of expense 301,325 500,690 Loss before taxes $ (22,993,058) $ (83,051,841) The following table shows the major customer(s) (10% or more) for the year ended December 31, 2019. Number Customer Bromine (000’s) Crude Salt (000’s) Chemical Products (000’s) Total Revenue (000’s) Percentage of Total Revenue (%) 1 Shandong Morui Chemical Company Limited $ 2,203 $ 175 $ — $ 2,378 22.6% 2 Shouguang Weidong Chemical Company Limited $ 1,629 $ 154 $ — $ 1,783 16.9% 3 Shandong Brother Technology Limited, Kuerle Xingdong Trading Limited $ 1,539 $ 192 $ — $ 1,731 16.4% 4 Dongying Bomeite Chemical Company Limited $ 1,098 $ — $ — $ 1,098 10.4% 5 Shandong Shouguang Shenrunfa Ocean Chemical Company Limited $ 1,297 $ — $ — $ 1,297 12.3% The following table shows the major customer(s) (10% or more) for the year ended December 31, 2018. Number Customer Bromine (000’s) Crude Salt (000’s) Chemical Products (000’s) Total Revenue (000’s) Percentage of Total Revenue (%) 1 Shandong Morui Chemical Company Limited $ — $ 656 $ 155 $ 811 31% 2 Shandong Brother Technology Limited, Kuerle Xingdong Trading Limited $ — $ 783 $ — $ 783 30% 3 Shouguang Weidong Chemical Company Limited $ — $ 543 $ — $ 543 21% |
16. CUSTOMER CONCENTRATION
16. CUSTOMER CONCENTRATION | 12 Months Ended |
Dec. 31, 2019 | |
Risks and Uncertainties [Abstract] | |
16. CUSTOMER CONCENTRATION | The Company sells a substantial portion of its products to a limited number of customers. During the year ended December 31, 2019, the Company sold 78.6% of its products to its top five customers, respectively. As of December 31, 2019, amounts due from these customers were $4,877,106. During the year ended December 31, 2018, the Company sold 90% of its products to its top five customers, respectively. At December 31, 2018, amount due from these customers were $0. |
17. MAJOR SUPPLIERS
17. MAJOR SUPPLIERS | 12 Months Ended |
Dec. 31, 2019 | |
Risks and Uncertainties [Abstract] | |
17. MAJOR SUPPLIERS | During the year ended December 31, 2019, the Company purchased 100% of its raw materials from its top five suppliers. As of December 31, 2019, amounts due to those suppliers were $0. During the year ended December 31, 2018, the Company did not purchase any raw materials. |
18. FAIR VALUE OF FINANCIAL INS
18. FAIR VALUE OF FINANCIAL INSTRUMENTS | 12 Months Ended |
Dec. 31, 2019 | |
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, 2019 and 2018. |
19. CAPITAL COMMITMENT AND OTHE
19. CAPITAL COMMITMENT AND OTHER SERVICE CONTRACTUAL OBLIGATIONS | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
19. CAPITAL COMMITMENT AND OTHER SERVICE CONTRACTUAL OBLIGATIONS | The following table sets forth the Company’s contractual obligations as of December 31, 2019: Property Management Fees Capital Expenditure Payable within: the next 12 months $ 89,425 $ 25,801 the next 13 to 24 months 89,425 - the next 25 to 36 months 89,425 - the next 37 to 48 months 89,425 - Total $ 357,700 $ 25,801 |
20. LOSS CONTINGENCIES
20. LOSS CONTINGENCIES | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
20. LOSS CONTINGENCIES | On or about August 3, 2018, written decisions of administration penalty captioned Shou Guo Tu Zi Fa Gao Zi [2018] No. 291, Shou Guo Tu Zi Fa Gao Zi [2018] No. 292, Shou Guo Tu Zi Fa Gao Zi [2018] No. 293, Shou Guo Tu Zi Fa Gao Zi [2018] No. 294, Shou Guo Tu Zi Fa Gao Zi [2018] No. 295 and Shou Guo Tu Zi Fa Gao Zi [2018] No. 296 (together, the “Written Decisions”) were served on Shouguang City Haoyuan Chemical Company Limited (“SCHC”) by Shouguang City Natural Resources and Planning Bureau (the “Bureau”), naming SCHC as respondent respectively thereof. The Decisions challenged the land use of Factory nos. 2, 9, 7, 4, 8 and 10, respectively, and alleged, among other things, that SCHC had illegally occupied and used the land in the total area of approximately 52,674 square meter, on which Factory nos. 2, 9, 7, 4, 8 and 10 were built, respectively. The Written Decisions ordered SCHC, among other things, to return the land subject to the Written Decisions to its respective legal owner, restore the land to its original state, and demolish or confiscate all the buildings and facilities thereon and pay monetary penalty of approximately RMB 1.3 million ($184,000) in the aggregate. Each of the Written Decisions shall be executed within 15 days upon serving on SCHC. Additional interest penalty shall be imposed at a daily rate of 3% in the event that SCHC does not make the monetary penalty payment in a timely manner. Subsequently, the Bureau filed enforcement actions to the People’s Court of Shouguang City, Shandong Province (the “Court”), naming SCHC as enforcement respondent and alleged, among other things, that SCHC failed to perform its obligations under each of the Written Decisions within the specified timeframe. The enforcement proceedings sought court orders to enforce the Written Decisions. On May 5, 2019, written decisions of administrative ruling captioned (2019) Lu 0783 Xing Shen No. 384, (2019) Lu 0783 Xing Shen No. 385, (2019) Lu 0783 Xing Shen No. 389, (2019) Lu 0783 Xing Shen No. 390, (2019) Lu 0783 Xing Shen No. 393, and (2019) Lu 0783 Xing Shen No. 394, respectively (together, the “Court Rulings”) were made by the Court in favor of the Bureau. The Court orders, among other relief, to enforce each of the Written Decisions, to return each subject land to its legal owner and demolish or confiscate the buildings and facilities thereon and restore the land to its original state within 10 days from the service of the Court Rulings on SCHC. The Court Rulings became enforceable immediately upon service on SCHC on May 5, 2019. In the last twenty years, there were no government regulations requiring bromine manufacturers to obtain land use and planning approval document. As such, the Company believes most of the bromine manufacturers in Shouguang City do not have land use and planning approval documents and lease their land parcels from the village associations. They are facing the same issues in connection with land use and planning as the Company. The Company is in the process of resolving the issues in connection with SCHC’s land use and planning diligently. The Company has been in discussions closely with the local government authorities with the help from Shouguang City Bromine Association to seek reliefs and, based on verbal confirmation by local government authorities, believes the administrative penalties imposed by the Bureau according to the Written Decisions are being re-assessed by local government authorities and may be revoked. The Company has obtained one confirmation from the local government authorities that the administrative penalty imposed on Factory No. 7 , Factory No. 8 and Factory No.10 are being revoked which are waiting for the Court formal approval ,and production of Factory No. 7 was allowed to resume in April 2019. In addition, on August 28, 2019, the People’s Government of Shandong Province, issued a regulation titled “Investment Project Management Requirements of Chemical Companies in Shandong Province” permitting the construction of facilities on existing sites or infrastructure of bromine manufacturing and other chemical industry-related types of projects (clause 11 of section 3).The Company believes that the goal of the government is to standardize and regulate the industry and not to demolish the facilities or penalize the manufacturers. As of the date of this report, the Company has not been notified by the local government that it will take any measure to enforce the administrative penalties. Based on information known to date, the Company believes that it is remote that the Written Decisions or Court Rulings will be enforced within the expected timeframe and a material penalty or costs and expenses against the Company will result. However, there can be no assurance that there will not be any further enforcement action, the occurrence of which may result in further liabilities, penalties and operational disruption. In view of the above facts and circumstances, the Company believes that it is not necessary to accrue for any estimated losses or impairment as of December 31, 2019. |
21. SUBSEQUENT EVENT
21. SUBSEQUENT EVENT | 12 Months Ended |
Dec. 31, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENT | In January 2020, the Company obtained the environmental protection assessment approval performed by the government of Shouguang City, Shandong Province for the proposed new Yuxin chemical factory. With this approval, the Company is permitted to construct our new chemical factory and the Company plans to begin construction in May 2020. In January 2020, an outbreak of a novel coronavirus (COVID-19) surfaced in Wuhan, China. The outbreak in China caused the Chinese government to require businesses to close and to restrict certain travel within the country. In cooperation with the government authorities, the Company’s operations in China extended their winter temporary shut down by approximately three weeks. As of the date of this filing, the Company has been allowed to resume production at its bromine factories No. 1, No. 4, No. 7 and No. 9, and the Company has been in preparation process for resuming production at those factories. The Company does not believe that the COVID-19 had material adverse impact on the Company’s operating results as of the end of fiscal 2019. The Company’s bromine factories No.7 and No.1 started trial production in the middle of March 2020, and commenced commercial production on April 3, 2020. On March 11, 2020, the World Health Organization (WHO) officially declared COVID-19 a pandemic, pointing to the over 118,000 cases of COVID-19 illness in over 110 countries and territories around the world and the sustained risk of further global spread. On April 8, 2020, WHO reported that there were more than 1.3 million of confirmed cases of COVID-19 including 79,235 deaths globally. Given this fact, the duration and intensity of the impact of the COVID-19 and resulting disruption to the Company’s operations is uncertain . While our operations are currently not materially affected, it is unknown whether or how they may be affected if such a pandemic persists for an extended period. While not yet quantifiable, the Company expects this situation will not have a material adverse impact on its operating results in the first quarter of 2020 and continues to assess the financial impact for the remainder of the year. |
SCHEDULE I - PARENT ONLY FINANC
SCHEDULE I - PARENT ONLY FINANCIAL INFORMATION | 12 Months Ended |
Dec. 31, 2019 | |
Condensed Financial Information Disclosure [Abstract] | |
SCHEDULE I - PARENT ONLY FINANCIAL INFORMATION | The following presents condensed parent company only financial information of Gulf Resources, Inc. Condensed Balance Sheets As of December 31, 2019 2018 Current Assets Prepayments and deposits $ - $ - Total Current Assets - - Non-Current Assets Interests in subsidiaries 200,057,813 230,229,081 Amounts due from group companies 63,546,235 64,017,517 Total non-current assets 263,604,048 294,246,598 Total Assets $ 263,604,048 $ 294,246,598 Liabilities and Stockholders’ Equity Current Liabilities Other payables and accrued expenses $ 354,247 $ 250,493 Amounts due to group companies 142,701 142,701 Total Current Liability 496,948 393,194 Total Liabilities $ 496,948 $ 393,194 Stockholders’ Equity PREFERRED STOCK; $0.001 par value; 1,000,000 shares authorized; none outstanding $ - $ - COMMON STOCK; $0.0005 par value; 80,000,000 shares authorized; 9,562,444 and 9,410,588 shares issued; and 9,516,614 and 9,360,758 shares outstanding as of December 31, 2019 and December 31, 2018 23,904 23,525 Treasury stock; 45,830 and 49,830 shares as of December 31, 2019 and December 31, 2018 at cost (510,329 ) (554,870 ) Additional paid-in capital 95,043,388 95,020,808 Retained earnings unappropriated 159,808,400 185,608,445 Retained earnings appropriated 24,233,544 24,233,544 Cumulative translation adjustment (15,491,807 ) (10,478,048 ) Total Stockholders’ Equity 263,107,100 293,853,404 Total Liabilities and Stockholders’ Equity $ 263,604,048 $ 294,246,598 Condensed Statements of Loss Years Ended December 31, 2019 2018 OPERATING EXPENSES General and administrative expenses $ (642,151 ) $ (1,061,674 ) TOTAL OPERATING EXPENSES (642,151 ) (1,061,674 ) OTHER EXPENSES Interest expense (385 ) (500 ) TOTAL OTHER EXPENSES (385 ) (500 ) TOTAL EXPENSES (642,536 ) (1,062,174 ) Equity in net Loss of subsidiaries (25,157,509 ) (68,901,812 ) LOSS BEFORE TAXES (25,800,045 ) (69,963,986 ) TAXES - - NET LOSS $ (25,800,045 ) $ (69,963,986 ) Condensed Statements of Cash Flows Years Ended December 31, 2019 2018 CASH FLOWS FROM OPERATING ACTIVITIES Net Loss $ (25,800,045 ) $ (69,963,986 ) Adjustments to reconcile net Loss to Equity Loss in unconsolidated subsidiaries 25,157,509 68,901,812 Stock-based compensation expense-options 45,900 496,200 Shares issued from treasury stock for services 21,600 - Changes in assets and liabilities: Other payables and accrued expenses 103,754 4,888 Net cash used in operating activities (471,282 ) (561,086 ) CASH FLOWS FROM FINANCING ACTIVITIES Advances from group companies 471,282 561,086 Net cash provided by financing activities 471,282 561,086 NET INCREASE IN CASH AND CASH EQUIVALENTS - - CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR - - CASH AND CASH EQUIVALENTS - END OF YEAR $ - $ - (i) Basis of presentation In the condensed parent-company-only financial statements, the Company’s investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since the date of acquisition. The Company’s share of net loss of its subsidiaries is included in condensed statements of loss using the equity method. These condensed parent-company-only financial statements should be read in connection with the consolidated financial statements and notes thereto. As of December 31, 2019, the Company itself has no purchase commitment, capital commitment and operating lease commitment. (ii) Restricted Net Assets Schedule I of Rule 5-04 of Regulation S-X requires the condensed financial information of registrant shall be filed when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. For purposes of the above test, restricted net assets of consolidated subsidiaries shall mean that amount of the registrant’s proportionate share of net assets of consolidated subsidiaries (after intercompany eliminations) which as of the end of the most recent fiscal year may not be transferred to the parent company by subsidiaries in the form of loans, advances or cash dividends without the consent of a third party (i.e., lender, regulatory agency, foreign government, etc.). The condensed parent company financial statements have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X as the restricted net assets of the subsidiaries of Gulf Resources, Inc. exceed 25% of the consolidated net assets of Gulf Resources, Inc. The ability of the Company’s Chinese operating subsidiaries to pay dividends may be restricted due to the foreign exchange control policies and availability of cash balances of the Chinese operating subsidiaries. Because a significant portion of the Company’s operations and revenues are conducted and generated in China, a significant portion of the revenues being earned and currency received are denominated in RMB. RMB is subject to the exchange control regulation in China, and, as a result, the Company may be unable to distribute any dividends outside of China due to PRC exchange control regulations that restrict the Company’s ability to convert RMB into US Dollars. |
1. NATURE OF BUSINESS AND SUM_2
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Consolidation | The accompanying audited consolidated financial statements have been prepared by Gulf Resources, Inc. (“Gulf Resources”). a Nevada corporation and its subsidiaries (collectively, the “Company”). 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 Shouguang Yuxin Chemical Industry Co., Limited (“SYCI”) and Daying County Haoyuan Chemical Company Limited (“DCHC”). All material intercompany transactions have been eliminated on consolidation. |
Nature of the Business | The Company manufactures and trades bromine and crude salt through its wholly-owned subsidiary, Shouguang City Haoyuan Chemical Company Limited (“SCHC”) and manufactures chemical products for use in the oil industry, pesticides, paper manufacturing industry and for human and animal antibiotics through its wholly-owned subsidiary, Shouguang Yuxin Chemical Industry Co., Limited (“SYCI”) in the People’s Republic of China (“PRC”). DCHC was established to further explore and develop natural gas and brine resources (including bromine and crude salt) in the PRC. DCHC’s business commenced trial operation in January 2019 but suspended production temporarily in May 2019 as required by the government to obtain project approval (see Note 1 (b)(iii)). (i) Bromine and Crude Salt Segments On September 1, 2017, the Company received notification from the Government of Yangkou County, Shouguang City of PRC that production at all its factories should be halted with immediate effect in order for the Company to perform rectification and improvement in accordance with the county’s new safety and environmental protection requirements. The Company worked closely with the county authorities to develop rectification plans for both its bromine and crude salt businesses and agreed on a plan in October 2017. In the fiscal year ended December 31, 2018, the Company incurred $16,243,677 in the rectification and improvements of plant and equipment of the bromine and crude salt factories resulting in a cumulative amount of $34,182,329 incurred as of December 31, 2018 recorded in the plant, property and equipment in the consolidated balance sheet. No such costs were incurred in the year ended December 31, 2019 and the Company does not expect to incur any additional capital expenditures in the rectification of its bromine and crude salt factories in respect of meeting the county’s new safety and environmental protection requirement. In the first quarter of 2018, six out of its ten bromine factories completed their rectification process within factory areas (i.e. excluding crude salt field area) and were approved and scheduled for production commencement by April 2018 as verbally indicated by the local government. The remaining four factories were still undergoing rectification at that time. Three factories (Factory no. 3, Factory no. 4 and Factory no. 11) had to be demolished in September 2018 as required by the government and rectification for Factory no. 10 was completed in November 2018. In 2018, the Shandong Provincial government required the local government to conduct “four rating and one comprehensive evaluation” for all of the chemical companies within its jurisdiction. This has delayed the production commencement schedule of the six bromine and crude salt factories in which rectification work was completed. On June 29 2018, the Company received a formal notice (dated June 25, 2018) jointly issued by various provincial government agencies in Shandong Province (the “Notice”) forwarded by the Weifang City Special Operations Leading Group Office of Safe Production, Transformation and Upgrading of Chemical Industry. In the Notice, the provincial government agencies set forth further requirements and procedures covering the following four aspects for the chemical industrial enterprises: project approval, planning approval, land use rights approval and environmental protection assessment approval. Those standards and procedures apply to all chemical industrial enterprises in Shandong Province including the Company’s bromine plants that have not completed project approval procedures, planning approval procedures, land use rights approval procedures and environmental protection assessment procedures. The Company believes that the government will not grant approval to the Company to allow its bromine and crude salt plants to resume operations until the Company has fully complied with the aforesaid rules set forth in the Notice. The Shouguang City Bromine Association, on behalf of all the bromine plants in Shouguang, has started discussions with the local government agencies. The local governmental agencies confirmed the facts that their initial requirements for the bromine industry did not include the project approval, the planning approval and the land use rights approval and that those three additional approvals were new requirements of the provincial government. The Company understood from the local government that it has been coordinating with several government agencies to solve these three outstanding approval issues in a timely manner and that all the affected bromine plants are not allowed to commence production prior to obtaining those approvals. In April 2019, Factory No.1, Factory No.5 and Factory No.7 (Factory no. 5 is considered part of Factory no.7 and both are managed as one factory since 2010) restarted operations upon receipt of verbal notification from local government of Yangkou County. On May 7, 2019, the Company renamed its Subdivision Factory No. 1 to Factory No. 4; and Factory No. 5 (which was previously considered part of Factory No. 7) to Factory No. 7. On November 25, 2019, the government of Shouguang City issued a notice ordering all bromine facilities in Shouguang City, including the Company’s bromine facilities, including Factory No.1 and Factory No.7, to temporarily stop production from December 16, 2019 to February 10, 2020. Subsequently, due to an outbreak of a novel coronavirus (COVID-19) in China, the local government ordered these bromine facilities to postpone the commencement of production. On February 27, 2020, the Company received an approval issued by the local governmental authority which allows the Company to resume production after the winter temporary closure. It received another approval from the Shouguang Yangkou People’s Government dated March 5, 2020 to resume production at its bromine factories No.1, No. 4, No.7 and No. 9 in order to meet the needs of bromide products for epidemic prevention and control. Company factories No.7 and No.1 had started trial production in the middle of March, 2020, and these two factories started its commercial production on April 3,2020. The Company is not certain when the issuance of the approval documents will be effected. The Company believes that this is another step by the government to improve the environment. It further believes the goal of the government is not to close all plants, but rather to codify the regulations related to project approval, land use, planning approval and environmental protection assessment approval so that illegal plants are not able to open in the future and so that plants close to population centers do not cause serious environmental damage. In addition, the Company believes that the Shandong provincial government wants to assure that each of its regional and county governments has applied the Notice in a consistent manner. The Company believes the issues related to the remaining bromine and crude salt factories including No.2, No.8, No.10 which have passed inspection are almost resolved. The Company is actively working with the local government to obtain the documentation for approval of project, planning, land use rights and environmental protection evaluation. (ii) Chemical Segment On November 24, 2017, the Company received a letter from the Government of Yangkou County, Shouguang City notifying the Company to relocate its two chemical production plants located in the second living area of the Qinghe Oil Extraction to the Bohai Marine Fine Chemical Industrial Park (“Bohai Park”). This is because the two plants are located in a residential area and their production activities will impact the living environment of the residents. This is as a result of the country’s effort to improve the development of the chemical industry, manage safe production and curb environmental pollution accidents effectively, and ensure the quality of the living environment of residents. All chemical enterprises which do not comply with the requirements of the safety and environmental protection regulations will be ordered to shut down. The Company believes this relocation process will cost approximately $60 million in total. The Company incurred relocation costs comprising prepaid land lease and professional fees related to the design of the new chemical factory in the amount of $10,320,017 and 10,489,930, which were recorded in the prepaid land leases and property, plant and equipment in the consolidated balance sheets as of December 31, 2019 and December 31, 2018. The Company does not anticipate that the Company’s new chemical factory to be significantly impacted by the Notice. The Company has secured from the government the land use rights for its chemical plants located at the Bohai Park and presented a completed construction design draft and other related documents to the local authorities for approval. On January 6 , 2020, the Company received the environmental protection approval by the government of Shouguang City, Shandong Province for the proposed Yuxin Chemical factory. The environmental protection approval was the last approval required before commencing construction. With this approval, Gulf Resources plans to begin construction in May 2020. (iii) Natural Gas Segment In January 2017, the Company completed the first brine water and natural gas well field construction in Daying located in Sichuan Province and commenced trial production in January 2019. On May 29, 2019, the Company received a verbal notice from the government of Tianbao Town ,Daying County, Sichuan Province, whereby the Company is required to obtain project approval for its well located in Daying, including the whole natural gas and brine water project, and approvals for safety production inspection, environmental protection assessment, and to solve the related land issue. Until these approvals have been received, the Company has to temporarily halt trial production at its natural gas well in Daying. At present, some documents have been submitted and the Company is still waiting for approval. |
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 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 240 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, 2019 and December 31, 2018, There were no allowances for doubtful accounts. No allowances for doubtful accounts were charged to the consolidated statements of loss for years ended December 31, 2019 and 2018. |
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, China Merchants Bank Company Limited and Sichuan Rural Credit Union, which are not insured or otherwise protected. The Company placed $100,301,986 and $178,998,935 with these institutions as of December 31, 2019 and 2018, 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 and extends credit terms as and when appropriate. Accounts receivable of $4,877,106 as of December 31, 2019 was fully collected in the period January through March in 2020. |
Inventories | Inventories are stated at the lower of cost, determined on a first-in first-out cost basis, or net realizable value. 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, when available for intended use, 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 of production method, whichever is shorter. Construction in process primarily represents direct costs of construction of property, plant and equipment. Costs incurred are capitalized and transferred to property, plant and equipment upon completion and depreciation will commence when the completed assets are placed in service. The Company’s depreciation and amortization policies on property, plant and equipment, other than mineral rights and construction in process, 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 the finance lease 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. Producing oil and gas properties are depreciated on a unit-of-production basis over the proved developed reserves. Common facilities that are built specifically to service production directly attributed to designated oil and gas properties are depreciated based on the proved developed reserves of the respective oil and gas properties on a pro-rata basis. Common facilities that are not built specifically to service identified oil and gas properties are depreciated using the straight-line method over their estimated useful lives. Costs associated with significant development projects are not depreciated until commercial production commences and the reserves related to those costs are excluded from the calculation of depreciation. |
Asset Retirement Obligation | The Company follows Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”), 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 by the bromine and crude salt factories. Also, for the two chemical plants that are to be relocated, currently, there are no obligations to restore the land to its original condition. |
Recoverability of Long Lived Assets | In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360-10-35 ”Impairment or Disposal of Long-lived Assets” 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, 2019, the Company determined that there were no events or circumstances indicating possible impairment of its long-lived assets. Upon the receipt of the closure notice from the People’s Government of Yangkou Town, Shouguang City in September 2018 (See Note 1(b)), the Company demolished the affected factories. As a result, the Company wrote off net book value of the affected factories’ property, plant and equipment in the amount of $18,644,473 which was recorded in the loss on demolition of factories in the consolidated statements of loss for the fiscal year ended December 31, 2018. The Company will negotiate with the local villages over compensation for the payment already made for the land leases and mineral rights of these factories. However, the Company is uncertain of the amount that it could recover and when this could be accomplished. Therefore, the Company wrote off the mineral rights of the affected factories of $1,284,832 included in the write-off/impairment on property, plant and equipment in the consolidated statements of loss for the fiscal year ended December 31, 2018 and $52,926 of prepaid land lease recorded in other operating loss in the consolidated statements of loss for fiscal year ended December 31, 2018. The Company incurred dismantling fees in the amount of $273,757 recorded in other operating loss in the consolidated statements of loss for fiscal year ended December 31, 2018. In addition, the Company recorded a write-off of $112,481 included in the write-off/impairment of property, plant and equipment for certain wells and equipment damaged by flood from a typhoon that occurred in August 2018. |
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 plan at the applicable rate based on the employees’ salaries. The required contributions under the retirement plans are charged to the consolidated statement of loss on an accrual basis when they are due. The Company’s contributions totaled $1,035,687 and $1,216,096 for the years ended December 31, 2019 and 2018, 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. |
Leases | The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. Finance leases are included in finance lease ROU assets and finance lease liabilities in the consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease and finance lease ROU assets and liabilities are recognized at January 1, 2019 based on the present value of lease payments over the lease term discounted using the rate implicit in the lease. In cases where the implicit rate is not readily determinable, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has elected not to recognize operating lease ROU assets and liabilities arising from short-term lease. |
Basic and Diluted Earnings 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 103,392 and 51,747 shares for the years ended December 31, 2019 and 2018, respectively. These awards could be dilutive in the future if the market price of the common stock increases and is greater than the exercise price of these awards. Because the Company reported a net loss for the years ended December 31, 2019 and 2018, common stock equivalents including stock options and warrants were anti-dilutive, therefore the amounts reported for basic and diluted loss per share were the same. |
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 other comprehensive income/(loss). The consolidated statement of income/(loss) and comprehensive income/(loss) 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/(loss) for the reporting periods as part of general and administrative expense. Included in the general and administrative expense is a foreign exchange gain of $421,657 and $1,315,454 for the years ended December 31, 2019 and 2018. The consolidated statement of cash flows is translated at the average rate during each quarter, with the exception of issuance of shares and payment of dividends which are translated at historical rates. |
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. |
Revenue Recognition | Net revenue is net of discount and value added tax and comprises the sale of bromine, crude salt and chemical products. Revenue is recognized at a point in time when the control of the promised goods is transferred to the customers in an amount that reflects the consideration that the Company expects to receive from the customers in exchange for those goods. The acknowledgement of receipt of goods by the customers is when control of the product is deemed to be transferred. Invoicing occurs upon acknowledgement of receipt of the goods by the customers. Customers have no rights to return the goods upon acknowledgement of receipt of goods. Revenue from contracts with customers is disaggregated in Note 15. |
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. Deferred tax assets and liabilities are measured using tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. The deferred income tax effects of a change in tax rates are recognized in the period of enactment. 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. Interests and penalties associated with unrecognized tax benefits are included within the (benefit from) provision for income tax in the consolidated statement of profit (loss). |
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. Once the commercial viability of a project has been confirmed, all subsequent costs are capitalized. For oil and gas properties, the successful efforts method of accounting is adopted. The Company carries exploratory well costs as an asset when the well has found a sufficient quantity of reserves to justify its completion as a producing well and where the Company is making sufficient progress assessing the reserves and the economic and operating viability of the project. Exploratory well costs not meeting these criteria are charged to expenses. Exploratory wells that discover potentially economic reserves in areas where major capital expenditure will be required before production would begin and when the major capital expenditure depends upon the successful completion of further exploratory work remain capitalized and are reviewed periodically for impairment. |
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. |
Stock-based Compensation | The Company accounts for stock-based compensation under the provisions of FASB ASC 718, Compensation Stock Compensation, In June 2018, the FASB Compensation Stock Compensation (Topic I 8), Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this Update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Prior to this Update, Topic 718 applied only to share-based transactions to employees. Consistent with the accounting requirement for employee share-based payment awards, nonemployee share-based payment awards within the scope of Topic 718 are measured at grant-date fair value of the equity instruments that an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. The Company has elected to account for the forfeiture of stock-based awards as they occur. |
New Accounting Pronouncements | Recent accounting pronouncements adopted In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments in this Update specify the accounting for leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from operating leases. The Company adopted the standard effective January 1, 2019 under the optional transition method which allows an entity to apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment, if any, to the opening balance of retained earnings in the period of adoption. The Company elected the available practical expedients. As a result of the adoption of this standard, the Company recognized operating lease ROU assets of $8,817,884, operating lease liabilities of $8,348,453, with the remaining balance paid in the consolidated financial statements as of and for the year ended December 31, 2019 with no cumulative-effect adjustment to retained earnings as of January 1, 2019. In June 2018, the FASB issued ASU No.2018-07, Compensation- Stock Compensation (Topic 718). Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Prior to this update, Topic 718 applied only to share-based transactions to employees. Consistent with the accounting requirements for employee share-based payment awards, nonemployee share-based payment awards within the scope of Topic 718 are measured at grant-date fair value of the equity instruments that an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. The amendments in the Update are effective for public business entities form fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company adopted this standard as of January 1, 2019. This adoption of this standard does not have a material impact on the Company’s consolidated financial statements. Recently Issued Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The amendments in this Update affect loans, debt securities, trade receivables, and any other financial assets that have the contractual right to receive cash. The ASU requires an entity to recognize expected credit losses rather than incurred losses for financial assets. For public entities, the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the effect of this on the consolidated financial statements and related disclosure. |
1. NATURE OF BUSINESS AND SUM_3
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
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 |
2. INVENTORIES (Tables)
2. INVENTORIES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Inventory Disclosure [Abstract] | |
Inventory | December 31, 2019 December 31, 2018 Raw materials $ 20,928 $ - Finished goods 669,159 65,169 Allowance for obsolete and slow-moving inventory - (65,169 ) $ 690,087 $ - |
4. PROPERTY, PLANT AND EQUIPM_2
4. PROPERTY, PLANT AND EQUIPMENT, NET (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property, plant and equipment, net | December 31, December 31, At cost: Mineral rights $ 2,764,462 $ 2,809,977 Buildings 59,880,567 60,866,462 Plant and machinery 234,669,007 161,178,816 Motor vehicles 6,129 6,230 Furniture, fixtures and office equipment 3,235,736 3,289,010 Construction in process 1,204,742 6,535,808 Total 301,760,643 234,686,303 Less: Accumulated depreciation and amortization (146,330,705) (134,681,628 ) Impairment (17,434,989) (17,722,045 ) Net book value $ 137,994,949 $ 82,282,630 |
5. FINANCE LEASE RIGHT-OF-USE_2
5. FINANCE LEASE RIGHT-OF-USE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
Property, plant and equipment under finance leases | December 31, December 31, At cost: Buildings $ 117,956 $ 119,899 Plant and machinery 2,157,848 2,193,375 Total 2,275,804 2,313,274 Less: Accumulated depreciation and amortization (2,096,278) (2,062,517 ) Net book value $ 179,526 $ 250,757 |
7. PAYABLE AND ACCRUED EXPENS_2
7. PAYABLE AND ACCRUED EXPENSES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Payables and Accruals [Abstract] | |
Payable and accrued expenses | December 31, December 31, 2019 2018 Salary payable $ 310,097 $ 241,343 Social security insurance contribution payable 105,750 140,326 Other payable-related party (see Note 8) 89,424 90,900 Deposit on subscription of a subsidiary’s share 144,798 - Accrued expense for construction 97,913 104,246 Accrued expense-others 358,066 328,443 Total $ 1,106,048 $ 905,258 |
9. TAXES PAYABLE (Tables)
9. TAXES PAYABLE (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Taxes Payable [Abstract] | |
Taxes payable | December 31, December 31, 2019 2018 Land use tax payable $ 779,623 $ 1,188,687 |
10. LEASE LIABILITIES-FINANCE_2
10. LEASE LIABILITIES-FINANCE AND OPERATING LEASE (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
Components of finance lease liabilities | Imputed December 31, December 31, Interest rate 2019 2018 Total finance lease liability 6.7% $ 2,104,278 $ 2,267,025 Less: Current portion (198,506 ) (197,480 ) Finance lease liability, net of current portion $ 1,905,772 $ 2,069,545 |
Components of operating lease liabilities | Imputed December 31, December 31, Interest rate 2019 2018 Total Operating lease liabilities 4.89% $ 8,348,453 $ - Less: Current portion (416,604 ) - Operating lease liabilities, net of current portion $ 7,931,849 $ - |
Maturities of lease liabilities | Finance lease Operating Lease Payable within: the next 12 months $ 269,049 $ 772,866 the next 13 to 24 months 269,049 786,584 the next 25 to 36 months 269,049 637,294 the next 37 to 48 months 269,049 644,149 the next 49 to 60 months 269,049 641,946 thereafter 1,614,295 11,442,172 Total 2,959,540 14,925,011 Less: Amount representing interest (855,262 ) (6,576,558 ) Present value of net minimum lease payments $ 2,104,278 $ 8,348,453 |
13. STOCK-BASED COMPENSATION (T
13. STOCK-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Stock option transactions | Number of Option Weighted- Average Exercise price of Option Range of Balance, January 1, 2019 503,600 $4.85 $3.55 - $24 Granted and vested 30,000 $4.55 $4.55 Exercised (379,400) $3.65 $3.57 - $4.56 Expired/cancelled (19,100) $11.20 $7.20 - $24.00 Balance, December 31, 2019 135,100 $7.21 $3.57 - $9.9 |
Stock and warrants options exercisable and outstanding | Stock and Warrants Options Exercisable and Outstanding Weighted Average Remaining Outstanding at December 31, 2019 Range of Exercise Prices Contractual Life (Years) Exercisable and outstanding 135,100 $3.57 - $9.9 1.55 |
14. INCOME TAXES (Tables)
14. INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Components of provision for income tax (expense) benefit | Years Ended December 31, 2019 2018 Current taxes – PRC $ - $ - Deferred taxes – PRC 5,865,830 13,302,779 Change in valuation allowance (8,672,817) (214,924) $ (2,806,987) $ 13,087,855 |
Effective income tax benefit (expense) | Years Ended December 31, Reconciliations 2019 2018 Statutory income tax rate 25 % 25 % Non-taxable & Non deductible items 1 % (9 %) Change in valuation allowance (38 %) - Effective income tax benefit (expense) rate (12 %) 16 % |
Deferred tax assets and liabilities | December 31, December 31, 2019 2018 Deferred tax liabilities $ — $ — Deferred tax assets: Allowance for obsolete and slow-moving inventories $ — $ 16,292 Impairment on property, plant and equipment 2,974,542 3,696,332 Impairment on prepaid land lease 826,673 840,284 Exploration costs 1,784,583 1,813,965 Compensation costs of unexercised stock options 171,672 194,016 PRC tax losses 18,737,005 12,663,985 US federal net operating loss 432,000 119,000 Total deferred tax assets 24,926,475 19,343,874 Valuation allowance (8,985,833 ) (313,016 ) Net deferred tax asset $ 15,940,642 $ 19,030,858 |
15. BUSINESS SEGMENTS (Tables)
15. BUSINESS SEGMENTS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Segment Reporting [Abstract] | |
Segment operating income | Year Ended December 31, 2019 Bromine* Crude Salt* Chemical Products Natural Gas Segment Total Corporate Total Net revenue (external customers) $ 10,022,027 $ 522,758 $ — $ 51,736 $ 10,596,521 $ — $ 10,596,521 Net revenue (intersegment) — — — — — — — Loss from operations before income tax expense (15,609,979 ) 446,900 (2,823,298 ) (188,949 ) (23,069,126 ) (225,257 ) (23,294,383 ) Income tax (expense) benefit (3,181,343 ) (247,250 ) 621,606 — (2,806,987 ) — (2,806,987 ) Loss from operations after income tax (expense) benefit (18,791,322 ) (694,150 ) (2,201,692 ) (188,949 ) (25,876,113 ) (225,257 ) (26,101,370 ) Total assets 142,568,684 23,352,060 111,506,728 1,732,380 279,159,852 91,133 279,250,985 Depreciation and amortization 9,625,334 3,833,288 459,613 142,692 14,060,927 — 14,060,927 Capital expenditures 57,607,104 3,004,845 — — 60,611,949 — 60,611,949 Year Ended December 31, 2018 Bromine * Crude Salt * Chemical Products Natural Gas Segment Total Corporate Total Net revenue $ — $ 1,981,573 $ 613,368 $ — $ 2,594,941 $ — $ 2,594,941 Net revenue (intersegment) — — — — — — — Income (loss) from operations before income taxes benefit (40,504,752 ) (8,336,305 ) (34,757,750 ) (204,517) (83,803,324 ) 250,793 (83,552,531 ) Income taxes benefit 10,304,897 1,902,111 880,847 — 13,087,855 — 13,087,855 Income (loss) from operations after income taxes benefit (30,199,855 ) (6,434,194 ) (33,876,903 ) (204,517) (70,715,469 ) 250,793 (70,464,676 ) Total assets 115,233,773 37,254,518 144,172,070 1,883,419 298,543,780 3,010 298,546,790 Depreciation and amortization 11,979,985 4,983,636 479,697 — 17,443,318 — 17,443,318 Capital expenditures 31,904,288 2,145,440 1,192,963 30,616 35,273,307 — 35,273,307 * 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 the respective segment. |
Segment costs | Years Ended December 31, Reconciliations 2019 2018 Total segment operating loss $ (23,069,126) $ (83,803,324) Corporate costs (646,914) (1,064,661) Unrealized gain on translation of intercompany balance 421,657 1,315,454 Loss from operations (23,294,383) (83,552,531) Other income, net of expense 301,325 500,690 Loss before taxes $ (22,993,058) $ (83,051,841) |
Major customers | The following table shows the major customer(s) (10% or more) for the year ended December 31, 2019. Number Customer Bromine (000’s) Crude Salt (000’s) Chemical Products (000’s) Total Revenue (000’s) Percentage of Total Revenue (%) 1 Shandong Morui Chemical Company Limited $ 2,203 $ 175 $ — $ 2,378 22.6% 2 Shouguang Weidong Chemical Company Limited $ 1,629 $ 154 $ — $ 1,783 16.9% 3 Shandong Brother Technology Limited, Kuerle Xingdong Trading Limited $ 1,539 $ 192 $ — $ 1,731 16.4% 4 Dongying Bomeite Chemical Company Limited $ 1,098 $ — $ — $ 1,098 10.4% 5 Shandong Shouguang Shenrunfa Ocean Chemical Company Limited $ 1,297 $ — $ — $ 1,297 12.3% The following table shows the major customer(s) (10% or more) for the year ended December 31, 2018. Number Customer Bromine (000’s) Crude Salt (000’s) Chemical Products (000’s) Total Revenue (000’s) Percentage of Total Revenue (%) 1 Shandong Morui Chemical Company Limited $ — $ 656 $ 155 $ 811 31% 2 Shandong Brother Technology Limited, Kuerle Xingdong Trading Limited $ — $ 783 $ — $ 783 30% 3 Shouguang Weidong Chemical Company Limited $ — $ 543 $ — $ 543 21% |
19. CAPITAL COMMITMENT AND OT_2
19. CAPITAL COMMITMENT AND OTHER SERVICE CONTRACTUAL OBLIGATIONS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contractual obligations | Property Management Fees Capital Expenditure Payable within: the next 12 months $ 89,425 $ 25,801 the next 13 to 24 months 89,425 - the next 25 to 36 months 89,425 - the next 37 to 48 months 89,425 - Total $ 357,700 $ 25,801 |
1. NATURE OF BUSINESS AND SUM_4
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 12 Months Ended |
Dec. 31, 2019 | |
Buildings | Minimum | |
Property, plant and equipment, useful life | 8 years |
Buildings | Maximum | |
Property, plant and equipment, useful life | 20 years |
Plant and Machinery | Minimum | |
Property, plant and equipment, useful life | 3 years |
Plant and Machinery | Maximum | |
Property, plant and equipment, useful life | 8 years |
Motor Vehicles | |
Property, plant and equipment, useful life | 5 years |
Furniture, Fixtures and Equipment | Minimum | |
Property, plant and equipment, useful life | 3 years |
Furniture, Fixtures and Equipment | Maximum | |
Property, plant and equipment, useful life | 8 years |
1. NATURE OF BUSINESS AND SUM_5
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Accounting Policies [Abstract] | |||
Cash | $ 100,301,986 | $ 178,998,935 | $ 208,906,759 |
Proceeds from accounts receivable | 4,877,106 | ||
Write-off/impairment on property, plant and equipment | 0 | 1,397,313 | |
Benefits contribution | $ 1,035,687 | $ 1,216,096 | |
Anti-dilutive common stock equivalents amount | 103,392 | 51,747 |
2. INVENTORIES (Details)
2. INVENTORIES (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 20,928 | $ 0 |
Finished goods | 669,159 | 65,169 |
Allowance for obsolete and slow-moving inventory | 0 | (65,169) |
Inventories | $ 690,087 | $ 0 |
3. PREPAID LAND LEASE (Details
3. PREPAID LAND LEASE (Details Narrative) | 12 Months Ended | |
Dec. 31, 2019USD ($)km² | Dec. 31, 2018USD ($)km² | |
Prepaid Land Lease | ||
Amortization of prepaid land lease | $ 0 | $ 761,713 |
Area of land | km² | 38.6 | 39 |
Aggregate carrying value | $ 599,747 | |
Operating lease right-of-use assets | $ 8,817,884 | $ 0 |
4. PROPERTY, PLANT AND EQUIPM_3
4. PROPERTY, PLANT AND EQUIPMENT, NET (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Property, Plant and Equipment [Abstract] | ||
Mineral rights | $ 2,764,462 | $ 2,809,977 |
Buildings | 59,880,567 | 60,866,462 |
Plant and machinery | 234,669,007 | 161,178,816 |
Motor vehicles | 6,129 | 6,230 |
Furniture, fixtures and office equipment | 3,235,736 | 3,289,010 |
Construction in progress | 1,204,742 | 6,535,808 |
Total | 301,760,643 | 234,686,303 |
Less: accumulated depreciation and amortization | (146,330,705) | (134,681,628) |
Impairment | (17,434,989) | (17,722,045) |
Net book value | $ 137,994,949 | $ 82,282,630 |
4. PROPERTY, PLANT AND EQUIPM_4
4. PROPERTY, PLANT AND EQUIPMENT, NET (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Property not be able to obtain property ownership certificates | $ 19,894,947 | $ 20,409,998 |
Depreciation and amortization expense | 14,060,927 | 17,443,318 |
Direct Labor and Factory Overhead | ||
Depreciation and amortization expense | 10,796,085 | 16,209,588 |
Administrative Expenses | ||
Depreciation and amortization expense | 848,345 | $ 966,718 |
Cost of Net Revenue | ||
Depreciation and amortization expense | $ 2,347,153 |
5. FINANCE LEASE RIGHT-OF-USE_3
5. FINANCE LEASE RIGHT-OF-USE ASSETS (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
At cost | $ 2,275,804 | $ 2,313,274 |
Less: accumulated depreciation and amortization | (2,096,278) | (2,062,517) |
Net book value | 179,526 | 250,757 |
Buildings | ||
At cost | 117,956 | 119,899 |
Plant and Machinery | ||
At cost | $ 2,157,848 | $ 2,193,375 |
5. FINANCE LEASE RIGHT-OF-USE_4
5. FINANCE LEASE RIGHT-OF-USE ASSETS (Details Narrative) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Leases [Abstract] | ||
Depreciation and amortization | $ 69,344 | $ 267,012 |
6. OPERATING LEASE RIGHT-OF-U_2
6. OPERATING LEASE RIGHT-OF-USE ASSETS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Leases [Abstract] | ||
Operating lease right-of-use assets | $ 8,817,884 | $ 0 |
Operating lease cost | $ 889,683 | $ 1,046,486 |
7. PAYABLES AND ACCRUED EXPENSE
7. PAYABLES AND ACCRUED EXPENSES (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Payables and Accruals [Abstract] | ||
Salary payable | $ 310,097 | $ 241,343 |
Social security insurance contribution payable | 105,750 | 140,326 |
Other payable-related party (see Note 8) | 89,424 | 90,900 |
Deposit on subscription of a subsidiary's share | 144,798 | 0 |
Accrued expense for construction | 97,913 | 104,246 |
Accrued expense - others | 358,066 | 328,443 |
Total | $ 1,106,048 | $ 905,258 |
8. RELATED PARTY TRANSACTIONS (
8. RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Related Party Transactions [Abstract] | ||
Company borrowed from Jiaxing Lighting Appliance Company Limited | $ 419,995 | $ 355,212 |
Property management services provided by Shandong Shouguang Vegetable Seed Industry Group Co., Ltd | $ 89,425 | $ 90,897 |
9. TAXES PAYABLE (Details)
9. TAXES PAYABLE (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Taxes Payable [Abstract] | ||
Land use tax payable | $ 779,623 | $ 1,188,687 |
10. LEASE LIABILITIES-FINANCE_3
10. LEASE LIABILITIES-FINANCE AND OPERATING LEASE (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Leases [Abstract] | ||
Imputed interest rate | 6.70% | 6.70% |
Total finance lease liability | $ 2,104,278 | $ 2,267,025 |
Less: current portion | (198,506) | (197,480) |
Finance lease liability, net of current portion | $ 1,905,772 | $ 2,069,545 |
10. LEASE LIABILITIES-FINANCE_4
10. LEASE LIABILITIES-FINANCE AND OPERATING LEASE (Details 1) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Leases [Abstract] | ||
Imputed interest rate | 4.89% | 4.89% |
Total operating lease liability | $ 8,348,453 | $ 0 |
Less: current portion | (416,604) | 0 |
Operating lease liability, net of current portion | $ 7,931,849 | $ 0 |
10. LEASE LIABILITIES-FINANCE_5
10. LEASE LIABILITIES-FINANCE AND OPERATING LEASE (Details 2) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Finance Lease | ||
Next twelve months | $ 269,049 | |
Next 13 to 24 months | 269,049 | |
Next 25 to 36 months | 269,049 | |
Next 37 to 48 months | 269,049 | |
Next 49 to 60 months | 269,049 | |
Thereafter | 1,614,295 | |
Total | 2,959,540 | |
Less amount representing interest | (855,262) | |
Present value of net minimum lease payments | 2,104,278 | $ 2,267,025 |
Operating Lease | ||
Next twelve months | 772,866 | |
Next 13 to 24 months | 786,584 | |
Next 25 to 36 months | 637,294 | |
Next 37 to 48 months | 644,149 | |
Next 49 to 60 months | 641,946 | |
Thereafter | 11,442,172 | |
Total | 14,925,011 | |
Less amount representing interest | (6,576,558) | |
Present value of net minimum lease payments | $ 8,348,453 | $ 0 |
10. LEASE LIABILITIES-FINANCE_6
10. LEASE LIABILITIES-FINANCE AND OPERATING LEASE (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Leases [Abstract] | ||
Interest expense from finance lease obligations | $ 144,880 | $ 159,839 |
Weighted average remaining operating lease term | 22 years 3 months 18 days | |
Weighted average discount rate | 4.89% |
11. EQUITY (Details Narrative)
11. EQUITY (Details Narrative) - shares | Dec. 31, 2019 | Dec. 31, 2018 |
Equity [Abstract] | ||
Common stock, shares authorized | 80,000,000 | 80,000,000 |
13. STOCK-BASED COMPENSATION (D
13. STOCK-BASED COMPENSATION (Details) | 12 Months Ended |
Dec. 31, 2019$ / sharesshares | |
Share-based Payment Arrangement [Abstract] | |
Number of option and warrants outstanding, beginning balance | shares | 503,600 |
Number of option and warrants granted and vested | shares | 30,000 |
Number of option and warrants exercised | shares | (379,400) |
Number of option and warrants expired/cancelled | shares | (19,100) |
Number of option and warrants outstanding, ending balance | shares | 135,100 |
Weighted-average exercise price of option and warrants outstanding, beginning balance | $ / shares | $ 4.85 |
Weighted-average exercise price of option and warrants granted and vested | $ / shares | 4.55 |
Weighted-average exercise price of option and warrants exercised | $ / shares | 3.65 |
Weighted-average exercise price of option and warrants expired/cancelled | $ / shares | 11.20 |
Weighted-average exercise price of option and warrants outstanding, ending balance | $ / shares | $ 7.21 |
Range of exercise price per common share, beginning balance | $3.55 - $24.00 |
Range of exercise price per common share granted and vested | $4.55 |
Range of exercise price per common share exercised | $3.57 - $4.56 |
Range of exercise price per common share expired/cancelled | $7.20 - $24.00 |
Range of exercise price per common share, ending balance | $3.57 - $9.90 |
13. STOCK-BASED COMPENSATION _2
13. STOCK-BASED COMPENSATION (Details 1) - $ / shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based Payment Arrangement [Abstract] | ||
Outstanding | 135,100 | 503,600 |
Range of exercise prices, lower limit | $ 3.55 | |
Range of exercise prices, upper limit | $ 9.90 | |
Weighted average remaining contractual life (years) | 1 year 6 months 18 days |
13. STOCK-BASED COMPENSATION _3
13. STOCK-BASED COMPENSATION (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based Payment Arrangement [Abstract] | ||
Stock-based compensation expense - options | $ 45,900 | $ 496,200 |
Aggregate intrinsic value of options outstanding and exercisable | $ 0 | |
Stock price | $ 2.55 | $ 3.90 |
Aggregate intrinsic value of options exercised | $ 922,429 | $ 119,059 |
14. INCOME TAXES (Details)
14. INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Current taxes - PRC | $ 0 | $ 0 |
Deferred taxes - PRC | 5,865,830 | 13,302,779 |
Change in valuation allowance | (8,672,817) | (214,924) |
Income tax (expense) benefit | $ (2,806,987) | $ 13,087,855 |
14. INCOME TAXES (Details 1)
14. INCOME TAXES (Details 1) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Statutory income tax rate | 25.00% | 25.00% |
Non-taxable & non deductible items | 1.00% | (9.00%) |
Change in valuation allowance | (38.00%) | 0.00% |
Effective tax rate | (12.00%) | 16.00% |
14. INCOME TAXES (Details 2)
14. INCOME TAXES (Details 2) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Income Tax Disclosure [Abstract] | ||
Deferred tax liabilities | $ 0 | $ 0 |
Deferred tax assets: | ||
Allowance for obsolete and slow-moving inventories | 0 | 16,292 |
Impairment on property, plant and equipment | 2,974,542 | 3,696,332 |
Impairment on prepaid land lease | 826,673 | 840,284 |
Exploration costs | 1,784,583 | 1,813,965 |
Compensation costs of unexercised stock options | 171,672 | 194,016 |
PRC tax losses | 18,737,005 | 12,663,985 |
US federal net operating loss | 432,000 | 119,000 |
Total deferred tax assets | 24,926,475 | 19,343,874 |
Valuation allowance | (8,985,833) | (313,016) |
Net deferred tax asset | $ 15,940,642 | $ 19,030,858 |
14. INCOME TAXES (Details Narra
14. INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Statutory tax rates | 25.00% | 25.00% |
Accumulated distributable earnings | $ 12,466,722 | $ 240,563,868 |
Unrecognized withholding tax | 5,254,560 | 11,035,843 |
US federal net operating loss to offset against future ferderal income tax liabilities | 2,100,000 | 566,000 |
Increases/decrease in valuation allowance | $ 8,672,817 | $ 214,924 |
Hong Kong | ||
Statutory tax rates | 16.50% | 16.50% |
15. BUSINESS SEGMENTS (Details)
15. BUSINESS SEGMENTS (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | ||
Net revenue (external customers) | $ 10,596,521 | $ 2,594,941 | |
Net revenue (intersegment) | 0 | 0 | |
Loss from operations before income tax expense | (23,294,383) | (83,552,531) | |
Income tax (expense) benefit | (2,806,987) | 13,087,855 | |
Loss from operations after income tax (expense) benefit | (26,101,370) | (70,464,676) | |
Total assets | 279,250,985 | 298,546,790 | |
Depreciation and amortization | 14,060,927 | 17,443,318 | |
Capital expenditures | 60,611,949 | 35,273,307 | |
Bromine Segment | |||
Net revenue (external customers) | [1] | 10,022,027 | 0 |
Net revenue (intersegment) | [1] | 0 | 0 |
Loss from operations before income tax expense | [1] | (15,609,979) | (40,504,752) |
Income tax (expense) benefit | [1] | (3,181,343) | 10,304,897 |
Loss from operations after income tax (expense) benefit | [1] | (18,791,322) | (30,199,855) |
Total assets | [1] | 142,568,684 | 115,233,773 |
Depreciation and amortization | [1] | 9,525,334 | 11,979,985 |
Capital expenditures | [1] | 57,607,104 | 31,904,288 |
Crude Salt Segment | |||
Net revenue (external customers) | [1] | 522,758 | 1,981,573 |
Net revenue (intersegment) | [1] | 0 | 0 |
Loss from operations before income tax expense | [1] | (446,900) | (8,336,305) |
Income tax (expense) benefit | [1] | (247,250) | 1,902,111 |
Loss from operations after income tax (expense) benefit | [1] | (694,150) | (6,434,194) |
Total assets | [1] | 23,352,060 | 37,254,518 |
Depreciation and amortization | [1] | 3,833,288 | 4,983,636 |
Capital expenditures | [1] | 3,004,845 | 2,145,440 |
Chemical Products Segment | |||
Net revenue (external customers) | 0 | 613,368 | |
Net revenue (intersegment) | 0 | 0 | |
Loss from operations before income tax expense | (2,823,298) | (34,757,750) | |
Income tax (expense) benefit | 621,606 | 880,847 | |
Loss from operations after income tax (expense) benefit | (2,201,692) | (33,876,903) | |
Total assets | 111,506,728 | 144,172,070 | |
Depreciation and amortization | 459,613 | 479,697 | |
Capital expenditures | 0 | 1,192,963 | |
Natural Gas | |||
Net revenue (external customers) | 51,736 | 0 | |
Net revenue (intersegment) | 0 | 0 | |
Loss from operations before income tax expense | (188,949) | (204,517) | |
Income tax (expense) benefit | 0 | 0 | |
Loss from operations after income tax (expense) benefit | (188,949) | (204,517) | |
Total assets | 1,732,380 | 1,883,419 | |
Depreciation and amortization | 142,692 | 0 | |
Capital expenditures | 0 | 30,616 | |
Segment Total | |||
Net revenue (external customers) | 10,596,521 | 2,594,941 | |
Net revenue (intersegment) | 0 | 0 | |
Loss from operations before income tax expense | (23,069,126) | (83,803,324) | |
Income tax (expense) benefit | (2,806,987) | 13,087,855 | |
Loss from operations after income tax (expense) benefit | (25,876,113) | (70,715,469) | |
Total assets | 279,159,852 | 298,543,780 | |
Depreciation and amortization | 14,060,927 | 17,443,318 | |
Capital expenditures | 60,611,949 | 35,273,307 | |
Corporate | |||
Net revenue (external customers) | 0 | 0 | |
Net revenue (intersegment) | 0 | 0 | |
Loss from operations before income tax expense | (225,257) | 250,793 | |
Income tax (expense) benefit | 0 | 0 | |
Loss from operations after income tax (expense) benefit | (225,257) | 250,793 | |
Total assets | 91,133 | 3,010 | |
Depreciation and amortization | 0 | 0 | |
Capital expenditures | $ 0 | $ 0 | |
[1] | 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 the respective segment. |
15. BUSINESS SEGMENTS (Details
15. BUSINESS SEGMENTS (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Business Segments | ||
Total segment operating loss | $ (23,069,126) | $ (83,803,324) |
Corporate costs | (646,914) | (1,064,661) |
Unrealized gain on translation of intercompany balance | 421,657 | 1,315,454 |
Loss from operations | (23,294,383) | (83,552,531) |
Other income, net of expense | 301,325 | 500,690 |
Loss before taxes | $ (22,993,058) | $ (83,051,841) |
15. BUSINESS SEGMENTS (Detail_2
15. BUSINESS SEGMENTS (Details 2) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Shandong Morui Chemical Company Limited | ||
Revenue from major customer | $ 2,378 | $ 811 |
Percentage of total revenue (%) | 22.60% | 31.00% |
Shandong Morui Chemical Company Limited | Bromine Segment | ||
Revenue from major customer | $ 2,203 | $ 0 |
Shandong Morui Chemical Company Limited | Crude Salt Segment | ||
Revenue from major customer | 175 | 656 |
Shandong Morui Chemical Company Limited | Chemical Products Segment | ||
Revenue from major customer | 0 | 155 |
Shouguang Weidong Chemical Company Limited | ||
Revenue from major customer | $ 1,783 | $ 543 |
Percentage of total revenue (%) | 16.90% | 21.00% |
Shouguang Weidong Chemical Company Limited | Bromine Segment | ||
Revenue from major customer | $ 1,629 | $ 0 |
Shouguang Weidong Chemical Company Limited | Crude Salt Segment | ||
Revenue from major customer | 154 | 543 |
Shouguang Weidong Chemical Company Limited | Chemical Products Segment | ||
Revenue from major customer | 0 | 0 |
Shandong Brother Technology Limited, Kuerle Xingdong Trading Limited | ||
Revenue from major customer | $ 1,732 | $ 783 |
Percentage of total revenue (%) | 16.40% | 30.00% |
Shandong Brother Technology Limited, Kuerle Xingdong Trading Limited | Bromine Segment | ||
Revenue from major customer | $ 1,539 | $ 0 |
Shandong Brother Technology Limited, Kuerle Xingdong Trading Limited | Crude Salt Segment | ||
Revenue from major customer | 192 | 783 |
Shandong Brother Technology Limited, Kuerle Xingdong Trading Limited | Chemical Products Segment | ||
Revenue from major customer | 0 | $ 0 |
Dongying Bomeite Chemical Company Limited | ||
Revenue from major customer | $ 1,098 | |
Percentage of total revenue (%) | 10.40% | |
Dongying Bomeite Chemical Company Limited | Bromine Segment | ||
Revenue from major customer | $ 1,098 | |
Dongying Bomeite Chemical Company Limited | Crude Salt Segment | ||
Revenue from major customer | 0 | |
Dongying Bomeite Chemical Company Limited | Chemical Products Segment | ||
Revenue from major customer | 0 | |
Shandong Shouguang Shenrunfa Ocean Chemical Company Limited | ||
Revenue from major customer | $ 1,297 | |
Percentage of total revenue (%) | 12.30% | |
Shandong Shouguang Shenrunfa Ocean Chemical Company Limited | Bromine Segment | ||
Revenue from major customer | $ 1,297 | |
Shandong Shouguang Shenrunfa Ocean Chemical Company Limited | Crude Salt Segment | ||
Revenue from major customer | 0 | |
Shandong Shouguang Shenrunfa Ocean Chemical Company Limited | Chemical Products Segment | ||
Revenue from major customer | $ 0 |
16. CUSTOMER CONCENTRATION (Det
16. CUSTOMER CONCENTRATION (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Amounts due from major customers | $ 4,877,106 | $ 0 |
Top 5 customers | ||
Percent products sold to top five customers | 78.50% | 90.00% |
17. MAJOR SUPPLIERS (Details Na
17. MAJOR SUPPLIERS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Risks and Uncertainties [Abstract] | ||
Top five suppliers percentage raw materials supplied | 100.00% | 100.00% |
Amount due top five suppliers | $ 0 | $ 0 |
19. CAPITAL COMMITMENT AND OPER
19. CAPITAL COMMITMENT AND OPERATING LEASE COMMITMENTS (Details) | Dec. 31, 2019USD ($) |
Property Management Fees | |
Next 12 months | $ 89,425 |
Next 13 to 24 months | 89,425 |
Next 25 to 36 months | 89,425 |
Next 37 to 48 months | 89,425 |
Total | 357,700 |
Capital Expenditure | |
Next 12 months | 25,801 |
Next 13 to 24 months | 0 |
Next 25 to 36 months | 0 |
Next 37 to 48 months | 0 |
Total | $ 25,801 |
SCHEDULE I - PARENT ONLY FINA_2
SCHEDULE I - PARENT ONLY FINANCIAL INFORMATION (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Current Assets | |||
Prepayments and deposits | $ 1,332,970 | $ 8,096,636 | |
Total Current Assets | 107,202,708 | 187,343,536 | |
Non-Current Assets | |||
Total Non-Current Assets | 172,048,277 | 111,203,254 | |
Total Assets | 279,250,985 | 298,546,790 | |
Current Liabilities | |||
Other payables and accrued expenses | 1,106,048 | 905,258 | |
Total Current Liabilities | 6,306,264 | 2,623,841 | |
Total Liabilities | 16,143,885 | 4,693,386 | |
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; 9,562,444 and 9,410,588 shares issued; and 9,516,614 and 9,360,758 shares outstanding as of December 31, 2019 and December 31, 2018 | 23,904 | 23,525 | |
Treasury stock; 45,830 and 49,830 shares as of December 31, 2019 and December 31, 2018 at cost | (510,329) | (554,870) | |
Additional paid-in capital | 95,043,388 | 95,020,808 | |
Retained earnings unappropriated | 159,808,400 | 185,608,445 | |
Retained earnings appropriated | 24,233,544 | 24,233,544 | |
Total Stockholders' Equity | 263,107,100 | 293,853,404 | $ 381,962,196 |
Total Liabilities and Stockholders' Equity | 279,250,985 | 298,546,790 | |
Parent | |||
Current Assets | |||
Prepayments and deposits | 0 | 0 | |
Total Current Assets | 0 | 0 | |
Non-Current Assets | |||
Interests in subsidiaries | 200,057,813 | 230,229,081 | |
Amounts due from group companies | 63,546,235 | 64,017,517 | |
Total Non-Current Assets | 263,604,048 | 294,246,598 | |
Total Assets | 263,604,048 | 294,246,598 | |
Current Liabilities | |||
Other payables and accrued expenses | 354,247 | 250,493 | |
Amounts due to group companies | 142,701 | 142,701 | |
Total Current Liabilities | 496,948 | 393,194 | |
Total Liabilities | 496,948 | 393,194 | |
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; 9,562,444 and 9,410,588 shares issued; and 9,516,614 and 9,360,758 shares outstanding as of December 31, 2019 and December 31, 2018 | 23,904 | 23,525 | |
Treasury stock; 45,830 and 49,830 shares as of December 31, 2019 and December 31, 2018 at cost | (510,329) | (554,870) | |
Additional paid-in capital | 95,043,388 | 95,020,808 | |
Retained earnings unappropriated | 159,808,400 | 185,608,445 | |
Retained earnings appropriated | 24,233,544 | 24,233,544 | |
Cumulative translation adjustment | (5,491,807) | (10,478,048) | |
Total Stockholders' Equity | 263,107,100 | 293,853,404 | |
Total Liabilities and Stockholders' Equity | $ 263,604,048 | $ 294,246,598 |
SCHEDULE I - PARENT ONLY FINA_3
SCHEDULE I - PARENT ONLY FINANCIAL INFORMATION (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
OPERATING EXPENSES | ||
General and administrative expenses | $ (13,272,921) | $ (11,268,800) |
TOTAL OPERATING EXPENSES | (33,890,904) | (86,147,472) |
OTHER EXPENSES | ||
Interest expense | (145,445) | (160,422) |
TOTAL OTHER EXPENSES | 301,325 | 500,690 |
LOSS BEFORE TAXES | (22,993,058) | (83,051,841) |
TAXES | 2,806,987 | (13,087,855) |
NET LOSS | (25,800,045) | (69,963,986) |
Parent | ||
OPERATING EXPENSES | ||
General and administrative expenses | (642,151) | (1,061,674) |
TOTAL OPERATING EXPENSES | (642,151) | (1,061,674) |
OTHER EXPENSES | ||
Interest expense | (385) | (500) |
TOTAL OTHER EXPENSES | (385) | (500) |
TOTAL EXPENSES | (642,536) | (1,062,174) |
Equity in net loss of subsidiaries | (25,157,509) | (68,901,812) |
LOSS BEFORE TAXES | (25,800,045) | (69,963,986) |
TAXES | 0 | 0 |
NET LOSS | $ (25,800,045) | $ (69,963,986) |
SCHEDULE I - PARENT ONLY FINA_4
SCHEDULE I - PARENT ONLY FINANCIAL INFORMATION (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (25,800,045) | $ (69,963,986) |
Adjustments to reconcile loss to net cash used in operating activities: | ||
Stock-based compensation expense - options | 45,900 | 496,200 |
Shares issued from treasury stock for services | 21,600 | 0 |
Changes in assets and liabilities | ||
Other payables and accrued expenses | (102,963) | (106,163) |
Net cash provided by operating activities | (15,309,112) | 17,340,671 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Advances from group companies | 419,995 | 355,212 |
Net cash provided by financing activities | (275,509) | (294,295) |
NET INCREASE IN CASH AND CASH EQUIVALENTS | (78,696,949) | (29,907,824) |
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR | 178,998,935 | 208,906,759 |
CASH AND CASH EQUIVALENTS - END OF YEAR | 100,301,986 | 178,998,935 |
Parent | ||
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | (25,800,045) | (69,963,986) |
Adjustments to reconcile loss to net cash used in operating activities: | ||
Equity loss in unconsolidated subsidiaries | 25,157,509 | 68,901,812 |
Stock-based compensation expense - options | 45,900 | 496,200 |
Shares issued from treasury stock for services | 21,600 | 0 |
Changes in assets and liabilities | ||
Other payables and accrued expenses | 103,754 | 4,888 |
Net cash provided by operating activities | (471,282) | (561,086) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Advances from group companies | 471,282 | 561,086 |
Net cash provided by financing activities | 471,282 | 561,086 |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 0 | 0 |
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR | 0 | 0 |
CASH AND CASH EQUIVALENTS - END OF YEAR | $ 0 | $ 0 |