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Operator: Greetings. Welcome to the Gulf Resources Fiscal Year 2022 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Helen Xu. Ma’am, you may begin.

Helen Xu: Thank you, operator. Good morning, ladies and gentlemen and good evening to all those of you for joining us from China. And we would like to welcome all of you to Gulf Resources’ fiscal year 2022 earnings conference call. I’m Helen Xu, the IR Director. Our CEO of the company, Mr. Xiaobin Liu, will also join this call today. I’d like to remind you €“ to all our listeners of this call, certain management’s statements during the call will contain forward-looking information about Gulf Resources, Inc. and its subsidiaries business and products within the meaning of Rule 175 under Securities Act of 1933 and Rule 3b-6 under the Securities Exchange Act of 1934 and are subject to the safe harbor created by those rules. Actual results may differ from those discussed today, taking into account a number of risk factors, including, but not limited to, the general economic and business conditions in China; the risks associated with the COVID-19 pandemic outbreak; future product development and production capabilities; shipments to end customers; market acceptance of new and existing products; additional competition from existing and new competition from the bromine and the other chemical production; changing technology; the ability to make future bromine assets; and the various other factors beyond its control.

All forward-looking statements are expressly qualified in this entirety by this cautionary statement and the risk factors detailed with the company’s reports filed with the SEC. Gulf Resources assumes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. Accordingly, our company believes expectations reflecting in those forward-looking statements are reasonable, and there can be no assurance of such prove to be correct. In addition, any reference to the company’s future performance represents the management’s estimate as of today, the 3rd of April 2023. For those of you unable to listen to the entire call at this time, a replay will be available and the link is accessible through our website.

So, please locate our press release issued earlier for the details. So, before I turn to the remarks from Mr. Liu and questions from our investors, let me briefly review the results for fiscal year 2022. The company had an excellent fiscal year 2022. Revenue increased approximately 20% to approximately $66.1 million. Gross profit increased 34% to approximately $37.4 million. Profit from operations increased 216% to approximately $16.5 million. We also had approximately of direct labor and factory overhead incurred during the shutdowns of our business. Income before taxes increased 210% to $16.6 million from $5.4 million. After tax income was approximately , compared to a loss of approximately . Earnings per share was $1 versus a loss of $0.09 per share.

We generated cash flow from operations of approximately $51.1 million, compared to approximately $23.3 million in the previous year. We invested approximately $37.6 million making us free cash flow positive. Despite negative foreign currency translation adjustment of approximately 24.9 million from the decline of the RMB against the U.S. dollar and in cash was $108.2 million or $10.37 per share, net-net cash, which is cash minus all liabilities per share was $8.38. Book value per share was . We are very pleased to have had such strong earnings and to have generated good free cash flow during the year 2022 instead of reading through all of the numbers, which are in our press release. We’d like to bring investors up to date on a series of current and projected issues.

Firstly, let’s look at our bromine and crude salt segment. Last year, our bromine business was extremely profitable with bromine prices increasing 14%. Since the end of the fiscal year, bromine prices have dropped approximately 40%. The company believes there are numerous reasons for the decline in bromine prices. Firstly, the economic conditions in China, as well as the rest of the world have slowed. Secondly, many of our customers have had their factories closed for Chinese New Year, as well as for COVID restrictions. Third, demand for fire retardants for export have decreased due to the lockdown. Fourth, the export of some other bromine downstream products have also decreased. Fifth, with the lockdown in China, many fewer people used disinfectants because they were home instead of going out or school €“ for work or school.

Producers of disinfectants and retailers had geared up for continued high demand, and the lockdown was a surprise. We believe this situation will reverse. The company remains optimistic about the opportunities in this bromine business. Some factories in China have been permanently closed, and some others, like our factories #2 and #10, which have not yet received permission to open yet. There have been no major and a few minor new discoveries of bromine. The decline of the RMB against the U.S. dollar has made imports more expensive. With the Chinese economy and its factories starting to reopen, demand should increase. Our factory #8 entered production at . We expect a full level of production for €“ from in year 2023. We also expect and we will try its best to be able to open one of our closed factories #2 and #10 in year 2023.

We are working with the government to resolve these problems as quickly as possible. As far as the pricing is concerned, we believe bromine prices have reached a bottom and we will begin to recover. However, until we get better handle on the future pricing of bromine, we are not able to make any revenue and earnings projections for fiscal year 2023. We are however very confident about the long-term profitability potential for bromine and crude salt segment. And if shareholders wishes to track the daily price of bromine may look at the website sunsirs.com, which tracks daily bromine prices in China. So, now let’s look at our Yuxin chemical factory segment. On March 23, 2023, the company issued a press release detailing the delays in the opening of our Yuxin chemical factory.

As noted in our press release, we have constructed a bulk of the section and received a good portion of a payment. The refrigeration and air compressor units have recent been received. The remaining equipment primarily include that related to environmental issues such as the treatment equipment, solid waste treatment equipment, and wastewater treatment equipment. The delivery of this equipment was initially delayed by the COVID pandemic. The recent delay has been caused by the increase of strict government requirements for environmental issues related to the public safety, including those that impact the air and the water pollution. We want investors to understand that these are not simple of the share of products. To meet especially government regulations, each piece of equipment had to be customized to specific environment.

Gulf Resources have been working closely with its suppliers on the specifications that will meet the stricter government regulations. We believe we are making excellent progress in completing this phase. Once the equipment is delivered, it will take approximately 3 to 4 months to get them fully installed. After installation, the testing process should take another 2 to 3 months. After testing is complete, we will apply for environmental and safety approval from the government. After receiving these approvals, trial production may take an additional 4 months. Once trial production is completed, we will be able to start commercial production. So, we are certain that to our customers, our investors that as frustrated as we are by the delay in the opening of our chemical plant.

We could not have projected COVID pandemic, the response of the government, or the closing of the economy. We are working as fast as we can to overcome these obstacles. We will continue to actively update our investors on our progress. , we are optimistic about the potential profitability of our Yuxin chemical factory. Our original view was that Yuxin factory would have been producing higher margin products. In year 2016, before the original chemical factory was shut down, our chemical factory had segment earnings of $25.5 million. We are currently not making long-term estimates for a factory that is still under construction. We would also like to note that chemical margins usually vary inversely with bromine margins, since bromine is a basic raw material for the chemical products.

However, the competitive environment in China should be quite favorable. As with bromine, manufacturing have been closed and will not reopen as the Chinese economy recovers and our Yuxin Chemical Factory is open, we believe investors will be pleased with the level of profit it will generate. So, now let’s look at the Sichuan natural gas and bromine segment business. We are still waiting for the government of Sichuan Province to finalize its land and resource planning and then the company plans to proceed with its application for the natural gas and project approvals with related government departments. The company remains optimistic about the future of these projects, because firstly, the government has that private companies can drill for and produce natural gas.

Secondly, the government had indicated that it wants to improve the private sector and strengthen the private companies. However, the company has decided to explore other options to hasten the process. One very promising option is to form a partnership with the government of Daying County for the extraction of halogen water and the related products. Under such partnership, the Government of Daying County could assist the company to obtain the related approvals or may also be able to have, provide other infrastructure help, but the company would then produce products and the partners will share the process. While we cannot guarantee that such a partnership will be finalized, it is encouraged. We believe this could be very effective way for gaining approval to reopen our Natural Gas project and gain approval for both natural gas and brine products.

We will keep investors updated on the progress of our negotiation with the government of Daying County. Now, let’s look at our shareholder value. Based on the closing of trading last Friday, our stock is selling and extremely cheap valuations. Our was 2.68x. Our price divided by cash was only 25.8%. Whilst selling at less than one-third of our net-net cash, we were selling at only 10% of our book value. Shareholders keep writing to us asking what we can do about the share price. Many shareholders have asked us to pay a dividend or buyback large amount of shares. However, as we have repeated on the call after call, China has strong currency restrictions. We are in getting money out of the country. I’d like to repeat this so all our investors fully understand.

China has strong currency We’re in getting money out of the country. Shareholders have also suggested we hire an IR firm, investor relations firm. As of the close on Friday, we had a market capitalization of about $29 million. Our stock trade and the average of 11,319 shares a day or about $30,000. This makes us too small for most institutional investors. We believe that once we have more bromine factories in operation, our chemical factories is open and we start producing natural gas and brine products in Sichuan. Our shares will appreciate and will be attractive to institutional investors. However, we have developed an automatic strategy that we believe it may be able to help the company to afford us the financial flexibility to exceed the type of action our shareholders have been requested.

At this time, I will turn the call over to Mr. Liu to describe the strategy.

Xiaobin Liu:

Helen Xu: Hi, everyone. So, I will do the translation for Mr. Liu’s explanation on this strategy. I’m the CEO of the company, Mr. Xiaobin Liu. First of all, welcome all of you to attend the fiscal year 2022 earnings conference call. We know that shareholders are frustrated, so is management team. In the last 3 years, I have earned no . Our COO and CFO have earned about $18,000 a year only. I personally repaid the company back about 600,000 or all the salaries I earned for more than 11 years. I don’t think we may find another company where management will pay back their salaries for more than one decade. The welfare of my family and that of other senior management completely depends on the price of shares. I can assure you not one is more frustrated than management team.

We are not just sitting around. We are now actively planning on a strategy that may give us the financial flexibility to help our shareholders, while a difficult to transport and export. The same is not the case for chemicals. Many of the products we are planning to produce in our chemical factory, such as the materials for pharmaceutical intermediaries are actively exported from China to country in Asia and around the world. We have formed a task force to analyze the potential of each of these products and the markets identify potential customer fees and focus on the products these customers are interested in purchasing. When our chemical factory is ready for full production, we may also be ready to begin exporting some of our chemical products.

We expect that the export of these products may give us a financial flexibility that our shareholders and our management team have been demanding. We believe this strategy of this task force will provide a good opportunity for our company. So, now let’s turn back the call for Helen and we may start the Q&A section.

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Operator: Sure. Your first question for today is coming from , a Private Investor.

Unidentified Analyst: Yes. I would like to ask, are there people outside the company involved in the task force looking at exporting chemical products? And who are they?

Helen Xu: Hi, John. Sorry, I did not get your question. You ?

Unidentified Analyst: Yes. You said you’re going to establish a task force to look at the possibility of exporting chemical products. I want to know if there are people outside the company’s employee list who are involved in that task force?

Helen Xu: Okay Thank you.

Xiaobin Liu: Hi John. Currently, it is from the company inside staff. We are doing the planning still and do the analyze. And once we’re going well with this, future, we may consider to hire someone from outside €“ consultant for the marketing and the technical segment.

Unidentified Analyst: Okay. I would encourage you also to talk to an investment banker to look at opportunities for improving the company’s stock price.

Helen Xu: Okay. Thank you. Okay. Hi John, okay. Thank you.

Operator: There are no further questions in queue. I will now turn the call over to management for closing remarks.

Helen Xu: Okay. Thank you.

Operator: Yes. It looks like Mr. Liu’s line disconnected. One moment, while I reconnect his line.

Helen Xu: Okay. It’s okay, . I think we can close the call for today, if there is no more questions.

Operator: There are no further questions in queue. I will close the call. Thank you. This concludes today’s conference call.

Helen Xu: Thank you all for attending the call. have a good day. Thank you, Take care. Bye-bye.

Operator: Thank you. This concludes today’s conference and you may disconnect your lines at this time. Thank you for your participation.

Helen Xu: Thank you. Thank you, . Bye-bye. Have a good day.