Gulf Resources Inc (GURE) 2021 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Gulf Resources 2021 Second Quarter Earnings Conference. (Operator Instructions)

It is now my pleasure to turn the floor over to your host, Helen Xu, IR Director at Gulf Resources. Helen, the floor is yours.

Yes. Good morning. Thanks, operator. Good morning, ladies and gentlemen, and good evening to all of you for joining us from China. And we'd like to welcome all of you to Gulf Resources' Second Quarter 2021 Earnings Conference Call. I'm Helen Xu, the IR Director. Our CEO of the company, Mr. Xiaobin Liu, will also join us in this call today.

I'd like to remind you to all of our listeners that in this call, certain management statements during the call will contain forward-looking information about Gulf Resources and its subsidiary business and products within the meaning of Rule 175 on the Securities Act of 1933 and Rule 3b-6 under the SE Act of 1934, and are subject to the safe harbor created by those rules.

Actual results may differ from those discussed today taking into account a number of risk factors, including, but not limited to, the general economic and business conditions in the PRC, the risk associated with 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 oilfields and the power production chemicals, changing technology, the ability to make future bromine assets and the various other factors beyond the company's control.

All forward-looking statements are expressly qualified in their entirety by this cautionary statement and the risk factors detailed with the company's reports filed with the SEC. Gulf Resources assumes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call.

Accordingly, our company believes expectations reflecting in those forward-looking statements are reasonable and that there can be no assurance of such will prove to be correct. In addition, any reference to the company's future performance represents the management's estimates as of today, the 16th of August 2021.

For those of you unable to listen to the entire call at this time, a replay will be available at the company's website. The call is also accessible through the webcast, and the link accessible through our website. So please locate our press release issued earlier for the details.

And at this moment, I just want to say that go to the company's website issue, and the webcasting we issued earlier in our press release have been updated and the company already issued a new webcasting link, and the PR is on its way. So I think it will be issued very soon in 5 or 10 minutes before the call -- supposed to be before the call. It's on the way now.

So now let's turn the call back to Mr. Liu now.

(foreign language)

[Interpreted] Thank you, Helen. I'm Xiaobin Liu, the CEO of the company. First of all, I'd like to welcome all of you to the Gulf Resources earnings call second quarter of year 2021.

In this quarter, the company's former auditor's, Morison Cogen, resigned and the company engaged WWC to serve as independent auditor very quickly and then be able to file its 2021 second quarter 10-Q report on time.

The company is optimistic about the second half of year 2021. Production loss in the second quarter is likely to be recouped in the third quarter, and bromine prices remains high. At the current levels of production, our bromine business should be profitable.

We have expensed all of our annual stock grants. So overhead will be reduced. We believe that we could receive approval for one or more of our closed bromine facilities in the near future.

In year 2022, we may begin to generate revenues from our chemical factory. We expect that our chemical business could be profitable in year 2023. We continue to believe that we may be able to produce both natural gas and bromine products in Sichuan if we are able to obtain required government approvals.

So now, I will turn it back -- the call back to Helen.

So now, I would like to discuss with our investors and shareholders about the company's financial results and some questions we received from our investors.

So I assume most of you have seen our press release. It contains our income statement, balance sheet and cash flow, as well as a review of events in the quarter and future expectations. Because there is much to discuss, so we will go quickly with reviewing the press release's major parts and focus on questions we have already received from investors. Then we will open the call to questions from those on the phone now.

So now let's look at the balance sheet first ended by June 30, 2021. The cash balance is approximately $97.1 million, and the current asset is approximately $105 million. Working capital was approximately $95.7 million. Book value is approximately $278.1 million.

Now looking at the income statement. Net revenues for the second quarter of 2021 increased 108 percentage to approximately $11.1 million compared to previous year same period. Gross margins increased for second quarter 2021 by 1,157% from 33 -- $336,500 to $4 million compared to the same period of previous year as the percentage of revenue gross margin for second quarter year 2021 were 38% compared to 6.3% in the previous year.

Direct labor and factory overhead for second quarter 2021 incurred during plant shutdown decreased 19.7%. As a percentage of sales, they were 12.5% against 32.4%.

GA expenses for second quarter 2021 increased approximately $3.7 million compared to the previous year. However, there was approximately $3.1 million of the increase was attributable to the onetime stock awards.

Net loss before taxes for second quarter 2021 declined 19.6% compared to the previous year same period.

Taxes was a loss of $356,000 for second quarter 2021 and -- against the benefit of $672.6 million (sic) [$672,600] for the second quarter year 2020.

And net loss after taxes were $2.7 million for second quarter 2021 versus the $2.2 million for second quarter year 2020.

The company had a comprehensive net gain in the second quarter year 2021 of approximately $2.6 million versus a net loss of $2 million for second quarter 2020.

So now we will read the questions we have received and then provide answers. Each question can be answered by either Helen -- by me or Mr. Liu later on after -- on the Q&A section.

Firstly, now let's look at the questions regarding company auditors. The first question relates to the change in auditors.

The question is, while Morison Cogen said there were no possible reason for their resignation, such resignation always makes investors nervous. Can the company provide an understanding of why they resigned?

The answer: We do not know why Morison Cogen resigned, but it did not have any conflict with company while it resigned.

And question, why did you select WWC?

So the answer is this: WWC came highly recommended by other Chinese firms. We see several advantages by -- to using WWC. WWC has an extensive Chinese-speaking staff. If an auditor is going to be effective, its staff has to be able to speak to people and understand the answers. WWC has offices in Beijing, Guangzhou, Hong Kong, so we can discuss matters with them on our time.

WWC is also an approved registrant of the PCAOB in the U.S., the CPAB in Canada, and the HKICPA in Hong Kong. Given some of the issues that are currently occurring between the U.S. and China, we believe it was important to have an auditor -- auditing partner that was approved in Hong Kong and the head offices in China. WWC committed to filing our 10-Q in a timely manner. We did not want to disappoint investors and file late. We'd like to thank WWC for working so hard that we could get our 10-Q filed on time.

Question: I know you filed an 8-K, but why did not issue a press release?

Change of auditor is an important issue. Some investors may have missed the 8-K. We agree completely, but we were advised by our counsel that the 8-K filing was sufficient based on related policy and requirements at that time. So in the future, we'll be more assertive to make sure we file a press release as well.

Did changing auditor have any adverse impacts on the company?

The answer: Change in our auditor was a major distraction. Morison Cogen has been our auditor for nearly 10 years. We never contemplated having to find a new auditor on short notice. When we received the letter from Morison Cogen, we talked to them a lot. We also started calling other companies to get recommendation. We rushed to interview and conduct due diligence on potential auditors.

During this time period, a number of issues that we probably should have addressed fell through the cracks. We would like you to understand this created greater stress -- great stress to us.

Question: Can you explain the stock awards in the second quarter and their impact on earnings?

First of all, during the quarter, we issued shares of stock to company management, Directors, consultants and the employees. Our auditors determined it should be priced at $6 -- around approximately $6.61 based on when they were issued. Have they been issued at the end of the quarter when the closing price was approximately $5, the charge would have been much lower. These are annual grants in lieu of other compensation. In coming quarters, our SG&A should be lower because we had paid people in shares.

Question: Why are you giving this stock grants?

Answer: This is a very important element of our Investor Relations strategy. Shareholders keep asking about the low price of our stock and often seem to think management does not care. We do care about the price, and we wish we could do more at this time. However, by giving our team stock instead of cash compensation, we are aligning their interest with that of you, our shareholders. As these people increase their holdings in our stock, they become increasingly focused on its price. By giving these stock grants in lieu of salary, we are making sure management has a vested interest in seeing the price of the stock go up.

Financial statement question: You normally provide balance sheet per share valuation to save us the trouble of doing the calculation. Can you provide these numbers?

Answer: Yes. Based on 10,469,477 shares outstanding at the end of the second quarter, cash per share was $9.27. Net-net cash, which is cash minus all liabilities, was $7.52. Working capital was $9.15, and the book value was $26.56. As you can see, our stock continues to sell at a discount to all of these measures.

Operations. The next set of questions are related to the operations. Now firstly, let's look at the questions regarding bromine business segment.

You have been opportunistic about the reopening of factories #2, #8, and #10. But these factories are still not open. What is happening with this factories? Why is it taking so long to get open?

As we disclosed in our 10-Q, to the company's knowledge, the government is currently completing its planning process for all mining areas, including that for provision of grants. As a result, the company may be required to make some modification to our current wells and aqueducts prior to commencement of operations of these factories to satisfy the local government's requirements. Because when Gulf Resources acquired these facilities, it was able to use its corporate mining license, but now government is requiring that each factory has its own license.

The major issue with this factories relates to the processing of crude salt and waste water. These factories are located in farming areas. However, the presence of halogen water means the soil content is not rich. Economic value for this land from the production of bromine and crude salt is much higher than the economic value from crops. To finalize license for these 3 properties, the company is working to reach agreements with village governments. We are optimistic about receiving approval. But as part of the process, we may have to modify our crude salt field and aqueducts.

So question: What can we expect from bromine in the third and fourth quarter, income, pricing and production?

Before we deal with the third and fourth quarter, I want to stress that even with the disruption caused by the inspection, bromine had an excellent quarter. Revenues increased 123%. Gross profit increased 1,953%. As a percentage of sales, gross profits were 45% compared to 5%. During the quarter, bromine made a profit of approximately $2.7 million compared to a loss of approximately $1.5 million. Production in tonnes increased 48% to 1,805 tonnes, while the average selling price increased 51.3% to $5,554 per tonne.

As we indicated, we expect no further inspection for the remainder of the year. This means that production should be at least 25% higher in coming quarters. Bromine prices have continued at a very high level. At the end of Q1, bromine was around RMB 35,000. In the middle of the quarter, it was at RMB 41,000. At the end of Q2, it had a reason to recording highs of RMB 45,950. Since the end of the quarter, it has declined slightly to RMB 43,000, still very close to its record high and well above the average for second quarter. The company expects bromine price to remain near its current level for the foreseeable future. This works well for our profitability in second -- third quarter and fourth quarter.

So now let's look at the chemical segment question.

The first question, I was confused by the photograph on your website and hope you can label them in the future. How many buildings are there in the chemical factories? And are they all complete? How many square meters are they in total?

So answer: We have 11 major buildings, including workshop and warehouses and a number of smaller supporting facilities. We will label our photograph in the future.

Can you explain the timing for installing equipments and the brisk start of the production?

We are starting to install equipments. This should take a few more months, then we will begin to test the equipments. If everything works well, we could start our production early next year. However, since this is all new and modern equipment, we do not know what problems will occur. Trial production in which we produce more amounts of products, and the trial basis should take approximately 6 months. Assuming things work as planned, we could begin commercial production by around the middle of year 2022, but we cannot assure. We expect full production in year 2023. However, since this is a major new project with new equipments, there is no guarantee.

How much will the factory cost? And how much has been spent to date?

We originally estimated $60 million. Inflation has raised the cost somewhat. We are now expecting costs around $67 million. We have already spent $41.4 million, including $5.8 million in the second quarter.

Question: What can we expect in revenue and profit once the factory is at full production? Why are you focusing on pharmaceutical intermediaries and other products?

The answer: Because will have modern equipment and focus on pharmaceutical intermediaries products and its byproducts, the margin will be higher. There are 2 primary reasons for focusing on the pharmaceutical products. We are much profitable, and that they are less polluting. Given the focus on green energy and most difficult government approvals, we do not want to produce products like oil and gas additives, which had traditionally been our largest product segment.

The third question regarding Sichuan natural gas project.

Question: What is happening in Sichuan Province? Are we ever going to be able to produce gas or mine bromine there?

Answer: We remain optimistic about the opportunities in Sichuan. We continue to maintain a staff in Sichuan, and the senior management always continuous to travel to province to meet with government officials. We know investors are frustrated, but creating environmental plans for province of 84 million people is a complex undertaking. We believe we will receive some feedback regarding this matter by the first half of next year, 2021 (sic) [2022].

This concludes our answer to some of the questions, we have received directly from our shareholders. We'd like now to offer those of you on the call to ask questions on your own.

So operator, can we open up the call for the Q&A session?

(Operator Instructions) And your first question is coming from [Max Waring].

This is [Max Waring]. I was just wondering what's the annual production capacity of these 4 factories? This quarter, we did about 1,800 tonnes. I thought maybe we could do about 2,500 tonnes. What's about the maximum these 4 factories can do in one quarter?

Okay. (foreign language)

(foreign language)

[Interpreted] So, okay. So for this whole year, for the 4 bromine factories that we are operating. Considering normally, we have 1 month holiday and like a stop of production at around the end of the year, the whole year production would be around 8,000 to 8,500 for the 4.

Okay. For this year, but, like, what's maximum capacity. Like, what's full production?

You mean this year? Do you mean this year or like...

No, not that this year. Just ever -- just I mean, what's like -- what's full capacity for -- is that full capacity for any year, that 8,500? Or can we do more?

8,000 to 8,500, the maximum production -- like, normally production.

Okay. And then I have one more question. Is that okay?

Yes.

Okay. I had -- this question has to do with, I think we get every quarter, but share repurchases, that would bring a huge shareholder value. Is there any chance to get that next year once we get the cash flows going? Or is that still longer than that?

Okay. (foreign language)

(foreign language)

[Interpreted] Max, so currently, the company management did not think about this share buybacks yet because you know that we need cash for put back company's old business operation back on track. And secondly, because the company was always looking for if there is any good acquisition targets.

But when all of our, like, business operation is back on track and when they can produce, like, a good cash flow and revenues, company management -- the company will consider about this buyback.

Okay. Appreciate it. The shareholder would love a buyback.

And the next question is coming from [John Rolls].

I'm John Rolls, a private investor. So my summary is that the company managed to lose money in an extremely strong market for your main product of bromine. And that leads me to 2 questions and then one comment.

The one question is that the average price you received for bromine was much lower than the market price throughout the second quarter. Now how did that come about? And what are the prospects for the future? Are you now selling bromine at close to market price?

Okay. (foreign language)

(foreign language)

[Interpreted] Okay. So because -- firstly, the second quarter bromine market price was increased steadily so our -- that is the average selling price and because some of our bromine were sold based on our first quarter agreements with our customers. These are 2 major reasons.

But in the third quarter, the selling price will be come up because we used some, like, second quarter agreements to sell our third quarter bromine products. So third quarter, the price will be more close to market price.

Okay. The second question is that you spent a considerable amount of money during your shutdown to add wells. And it was stated that this would increase capacity utilization. Instead, your bromine capacity utilization did not go up in quarter 2, but as -- according to my calculations actually went down somewhat. Why did that happen?

Okay. (foreign language)

(foreign language)

[Interpreted] So firstly, that because the wells and aqueducts, we have their useful lives. So in order to extending their useful lives, we have to do a lot of maintenance and even though in order to keep it at, like -- keep the utilization rate not going down so much.

Secondly, because after some wells and aqueducts, their useful life, and they write off them. Then now your cost to build new wells and aqueducts also increased a lot.

Okay. And then I'd like to close with just one comment that I agree that the stock grants are a sensible way of rewarding management, but it's almost always linked to good performance.

In my view, performance in this quarter was not good. You had lower volume sales than you had yourself predicted. The lower price than the market price. Your auditor quit. There was no progress on the continuing issues of shutdown factories or natural gas, and the stock price has not improved, yet you rewarded management for the second time in a year. I recommend that you look at future grants as rewards for good performance.

Okay. Thank you. (foreign language)

(foreign language)

[Interpreted] So thanks for your comments. That we still explains that, yes, the company, first of all, its revenue and income did decreased this quarter, which are under its expectation because that this quarter, the national environmental protection expectation -- inspection team came to Shandong Province. I think this news we can see on all the news on any public media.

Because they came to Shandong and the local government become very nervous and they always come to, like, the company have asked for unexpected and unplanned intermittent inspection, or ask the company to temporarily stop production for 1 or 2 days and do some for their work preparation. So this quarter, the company's production was intermittently affected by this issue. That's why its production volume decreased this quarter. Under expectation -- under the company's expectation and this matter was unexpected.

Secondly, because company's auditor resigned in the quarter and the company staff and management were depressed at that time. In order to increase the staff's confidence and to make them more motivated, that's why this stock compensation was granted at that time. The -- and later on, the company will consider about your comments. Of course, we will not issue like this much to staff and we'll make their performance connected to stock and the company performance as well in the future.

The next question is coming from [Matthew Macerata].

I just want to make a comment. Why don't -- I think that one thing -- one problem that the company has is about communication. So I really appreciate if you think to invest like, for example, $1 million in order to do these 3 things. The first one, hire a professional investor relations so that you can start to participate to conference with investment bankers and make sure that Gulf Resources will be known in the financial community. Make, like, a presentation of your company like a PDF.

Another topic that according to me would be very important, is to hire a professional communications firm so that you can start to give, for example, 1 month update. So each month, you need to -- you write, like, a press release giving an update to investors. So they are informed of what happens because we will have 12 updates during the year.

And the third part is like that I really think that you should hire also like a professional web service because as of today, just on your website, we're told that this site is temporarily unavailable. It's very important as of today that website provides a lot of information to investors. It works well, full information. It is not accessible, that your website is unavailable today. Because otherwise, people have a bad reputation of your company, the website doesn't work.

Okay. Okay. Thank you. (foreign language)

(foreign language)

[Interpreted] Okay. Thank you. Hi, [Maximo]. So the response from Mr. Liu, he says that thanks very much for your comments. We did consider about your question, and we did receive your e-mail already because previously, for previous past years, the company had no income because all our facilities were shut down that time. We don't not have any income. And this year, due to COVID-19, our discussion with U.S. professional companies was not so smoothly. And due to this COVID-19, we cannot, like, easily travel to China, and the company also cannot easily travel to U.S. as well. So this created the difficulties for company to hire a new IR, but we will consider your comments and we will hire a professional IR from -- in the near future, and we will also consider to redo the company website again based on your comments. Thanks.

Okay. For me, as I mentioned before, communication is very important. So please consider also to make a lot of press releases in order to get investors informed.

I want to do another question that was actually already done, but I want to put on another angle. In the last 2, 3 years, the number of shares passed from 9.5 million to 10.5 million, primarily for stock grants. Your company has $100 million of cash. I understand that you want to invest this cash for rebuild the company factories and also to make light acquisition.

But I really ask you, probably, would be yourself international shareholder because you have a huge stack to do at least a share buyback of 1 million shares. That is the number of shares of stock granted in the last 2 years. So basically, if you do like this one, it would be really appreciated. All the stocks granted to management for incentive scheme should come from back of the company and not from issue of new share. This is something very useful and is something very common in Europe and United States. The stock grants are not done to dilute shareholder, but the stock grants are done with share buybacks. So if you do 1 million share buybacks you basically do the share buybacks to cover the stocks granted in the last 2 years.

I would really be happy if you can accept like this one. No huge share buybacks, but just share buybacks to cover the stock grant so you give a signal to the market the 1 million of share stock buyback is just $5 million and you have more than 90 million.

Okay. (foreign language) $1 million buyback -- or 1 million share buyback?

1 million share buyback that is $5 million because 3 years ago, the company had 9.5 million shares. As of today, you have 10.5 million shares. So there were -- around 1 million shares of stock grants to management. I think that would be right for shareholders, if you announce today like a 5 million -- 1 million share buyback, this $5 million that will took over all the stock grants that were issued in the last 2 years.

Okay. Thank you. (foreign language)

(foreign language)

[Interpreted] Yes. Thanks for your comments, and we will consider it very carefully.

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

Yes. We will. Just e-mail me anytime when you have questions.

And the next question is coming from [Randy Lea].

Just to reiterate what the fellow said beforehand. It's kind of like hiding the -- I know you're not hiding, and don't take that the wrong way, but it's kind of like the accounting thing and then not telling us about the inspection because all of us are looking at the price of bromine and said there's no way that can hit that guy. And then we either find out on a conference call. It just seems to happen every quarter.

And I think that -- I totally agree, and we talk about this and talk about it, about hiring a professional PR firm. You can't do it all. I knew that. But I mean, just not telling -- I mean it just doesn't look good. I mean let's face that fact. And any company that I've ever invested in, if they didn't do that, they get creamed in the market. And it's just kind of frustrating.

And on top of that, is there any government regulation, I know we have a problem with dividends because we don't have an overseas subsidiary. And that's been talked about for years, but is there anything holding us back from doing a buyback from a government regulation standpoint? That's my question, really. Yes. I mean -- we should have said something about the accounting firm. And we should have said something about the inspection. I mean before the quarterly call. I mean -- and the CEO should know that. And I don't really know what else you're facing. It's kind of frustrating.

I mean you got so much going on for you and nobody really knows about except for us on the conference call. That's what I find kind of just sad. I mean you all could be making tons of money. We just get the thing out somewhere. So -- but getting back, but is that a government regulation on the buyback? Or is that just something you all decided just -- I know we've held off on because we had all these expenses. But is there any government -- do they prohibit that?

Yes. I will check -- I will double check this for you. Thank you. (foreign language)

Helen, please hold the line. I'm just -- we just lost Xiaobin's line. I'm going to dial after him. One moment. Please hold the line.

Okay. Thank you.

And also, we should let investors know a week beforehand when we're doing an investor call, too. I mean that's just -- those are just simple things that the management can get screened out on their own, I think. I just -- I think I'm talking to myself probably at the moment, Helen. I'm joking.

Okay. Okay. Okay. I understand.

And Xiaobin's line has been reconnected.

Okay.

(foreign language)

(foreign language)

(foreign language)

[Interpreted] Okay.

(foreign language)

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

Yes. Yes. I mean, I guess, I understand that. But there, again, the other thing was -- I mean it's just really simple to tell investors, "Hey, put out a press release until we hire a PR firm. Hey, this is what happened with the accounting firm. Hey, we had an inspection this week, we're 2 weeks behind." I mean, people would understand that if you just tell us. It's just concerns shareholders when we don't tell everybody, people. And I think he should know that. So just please tell him that. Thank you, Helen.

Okay. No worries. (foreign language)

(foreign language)

[Interpreted] Okay, we got it. Okay, we got it. We'll be -- yes.

The next question is coming from [Teegan Winsowitch].

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

Okay. (foreign language)

(foreign language)

[Interpreted] Okay. Okay. So we cannot provide it right now, but we'll try our best. The next time the company is going to issue a guidance, we'll try to estimate the gross margin and the revenue for our chemical segment and products.

That would be fantastic.

We'll provide it publicly.

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

And the next question is coming from [Peter Cyrus].

I'm a private investor. I have 2 questions. Just so I understand, so when you gave guidance in the first quarter for $14 million in -- $12 million to $14 million in revenue and does $12 million of revenue, I just want to understand what happened with inspections. You mentioned the inspections a couple of times. These were unplanned inspections and it accords you to stop and start your production. Is that correct?

Yes, you're right. It's unexpected.

And on these, have you expected these inspections this quarter?

Sorry?

Have you expected to have these inspections in a different quarter like the third quarter and fourth quarter? Or these were just this new inspections?

We expected this production loss in the same quarter will be recouped in the third quarter.

Okay. So the -- and if the inspection had not happened, would you have made your guidance -- think you would have made your guidance?

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

No. If there had been no inspection, do you think that you would have made your original guidance?

Okay. Yes, we will. (foreign language)

(foreign language)

[Interpreted] Yes, definitely, because due to this national environmental protection inspection team, they came to Shandong Province, every landlord of the government agencies, they become very nervous. So because they become nervous, they became -- every level comes to company and say, "Okay, you had to stop for 1 or 2 days, wait for the inspection. And then later we stop and start our production continually for 1 or 2 days.

Beginning -- because this is not planned and it's totally unexpected every time. So we cannot predict this issue, and we were not able to issue a press release saying, "Okay, this government inspection team is going to come," because we do not know when and how long or any time they come just without any notice or plan. So -- but by end of the quarter, then our production results come out, we did not achieve our quarterly guidance. But if without this issue, definitely, we can meet our guidance in terms of revenue and net income.

Okay. And I'd just like to comment, I agree with the earlier comments that I understood you were working very hard on getting new orders. But the next time this happens, please do a press release of that.

The second thing I'd like to ask is actually a comment. At this thing asking about stock buyback, and I understand there is a problem of getting money out of China to do stock buybacks. Is that correct?

Sorry?

I understand there is a problem of getting money out of China to do stock buybacks. Is that correct?

Yes. Yes, yes, it is.

Okay. There is something I would like the company to consider, okay?

Okay. Okay.

If stock grants is given to executives, the executives now own stock in the company in the United States. Is that correct?

Yes.

If the company could buy back -- could buy stock from the executives, pay the executives in R&D, the company would then have stock and money in the United States, which it could use to do the stock buyback. Did you understand me?

Yes, I got your idea.

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

Okay. (foreign language)

(foreign language)

[Interpreted] Yes. Okay. Peter, yes, okay. We will discuss with management and the staff to see how to do it and if there's possibilities of this way is applicable. Yes.

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

No. I think if there is no more questions, we can close the call for today. (foreign language) Okay. Thank you. Thank you all for participating.

(foreign language)

Have a good day.

Thank you.

Have a good day, and for those, have good night in China.

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

Thank you, Paul. Have a good day. Good-bye.

Bye-bye.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]