What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-03-31 compared with 2022-04-12 · 207 added, 96 removed, 606 unchanged (33% of the section changed)

115 unchanged sentences

January 28, 2020, our shares began trading on the NASDAQ Global Select Market under the new CUSIP # 40251W.

In April 2022, Shouguang Hengde Salt Industry

Ltd, our subsidiary, was incorporated in Shandong Province, China, for crude salt production and trading.

Corporate Structure

5 unchanged sentences

Industry Co., Limited, or SYCI;

and (iii) Daying County Haoyuan Chemical Co., Ltd., or DCHC, each a PRC company.

and (iii) Daying County Haoyuan Chemical Co., Ltd., or DCHC, (IV) Shouguang Hengde Salt Industry Co.

or SHSI, each a PRC company.

Our executive offices are located at Level 11,

27 unchanged sentences

operations or our ability to accept foreign investments and list on an U.S.

On February 17, 2023, the China Securities Regulatory

Commission (‘CSRC”) released the Trial Measures for Administration of Overseas Securities Offerings and Listings by Domestic

Companies (the “Trial Measures”) and five supporting guidelines, which will come into effect on March 31, 2023.

the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill the

filing procedures and report relevant information to the CSRC.

If a domestic company fails to complete the filing procedures or conceals

any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties

by the CSRC, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge

and other directly liable persons may also be subject to administrative penalties, such as warnings and fines.

As a listed company, we

believe that we, and all of our PRC subsidiaries are not required to fulfill filing procedures and obtain approvals from the CSRC to continue

to offer our securities or operate our business as of the date of this annual report.

In addition, to date, none of us and our PRC subsidiaries

has received any filing or compliance requirements from CSRC for the listing of the Company at Nasdaq and all of its overseas offerings.

Furthermore, based on our understanding of the current PRC laws, we believe that the CSRC’s approval is not required to be obtained

for the Company’s listing on Nasdaq;

however, there are substantial uncertainties regarding the interpretation and application of

the Regulation on Mergers and Acquisitions of Domestic Companies by Foreign Investors (“M&A Rules”), other PRC Laws and

future PRC laws and regulations, and there can be no assurance that any governmental agency will not take a view that is contrary to or

otherwise different from our belief stated herein.

On February 24, 2023, the CSRC, the Ministry of

Finance, the National Administration of State Secrets Protection and the National Archives Administration jointly issued the Provisions

on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies, or the

Confidentiality and Archives Provisions, which will take effective from March 31, 2023.

The Confidentiality and Archives Provisions specify

that during the overseas securities offering and listing activities of domestic companies, domestic companies and securities companies

and securities service institutions that provide relevant securities business shall, by strictly abiding by the relevant laws and regulations

of the PRC and this Confidentiality and Archives Provisions, institute a sound confidentiality and archives administration systems, take

necessary measures to fulfill confidentiality and archives administration obligations, and shall not divulge any national secrets, work

secrets of governmental agencies and harm national and public interests.

Confidentiality and Archives Provisions provides that it is applicable

to initial public offerings as well as other types of securities listing of PRC domestic enterprises, and any future issuance of securities

and listing activities after the initial listing.

Working papers generated in the PRC by securities companies and securities service providers

that provide relevant securities services for overseas issuance and listing of securities by domestic companies shall be kept in the PRC.

Confidentiality and Archives Provisions provide no explicit definition of working papers.

In practice, the securities companies’

working papers usually refer to various important information and work records related to the securities business obtained and prepared

by the securities companies and securities service providers and their representatives in the whole process of the securities businesses,

such as due diligence work.

Without the approval of relevant competent authorities, such as CSRC, MOF PRC National Administration of State

Secrets Protection, and National Archives Administration of China, depending on the nature and transmission method of secrets, it shall

not be transferred overseas.

Where documents or materials need to be transferred outside of the PRC, it shall be subject to the approval

procedures in accordance with relevant PRC regulations.

The relevant competent authorities, such as, CSRC, MOF, PRC National Administration

of State Secrets Protection, and National Archives Administration of China will regulate, supervise and inspect pursuant to their respective

statutory mandates over matters of Confidentiality and Archives Administration concerning overseas offering and listing by domestic companies.

As Confidentiality and Archives Administration is newly promulgated, there is substantial uncertainty regarding their specific requirements.

If we fail to comply with related laws and regulation, we may be subject to fine, confiscation, blocking transmission or criminal offense.

We have taken measures to adopt management systems for the compliance of Confidentiality and Archives Provisions.

We believe our listing

does not involve in national secrets, work secrets of governmental agencies and undermine national and public interests.

There is no assurance

that we will be able to meet all applicable regulatory requirements and guidelines, or comply with all applicable regulations at all times,

or that we will not be subject to fines or other penalties in the future as a result of regulatory inspections.

Cash Transfers and Dividend Distribution

53 unchanged sentences

on page 16 of this annual report for additional information.

Holding Foreign Company

Accountable Act

Pursuant to the Holding

Foreign Companies Accountable Act (“HFCAA”), the Public Company Accounting Oversight Board (the “PCAOB”) issued

a Determination Report on December 16, 2021 which found that the PCAOB is unable to inspect or investigate completely registered public

accounting firms headquartered in:

(1) mainland China of the People’s Republic of China because of a position taken by one or more

authorities in mainland China;

and (2) Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken

by one or more authorities in Hong Kong.

In addition the PCAOB’s report identified the specific registered public accounting firms

which are subject to these determinations.

Our auditor, WWC, P.C.,

Certified Public Accountants (“WWC”), is an independent registered public accounting firm with the PCAOB, and as an auditor

of publicly traded companies in the U.S., is subject to laws in the U.S.

pursuant to which the PCAOB conducts regular inspections to assess

its compliance with the applicable professional standards.

WWC, P.C., Certified Public Accountants, is based in the United States and

has been inspected by the PCAOB on a regular basis, with the last inspection in November 2021.

WWC is not headquartered in mainland

China or Hong Kong and was not identified in the Determination Report on December 16, 2021 as a firm subject to the PCAOB’s

determination.

Notwithstanding the foregoing, if the PCAOB is not able to fully conduct inspections of our auditor’s work papers

in China, our investors may be deprived of the benefits of such inspection which could result in limitation or restriction to our access

capital markets and trading of our securities may be prohibited under the HFCAA.

See Risk Factor –“ Although the

audit report included in this annual report was issued by U.S.

auditors who are currently inspected by the PCAOB, if it is later determined

that the PCAOB is unable to inspect or investigate our auditor completely, investors would be deprived of the benefits of such inspection

and our common stock may be delisted or prohibited from trading.”

Holding Foreign Company Accountable Act

Our common stock may be delisted from the Nasdaq under

the Holding Foreign Companies Accountable Act (“HFCAA”), if the PCAOB is unable to adequately inspect audit documentation

located in China, or investigate our auditor.

Furthermore, on June 22, 2021, the U.S.

Senate passed the Accelerating Holding Foreign Companies

Accountable Act, whichwas signed into law, and amends the HFCAA and requires the SEC to prohibit an issuer’s securities from trading

stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three.

WWC, P.C., Certified Public Accountants, is a U.S.-based accounting firm registered with the PCAOB, and is subject to laws in the United

States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards.

auditor is headquartered in the United States and is subject to inspection by the PCAOB on a regular basis with the last inspection in

November 2021.

On August 26, 2022, the PCAOB signed the Protocol with the CSRC and the MOF of the People’s Republic of China, governing

inspections and investigations of audit firms based in mainland China and Hong Kong.

The Protocol remains unpublished and is subject to

further explanation and implementation.

Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC, the PCAOB shall

have independent discretion to select any issuer audits for inspection or investigation and the unfettered ability to transfer information

On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered

public accounting firms headquartered in China mainland and Hong Kong completely in 2022.

The PCAOB Board vacated its previous 2021 determinations

that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in China mainland and

However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting

firms headquartered in China mainland and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s

The PCAOB is continuing to demand complete access in China mainland and Hong Kong moving forward and is already making plans

to resume regular inspections in early 2023 and beyond, as well as to continue pursuing ongoing investigations and initiate new investigations

The PCAOB has indicated that it will act immediately to consider the need to issue new determinations with the HFCAA if needed.

Therefore, the PCAOB in the future may determine that it is unable to inspect or investigate completely registered public accounting firms

in mainland China and Hong Kong.

Our auditor’s working papers related to us and our subsidiaries are located in China.

If our auditor

is not permitted to provide requested audit work papers located in China to the PCAOB, investors would be deprived of the benefits of

PCAOB’s oversight of our auditor through such inspections which could result in limitation or restriction to our access to the U.S.

capital markets and trading of our securities may be prohibited under the HFCAA, which would result in the delisting of our securities

from the Nasdaq.

See “ Risk Factors - Our common stock may be delisted from the Nasdaq under the Holding Foreign Companies Accountable

Act if the PCAOB is unable to adequately inspect audit documentation located in China.

The delisting of our common stock, or the threat

of their being delisted, may materially and adversely affect the value of your investment .”

Closure and rectification process of our Bromine,

26 unchanged sentences

committee will not be compensated.

The Company has completed all the rectification

and improvements in accordance with the government requirements, and it is still waiting for governmental approval for factories #2, #8,

To our knowledge, the government is currently completing its planning process for all mining areas including that for prevention

As a result, we may be required to make some modifications to our current wells and aqueducts prior to commencement of operations

of these factories to satisfy the local government's requirements.

Pursuant to the notification issued from the government of Shouguang

City, all bromine facilities in Shouguang City had to be temporarily closed from December 28, 2021 until February 21, 2022 8:00 AM China

To comply with such notification, the Company had temporarily stopped production at its bromine facilities in factory No.

9 during the aforesaid period and commenced production as scheduled on February 21, 2022.

In February 2019, the Company received a notification

from the local government of Yangkou County that its Factory No.

9 passed inspection and could resume operations.

In April 2019, Factory No.1, and Factory No.7 resumed operation.

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

1 and Factory No.

7, to temporarily stop production from December 16, 2019 to February 10, 2020.

Subsequently, due to the coronavirus

outbreak in China, the local government ordered those bromine facilities to postpone the commencement of production.

Subsequently, the

Company received an approval dated February 27, 2020 issued by the local governmental authority allowing the Company to resume production

after the winter temporary closure.

Further, the Company received another approval from the Shouguang Yangkou People’s Government

dated March 5, 2020 allowing the Company to resume production at its bromine factories No.

4, No.7 and No.

9 in order to meet the

needs of bromide products for epidemic prevention and control (the “March 2020 Approval”).

The Company’s Factories No.

7 commenced trial production in mid-March 2020 and commercial production on April 3, 2020 and its Factories No.

commenced commercial production on May 6, 2020.

The Company received an oral notification from the government for its Factory No.

permits the Factory No.

8 to resume production in August 2022.

And Factory No.

8 started contribute revenue in the fourth quarter 2022.

The Company is still waiting for governmental

approval for Factories No.

To our knowledge, the government is currently completing its planning process for all mining

areas including that for prevention of flood.

As a result, we may be required to make some modifications to our current wells and aqueducts

prior to commencement of operations of these factories to satisfy the local government's requirements.

Pursuant to the notification from the government

of Shouguang City, all bromine facilities in Shouguang City were temporarily closed from December 10, 2022 until February 1, 2023 8:00

AM China Time.

To comply with such notification, the Company had temporarily stopped production at its bromine facilities during the aforesaid

period and reopened the operating bromine and crude salt factories in February, 2023 as planned.

In April 2022, Shouguang Hengde Salt Industry

Ltd, our subsidiary, was incorporated in Shandong Province, China, for crude salt production and trading.

This subsidiary was created

in response to a new government policy that required bromine and crude salt companies to have separate registrations.

Because many smaller producers have not had the

4 unchanged sentences

Management may consider acquisition opportunities in this segment in the future if the prices were sufficiently

To date, we have secured the land for our new

chemical factory.

The Company also has had the final approval regarding environmental protection assessment and commenced construction

on its new chemical facilities located at Bohai Marine Fine Chemical Industrial Park in June 2020.

There was an impairment loss on the

property, plant and equipment related to the relocation of our chemical plants to Bohai Park in the amount of $16,636,322, since much

of the equipment that was used in the chemical factories was relatively old.

Further, even if it had been newer, we believe that it might

not have passed new environmental tests.

The total cost of building the new factory is currently estimated to be approximately $64

The Company incurred relocation costs in the amount of $45,584,344 and $33,496,295 as of December 31, 2021 and 2020.

We secured the land for our new chemical factory

and received the final approval regarding environmental protection assessment.

The Company commenced construction on its new chemical

facilities located at Bohai Marine Fine Chemical Industrial Park in June 2020.

The construction was expected to take approximately one

year and an additional six months to complete the equipment installation and testing, however, due to the COVID epidemic and electrical

restrictions, the opening of the chemical factory has been delayed.

The Company has received the refrigeration and air compressor

The rest equipment is expected to be delivered by the second quarter of 2023.

The Company intends to start installation of

equipment and may start testing and trial production by the end of 2023 or beginning of 2024.

There was an impairment loss on the property,

plant and equipment related to the relocation of our chemical plants to Bohai Park in the amount of $16,636,322, since much of the equipment

that was used in the chemical factories was relatively old.

Further, even if it had been newer, we believe that it might not have passed

new environmental tests.

The total cost of building the new factory is currently estimated to be approximately $64 million.

Company incurred relocation costs in the amount of $45,584,344 and $45,584,344 as of December 31, 2022 and 2021.

In January 2017, the Company completed the first

30 unchanged sentences

The spread of

COVID-19 has resulted in the World Health Organization declaring the outbreak of COVID-19 as a global pandemic.

COVID-19 had resulted in the World Health Organization declaring the outbreak of COVID-19 as a global pandemic.

Substantially

4 unchanged sentences

The virus outbreak

slightly delayed the commencement of the operations for Factory No.1, No.4, No.7, No.9, and it may also delay the approval for the remaining

three factories include No.2, No.8 and No.10.

It is, however, still unclear how the pandemic will evolve going forward, and we cannot

assure you whether the COVID-19 pandemic will again bring about significant negative impact on our business operations, financial

slightly delayed the commencement of the operations for Factory No.1, No.4, No.7, No.9, and No.8 and it may also delay the approval for

the remaining three factories include No.2, and No.10.

It is, however, still unclear how the pandemic will evolve going forward, and we

cannot assure you whether the COVID-19 pandemic will again bring about significant negative impact on our business operations, financial

condition and operating results, including but not limited to negative impact to our total revenues.

11 unchanged sentences

Our Business Segments

Our business operations are conducted in four segments, bromine, crude

salt, chemical products, and natural gas.

We manufacture and trade bromine, crude salt and natural gas, and manufacture and

sell chemical products used inoil and gas field explorations and papermaking chemical agents, and materials for human and animal antibiotics.

conduct all of our operations in China.

Our business operations are conducted in four segments, bromine,

crude salt, chemical products, and natural gas.

We manufacture and trade bromine, crude salt and natural gas, and

manufacture and sell chemical products used in oil and gas field explorations and papermaking chemical agents, and materials for

human and animal antibiotics.

We conduct all of our operations in China.

Bromine and Crude Salt

182 unchanged sentences

7) to Factory No.

On November 25, 2019, the government of Shouguang

City issued a notice ordering all bromine facilities in Shouguang City, including the Company’s all bromine facilities, including

Factory No.1 and Factory No.

On November 25, 2019, the government of Shouguang City issued a notice

ordering all bromine facilities in Shouguang City, including the Company’s all bromine facilities, including Factory No.1 and Factory

7, to temporarily stop production from December 16, 2019 to February 10, 2020.

Subsequently, due to the coronavirus

outbreak in China, the local government ordered those bromine facilities to postpone the commencement of production.

Subsequently, the

Company received an approval dated on February 27, 2020 issued by the local governmental authority which allows us to resume production

after the winter temporary closure.

Further, the Company received another approval from the Shouguang Yangkou People’s Government

dated on March 5, 2020 to resume production at its bromine factories No.1, No.

Subsequently, due to the coronavirus outbreak in China,

the local government ordered those bromine facilities to postpone the commencement of production.

Subsequently, the Company received an

approval dated on February 27, 2020 issued by the local governmental authority which allows us to resume production after the winter temporary

Further, the Company received another approval from the Shouguang Yangkou People’s Government dated on 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 (the “March 2020 Approval”).

The Company’s factories No.7 and No.1 started

trial production on middle of March, 2020, and commenced commercial production on April 3, 2020.

9 in order to meet the needs of bromide products for epidemic prevention

and control (the “March 2020 Approval”).

The Company’s factories No.7 and No.1 started trial production on middle of

March, 2020, and commenced commercial production on April 3, 2020.

The Company received an oral notification from

the government for its Factory No.

8, which permitted Factory No.8 to resume production in August 2022.

Factory No.8 started to contribute

revenue in the fourth quarter 2022.

The Company is still waiting for governmental approval for factories

#2, #8, and #10.

To our knowledge, the government is currently completing its planning process for all mining areas including that for

prevention of flood.

As a result, we may be required to make some modifications to our current wells and aqueducts prior to commencement

of operations of these factories to satisfy the local government's requirements.

Nevertheless, the Company expects to receive approval

to open at least one and potentially more of its closed factories in 2022.

Pursuant to the notification issued from the government

of Shouguang City, all bromine facilities in Shouguang City had to be temporarily closed from December 28, 2021 until February 21, 2022.

To comply with such notification, the Company had temporarily stopped production at its bromine facilities during the aforesaid period

and resumed production as scheduled on February 21, 2022.

To our knowledge, the government is currently completing its planning process for all mining areas including that for prevention

As a result, we may be required to make some modifications to our current wells and aqueducts prior to commencement of operations

of these factories to satisfy the local government's requirements.

Pursuant to the notification from the government

of Shouguang City, all bromine facilities in Shouguang City were temporarily closed from December 10, 2022 until February 1, 2023 8:00

AM China Time.

To comply with such notification, the Company had temporarily stopped production at its bromine facilities during the

aforesaid period and reopened the operating bromine and crude salt factories in February 2023 as planned.

▼ Chemical Products

9 unchanged sentences

incurred relocation costs in the amount of $45,584,344 as of December 31, 2022.

In January 2020, the Company received the

environmental protection approval by the government of Shouguang City, Shandong Province for the proposed Yuxin Chemical factory.

Company began the construction on its new chemical facilities located at Bohai Marine Fine Chemical Industrial Park in June 2020 and basically

completed the civil works by end of June 2021.

15, 2021, the company announced due to the supply chain issues as well as the electric

In January 2020, the Company received the environmental

protection approval by the government of Shouguang City, Shandong Province for the proposed Yuxin Chemical factory.

The Company began

the construction on its new chemical facilities located at Bohai Marine Fine Chemical Industrial Park in June 2020 and basically completed

the civil works by end of June 2021.

On November 15, 2021, the company announced due to the supply chain issues as well as the electric

restrictions in China, the delivery of some equipment, the equipment installation and testing and beginning trial production at the chemical

2 unchanged sentences

that the electricity restrictions are being eased.

Accordingly, the Company has contacted its suppliers and will have the remainder of

Accordingly, the Company had contacted its suppliers and will have the remainder of

the equipment produced and delivered, so the Company can complete installation and begin testing and trial production.

The Company has

started the preparation work for its application for safety and environmental assessment recently.

To date, our sales have been limited to customers

66 unchanged sentences

As of December 31, 2022, we employed approximately

423 full-time employees, of whom approximately 70% are with SCHC and DCHC, and 30% are with SYCI.

Approximately 6% of our employees

are management personnel and 4% are sales and procurement staff.

435 full-time employees, of whom approximately 72% are with SCHC、SHSI and DCHC, and 28% are with SYCI.

Approximately 6% of

our employees are management personnel and 4% are sales and procurement staff.

None of our employees are represented by a union.

8 unchanged sentences

In addition, we are required by Chinese law to cover employees in China with other types of social insurance.

We have purchased social insurance for almost all of our employees.

We have purchased social insurance for almost allof our employees.

Expense related to social insurance was approximately $624,827 for

32 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business