CEO Letter

Dear Stockholders:

Three years ago, three of our bromine and crude salt facilities were permanently closed because they were too close to population centers and in the consideration to improve environmental protection by the government. In addition, we had to close our two chemical factories and relocate them to one new facility in a specialized chemical industrial park. Shortly thereafter, we had to shut down our natural gas well while the government of Sichuan Province also enacted new environmental regulations.

In 2019, we were able to get two of our bromine and crude salt factories back in operation. However, shortly thereafter, Shandong Province was hit by Typhoon Lekima, the most destructive typhoon in Chinese history. All of our facilities suffered serious flooding. This flooding forced us to rebuild some of the roads and salt ponds, drill new wells, and etc.

We were able to re-open two of our facilities, but then in December of 2019, the government forced the closing our all facilities for around six weeks because of pollution. In Shandong Province, our pollution is especially bad during the winter. Fortunately, this is normally the slowest period of the year for our business because our customers close for Chinese New Year and because it is difficult to mine crude salt in very cold weather.

At the same time, we were impacted by the COVID-19 pandemic. This caused further issues for both our company and for our customers.

The provincial, city, and local governments were burdened with implementing new environmental regulations, recovering from the typhoon, and coping with the impact of the COVID pandemic. This delayed the approvals for opening some of our facilities. As part of this process, the government decided to include flood control to its environmental protection plan.. Adding flood control to the list of environmental concerns has further delayed the timeline for opening and created added expenses for the company.

In 2020, we were able to reopen four of our bromine and crude salt facilities. After initial test production, we were able to profitably produce products in these four factories. We were also able to begin construction on our new chemical factory.

Although the government once again announced another approximately six-week closing for environmental protection during the winter, we believe this closing will have a relatively small impact on our sales and profits.

Despite all of the difficulties, our company believes our future is very bright and we will soon return to profitability.

Although most of our facilities were closed for several years, and although we have spent a lot of money building new factories and drilling new wells, our balance sheet remains strong. Cash at ended September 30, 2020 was $95.6 million ($9.56 per share) .Our net net cash, which is cash minus all liabilities, was $81.3 million or $8.13 per share. Our book value was $263.6 million or $26.37 per share. The Company also believes that we have enough cash to finish all our construction and build our business. We currently expect to eventually earn a strong return on our book value.

Four of our bromine and crude salt facilities will return to operation at the end of Chinese New Year. We expect demand to be strong. We are especially encouraged by the price of bromine. In July, it was RMB 26,650 per tonne. By the end of September, it was above RMB 30,000. On Nov.14, it reached RMB 32,278. On Christmas day, it reached 33,333, Since mining and production costs are relatively fixed, this increase in bromine prices augers well for future profits.

We are 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 approvals for these factories in second half of 2021,

However, there is no assurance that we will be able to obtain the approvals necessary to operate those factories from the government.”

We are also extremely optimistic about the potential for our new chemical factory, it commenced production on its new chemical facilities located at Bohai Marine Fine Chemical Industrial Park in June 2020. The construction is expected to take approximately one year, and an additional six months to complete the equipment installation and testing. The Company expects to begin trial production at the beginning of 2022. Management expects a strong return from this investment. In the previous two years before the shutdown for rectification, our chemical business had income from operation before corporate cost of approximately $25.5 million in year 2016 and $33.0 million in year 2015, respectively. While this new factory will be smaller than the combined two old factories, the Company expects it to make higher net profit margin as we plan to focus more on the higher margin pharmaceutical intermediate products. We are optimistic by the progress we are making on constructing our new factories. Management expects to post photos on its website each quarter so investors can track the progress of the construction of the chemical factories.

We continue to be encouraged by the opportunities to produce natural gas and brine products in Sichuan Province. As disclosed previously, Petro-China’s discovery of natural gas in Tianbao Town is close to our current natural gas well. We believe this discovery could have material positive impact on the Company and may open significant opportunities for us. The Company believes that the government will more focus on finalizing the planning for exploration and exploitation of mineral resources in this area.

In addition, the Company plans to proceed with its applications for the natural gas and brine project approvals with related government departments after the government has finalized the land and resources planning for Sichuan Province.

We are working on a long-term plan that we will communicate with our shareholders. We have a good understanding of the potential revenue and profits our business can generate. The only question is the exact timing of reaching full production in our chemical factory, receiving approvals for our remaining three bromine facilities, and also receiving approvals for our natural gas and brine projects in Sichuan.

Obviously, this has been a difficult time for our company. We want to reiterate how much we appreciate the support of our shareholders. During this time, we have increased our communications with you. We are now in the process of updating our website. We are committed to continuing to improve both our business and our communications with you.

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