XML 23 R11.htm IDEA: XBRL DOCUMENT

5. PROPERTY, PLANT AND EQUIPMENT, NET

12 Months Ended

Dec. 31, 2017

Property, Plant and Equipment [Abstract]

5. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consist of the following:

		As of December 31,
		2017				2016
At cost:
Mineral rights		$	4,711,822			$	4,438,115
Buildings			67,748,512				61,656,398
Plant and machinery			200,742,652				186,228,562
Motor vehicles			8,792				8,282
Furniture, fixtures and office equipment			4,150,588				4,553,473
Construction in progress			183,036				374,790
Total			277,545,402				257,259,620
Less: accumulated depreciation and amortization			(163,597,407	)			(146,844,072	)
Impairment			(18,833,491	)			(1,684,422	)
Net book value		$	95,114,504			$	108,731,126

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. 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 $27,432,351 and $35,184,613 as at December 31, 2017 and 2016, respectively.

During the year ended December 31, 2017, depreciation and amortization expense totaled $19,930,786 of which $13,443,298 and $1,213,010 were recorded as cost of net revenue and administrative expenses, respectively. During the year ended December 31, 2017, depreciation and amortization expense related to property, plant and equipment of $5,274,478 was recorded in direct labor and factory overheads incurred during plant shutdown.

During the year ended December 31, 2016, depreciation and amortization expense totaled $24,552,507 of which $23,220,525 and $1,331,982 were recorded as cost of net revenue and administrative expenses, respectively.

In the third quarter of 2017, the Company incurred enhancement works for rectification and improvement in order to meet the new environmental rules in China at costs of approximately $0.6 million.

In the fourth quarter of 2017, the Company incurred enhancement works for rectification and improvement in order to meet the new environmental rules in China at costs of approximately $17.3 million.

In the third quarter of 2016, the Company incurred enhancement works in our existing bromine extraction and crude salt production facilities at costs of approximately $15.23 million. The above enhancement projects have estimated useful lives of 5 to 8 years and are capitalized as buildings and plant and machinery.

At the end of November 2016, the Company has signed the demolition compensation agreement for its Factory No. 6 with the Yangzi Street Office of Weifang City Binhai Economic-Technological Development Zone for the Taiwan Island Ecological Culture City Project.

The operation of the original Factory No.6 was stopped at the end of November 2016 to allow for the demolition of the factory by the government collection unit. The total written off during the demolition period was $3,761,862.

Upon the completion of demolition and clearance of all ground fixtures in December 2016, a total sum of $2,708,417 was received from government. The write-off and demolition costs were offset against the compensation proceeds resulting in a net loss on demolition of factory of $1,053,445. This is included in the income statement for the year ended December 31, 2016 as loss on demolition of factory. This is accounted for in accordance with FASB ASC 605-40 “Revenue Recognition – Gains and Losses”.

In the fiscal year 2016, the company incurred $1,747,316 for the construction of roads and related infrastructure needed to begin operations in the remote and mountainous region of Daying county.

For the years ended December 31, 2017 and 2016, ordinary repair and maintenance expenses were $130,842 and $463,156, respectively.