UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended September 30, 2021

	Or

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from _________ to _________

Commission File Number: 001-34499

GULF RESOURCES, INC.

(Exact name of registrant as specified in its charter)

Nevada		13-3637458
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Level 11,Vegetable Building, Industrial Park of the East City, Shouguang City, Shandong, China		262700
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: +86 (536) 567 0008

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol (s)	Name of each exchange on which registered
Common Stock, $0.0005 par value	GURE	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated Filer ☐	Smaller reporting company ☒
	Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of November 13, 2021, the registrant had outstanding 10,469,477 shares of common stock.

Table of Contents

Part I – Financial Information
Item 1. Financial Statements	1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3. Quantitative and Qualitative Disclosures about Market Risk	28
Item 4. Controls and Procedures	29
Part II – Other Information
Item 1. Legal Proceedings	29
Item 1A. Risk Factors	30
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds	30
Item 3. Defaults Upon Senior Securities	30
Item 4. Mine Safety Disclosures	30
Item 5. Other Information	30
Item 6. Exhibits	30
Signatures	31

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in U.S. dollars)

	September 30, 2021 Unaudited			December 31, 2020 Audited
Current Assets
Cash	$	98,880,826		$	94,222,538
Accounts receivable		13,433,116			6,521,798
Inventories, net		489,502			419,609
Prepayments and deposits		5,116,702			6,146,461
Other receivable		559			559
Total Current Assets		117,920,705			107,310,965
Non-Current Assets
Property, plant and equipment, net		150,414,047			148,947,689
Finance lease right-of use assets		183,118			186,272
Operating lease right-of –use assets		8,328,584			8,868,661
Prepaid land leases, net of current portion		10,194,743			10,134,004
Deferred tax assets		17,397,924			18,590,227
Total non-current assets		186,518,416			186,726,853
Total Assets	$	304,439,121		$	294,037,818

Liabilities and Stockholders’ Equity
Current Liabilities
Accounts , other payable and accrued expenses	$	10,227,804		$	5,081,701
Taxes payable-current		2,223,200			1,326,179
Finance lease liability, current portion		191,719			217,070
Operating lease liabilities, current portion		474,695			477,350
Total Current Liabilities		13,117,418			7,102,300
Non-Current Liabilities
Finance lease liability, net of current portion		1,740,499			1,888,903
Operating lease liabilities, net of current portion		7,357,483			8,022,342
Total Non-Current Liabilities		9,097,982			9,911,245
Total Liabilities	$	22,215,400		$	17,013,545
Commitment and Loss Contingencies

Stockholders’ Equity
PREFERRED STOCK; $0.001 par value; 1,000,000 shares authorized; none outstanding	$	—		$	—
COMMON STOCK; $0.0005 par value; 80,000,000 shares authorized; 10,515,307 and 10,043,307 shares issued; 10,469,477 and 9,997,477 shares outstanding as of September 30, 2021 and December 31, 2020, respectively		24,375			24,139
Treasury stock; 45,830 and 45,830 shares as of September 30, 2021 and December 31, 2020 at cost		(510,329	)		(510,329	)
Additional paid-in capital		100,569,160			97,435,316
Retained earnings unappropriated		151,576,627			151,388,356
Retained earnings appropriated		24,233,544			24,233,544
Accumulated other comprehensive loss		6,330,344			4,453,247
Total Stockholders’ Equity		282,223,721			277,024,273
Total Liabilities and Stockholders’ Equity	$	304,439,121		$	294,037,818

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(Expressed in U.S. dollars)

(UNAUDITED)


	Three-Month Period Ended September 30,						Nine -Month Period Ended September 30,
	2021			2020			2021			2020

NET REVENUE
Net revenue	$	17,753,669		$	10,482,185		$	34,160,920		$	16,399,338

OPERATING INCOME (EXPENSE)
Cost of net revenue		(8,197,697	)		(6,750,055	)		(19,294,860	)		(12,694,271	)
Sales, marketing and other operating expenses		(19,035	)		(15,785	)		(44,205	)		(28,866	)
Direct labor and factory overheads incurred during plant shutdown		(1,229,058	)		(1,538,193	)		(5,237,258	)		(6,886,215	)
General and administrative expenses		(1,209,818	)		(4,911,970	)		(8,150,769	)		(7,297,010	)
Other operating income (loss)		(86	)		—			(86	)		(15,775	)
Total operating expense		(10,655,694	)		(13,216,003	)		(32,727,178	)		(26,922,137	)

INCOME(LOSS) FROM OPERATIONS		7,097,975			(2,733,818	)		1,433,742			(10,522,799	)

OTHER INCOME (EXPENSE)
Interest expense		(32,420	)		(32,257	)		(108,650	)		(102,573	)
Interest income		73,707			70,819			221,597			216,662
Other (income) expenses		4,636			—			4,636			—
INCOME(LOSS) BEFORE TAXES		7,143,898			(2,695,256	)		1,551,325			(10,408,710	)

INCOME TAX BENEFIT		(1,750,283	)		(217,325	)		(1,363,054	)		1,711,751
NET INCOME(LOSS)	$	5,393,615		$	(2,912,581	)	$	188,271		$	(8,696,959	)

COMPREHENSIVE LOSS:
NET INCOME(LOSS)	$	5,393,615		$	(2,912,581	)	$	188,271		$	(8,696,959	)
OTHER COMPREHENSIVE LOSS
- Foreign currency translation adjustments		(1,272,449	)		11,120,339			1,877,097			6,826,849
COMPREHENSIVE INCOME(LOSS)	$	4,121,166		$	8,207,758		$	2,065,368		$	(1,870,110	)

INCOME(LOSS) PER SHARE:
BASIC AND DILUTED	$	0.52		$	(0.30	)	$	0.02		$	(0.91	)

WEIGHTED AVERAGE NUMBER OF SHARES:

BASIC AND DILUTED		10,469,477			9,566,333			10,469,477			9,533,729

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2021

(Expressed in U.S. dollars)


	Common stock																	Accumulated
	Number		Number		Number							Additional		Retained		Retained		other
	of shares		of shares		of treasury				Treasury			paid-in		earnings		earnings		comprehensive
	issued		outstanding		stock		Amount		stock			capital		unappropriated		appropriated		Income(loss)			Total
							Common Stock		Treasury Stock			Additional Paid-In Capital		Retained Earnings Unappropriated
BALANCE AT JUNE 30, 2021 (Unaudited)		10,515,307		10,469,477		45,830	$	24,375	$	(510,329	)	$	100,569,160	$	146,183,012	$	24,233,544	$	7,602,793		$	278,102,555
Restricted shares		—		—		—		—		—			—		—		—		—			—
Translation adjustment		—		—		—		—		—			—		—		—		(1,272,449	)		(1,272,449	)
Net income for three-month period ended September 30, 2021		—		—		—		—		—			—		5,393,615		—		—			5,393,615
BALANCE AT SEPTEMBER 30, 2021 (Unaudited)		10,515,307		10,469,477		45,830	$	24,375	$	(510,329	)	$	100,569,160	$	151,576,627	$	24,233,544	$	6,330,344		$	282,223,721

	Common stock																		Accumulated
	Number		Number		Number							Additional		Retained			Retained		other
	of shares		of shares		of treasury				Treasury			paid-in		earnings			earnings		comprehensive
	issued		outstanding		stock		Amount		stock			capital		unappropriated			appropriated		Income(loss)			Total

BALANCE AT JUNE 30, 2020 (Unaudited)		9,563,257		9,517,427		45,830	$	23,904	$	(510,329	)	$	95,043,388	$	154,024,022		$	24,233,544	$	(19,785,297	)	$	253,029,232
Restricted shares issued for services		480,050		480,050				235					2,350,015										2,350,250
Translation adjustment		—		—		—		—		—			—		—			—		11,120,339			11,120,339
Net loss for three-month period ended September 30, 2020		—		—		—		—		—			—		(2,912,581	)		—		—			(2,912,581	)
BALANCE AT SEPTEMBER 30, 2020 (Unaudited)		10,043,307		9,997,477		45,830	$	24,139	$	(510,329	)	$	97,393,403	$	151,111,441		$	24,233,544	$	(8,664,958	)	$	263,587,240

	Common stock																	Accumulated
	Number		Number		Number							Additional		Retained		Retained		other
	of shares		of shares		of treasury				Treasury			paid-in		earnings		earnings		comprehensive
	issued		outstanding		stock		Amount		stock			capital		unappropriated		appropriated		Income(loss)		Total

BALANCE AT DECEMBER 31, 2020 (Audited)		10,043,307		9,997,477		45,830	$	24,139	$	(510,329	)	$	97,435,316	$	151,388,356	$	24,233,544	$	4,453,247	$	277,024,273
Restricted shares		472,000		472,000		—		236		—			3,133,844		—		—		—		3,134,080
Translation adjustment		—		—		—		—		—			—		—		—		1,877,097		1,877,097
Net income for nine-month period ended September 30, 2021		—		—		—		—		—			—		188,271		—		—		188,271
BALANCE AT SEPTEMBER 30, 2021 (Unaudited)		10,515,307		10,469,477		45,830	$	24,375	$	(510,329	)	$	100,569,160	$	151,576,627	$	24,233,544	$	6,330,344	$	282,223,721

	Common stock																		Accumulated
	Number		Number		Number							Additional		Retained			Retained		other
	of shares		of shares		of treasury				Treasury			paid-in		earnings			earnings		comprehensive
	issued		outstanding		stock		Amount		stock			capital		unappropriated			appropriated		Income(loss)			Total

BALANCE AT DECEMBER 31, 2019 (Audited)		9,563,257		9,517,427		45,830	$	23,904	$	(510,329	)	$	95,043,388	$	159,808,400		$	24,233,544	$	(15,491,807	)	$	263,107,100
Restricted shares issued for services		480,050		480,050				235					2,350,015										2,350,250
Translation adjustment		—		—		—		—		—			—		—			—		6,826,849			6,826,849
Net loss for nine-month period ended September 30, 2020		—		—		—		—		—			—		(8,696,959	)		—		—			(8,696,959	)
BALANCE AT SEPTEMBER 30, 2020 (Unaudited)		10,043,307		9,997,477		45,830	$	24,139	$	(510,329	)	$	97,393,403	$	151,111,441		$	24,233,544	$	(8,664,958	)	$	263,587,240

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S. dollars)

(UNAUDITED)


	Nine-Month Period Ended September 30,
	2021		2020

CASH FLOWS FROM OPERATING ACTIVITIES
Net income(loss)	$	188,271	$	(8,696,959	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Interest on finance lease obligation		103,212		102,220
Depreciation and amortization		12,316,639		11,907,702
Unrealized exchange gain on translation of inter-company balances		283,287		648,331
Deferred tax asset		1,363,055		(1,712,229	)
Common stock issued for services		3,134,080		2,350,250
Issuance of stock options to employee		—		—
Changes in assets and liabilities:

SEC Form 10-Q filed by Gulf Resources, Inc.