UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

	For the quarterly period ended September 30, 2022

	Or

☐	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 14, 2022, the registrant had outstanding 10,671,924 shares of common stock.

Table of Contents

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, 2022 Unaudited			December 31, 2021 Audited
Current Assets
Cash	$	92,638,278		$	95,767,263
Accounts receivable		9,995,651			14,525,807
Inventories, net		603,961			691,111
Prepayments and deposits		3,920,177			4,450,037
Other receivable		635			644
Total Current Assets		107,158,702			115,434,862
Non-Current Assets
Property, plant and equipment, net		158,607,644			162,657,546
Finance lease right-of use assets		162,057			184,824
Operating lease right-of-use assets		8,208,368			8,311,127
Prepaid land leases, net of current portion		9,329,586			10,368,469
Deferred tax assets		7,078,024			12,900,034
Total non-current assets		183,385,679			194,422,000
Total Assets	$	290,544,381		$	309,856,862

Liabilities and Stockholders’ Equity
Current Liabilities
Payable and accrued expenses	$	10,058,811		$	10,530,776
Taxes payable-current		657,001			775,708
Amount due to a related party		1,721,606			1,849,044
Finance lease liability, current portion		182,639			227,429
Operating lease liabilities, current portion		425,199			506,579
Total Current Liabilities		13,045,256			13,889,536
Non-Current Liabilities
Finance lease liability, net of current portion		1,433,928			1,770,526
Operating lease liabilities, net of current portion		7,451,438			7,557,583
Total Non-Current Liabilities		8,885,366			9,328,109
Total Liabilities	$	21,930,622		$	23,217,645

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; 10,517,754 shares issued; and 10,471,924 shares outstanding as of September 30, 2022 and December 31, 2021, respectively		24,376			24,376
Treasury stock; 45,830 and 45,830 shares as of September 30, 2022 and December 31, 2021 at cost		(510,329	)		(510,329	)
Additional paid-in capital		100,569,159			100,569,159
Retained earnings unappropriated		163,212,866			150,463,638
Retained earnings appropriated		24,233,544			24,233,544
Accumulated other comprehensive loss		(18,915,857	)		11,858,829
Total Stockholders’ Equity		268,613,759			286,639,217
Total Liabilities and Stockholders’ Equity	$	290,544,381		$	309,856,862

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,
	2022			2021			2022			2021

NET REVENUE
Net revenue	$	22,862,795		$	17,753,669		$	47,505,246		$	34,160,920

OPERATING INCOME (EXPENSE)
Cost of net revenue		(8,405,694	)		(8,197,697	)		(21,056,782	)		(19,294,860	)
Sales, marketing and other operating expenses		(19,681	)		(19,035	)		(47,086	)		(44,205	)
Direct labor and factory overheads incurred during plant shutdown		(1,910,318	)		(1,229,058	)		(6,022,206	)		(5,237,258	)
General and administrative expenses		(584,473	)		(1,209,818	)		(3,384,063	)		(8,150,769	)
Other operating income (loss)		(37	)		(86	)		(8,441	)		(86	)
Total operating income (expense)		(10,920,203	)		(10,655,694	)		(30,518,578	)		(32,727,178	)

INCOME(LOSS) FROM OPERATIONS		11,942,592			7,097,975			16,986,668			1,433,742

OTHER INCOME (EXPENSE)
Interest expense		(27,715	)		(32,420	)		(94,703	)		(108,650	)
Interest income		63,470			73,707			213,546			221,597
Other (income) expenses					4,636						4,636
INCOME(LOSS) BEFORE TAXES		11,978,347			7,143,898			17,105,511			1,551,325

INCOME TAX EXPENSE		(3,010,967	)		(1,750,283	)		(4,356,283	)		(1,363,054	)
NET INCOME(LOSS)	$	8,967,380		$	5,393,615		$	12,749,228		$	188,271

COMPREHENSIVE LOSS:
NET INCOME(LOSS)	$	8,967,380		$	5,393,615		$	12,749,228		$	188,271
OTHER COMPREHENSIVE LOSS
- Foreign currency translation adjustments		(15,930,276	)		(1,272,449	)		(30,774,686	)		1,877,097
COMPREHENSIVE INCOME(LOSS)	$	(6,962,896	)	$	4,121,166		$	(18,025,458	)	$	2,065,368

INCOME(LOSS) PER SHARE:
BASIC AND DILUTED	$	0.86		$	0.52		$	1.22		$	0.02

WEIGHTED AVERAGE NUMBER OF SHARES:

BASIC AND DILUTED		10,471,924			10,469,477			10,471,924			10,469,477

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, 2022

(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

BALANCE AT JUNE 30, 2022 (Unaudited)		10,517,754		10,471,924		45,830	$	24,376	$	(510,329	)	$	100,569,159	$	154,245,486	$	24,233,544	$	(2,985,581	)	$	275,576,655
Restricted shares		—		—		—		—		—			—		—		—		—			—
Translation adjustment		—		—		—		—		—			—		—		—		(15,930,276	)		(15,930,276	)
Net income for three-month period ended September 30, 2022		—		—		—		—		—			—		8,967,380		—		—			8,967,380
BALANCE AT SEPTEMBER 30, 2022 (Unaudited)		10,517,754		10,471,924		45,830	$	24,376	$	(510,329	)	$	100,569,159	$	163,212,866	$	24,233,544	$	(18,915,857	)	$	268,613,759

	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, 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 DECEMBER 31, 2021 (Audited)		10,517,754		10,471,924		45,830	$	24,376	$	(510,329	)	$	100,569,159	$	150,463,638	$	24,233,544	$	11,858,829		$	286,639,217
Restricted shares		—		—		—		—		—			—		—		—		—			—
Translation adjustment		—		—		—		—		—			—		—		—		(30,774,686	)		(30,774,686	)
Net income for nine-month period ended September 30, 2022		—		—		—		—		—			—		12,749,228		—		—			12,749,228
BALANCE AT SEPTEMBER 30, 2022 (Unaudited)		10,517,754		10,471,924		45,830	$	24,376	$	(510,329	)	$	100,569,159	$	163,212,866	$	24,233,544	$	(18,915,857	)	$	268,613,759

Common stock

Accumulated

Number