UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K
CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act 1934

Date of Report (date of earliest event reported): November 25, 2016
 
Gulf Resources, Inc.
(Exact name of registrant as specified in charter)

Nevada
(State or other jurisdiction of incorporation)
 
000-20936
(Commission File Number)
13-3637458
(IRS Employer Identification No.)
 
Level 11,Vegetable Building, Industrial Park of the East
Shouguang City, Shandong, PRC 262700
(Address of principal executive offices and zip code)

+86 (536) 567 0008
  (Registrant's telephone number including area code)
 
  (Registrant's former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of registrant under any of the following provisions:
 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o
Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12(b))
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
 
Item 1.01 Entry into a Material Definitive Agreement.

On November 25, 2016, Shouguang City Haoyuan Chemical Company Limited (“SCHC”), a subsidiary of Gulf Resources, Inc. (the “Registrant”), entered into a Demolition Compensation Agreement with the Office of Weifang City Binhai Economic-Technological Development Zone.  In connection with certain government sponsored construction projects that are underway in Weifang City, there is a need for the government to acquire the land on which Factory #6 of SCHC is located. Under the terms of the agreement, the parties have agreed on the demolition and clean-up of the premises where Factory #6 is located and Weifang City has agreed to compensate SCHC in the aggregate amount of RMB 18,529,225.67 (of USD$9,722,222) for the demolition of the factory.

The foregoing description of the Demolition Compensation is qualified in its entirety by the full text of such agreement, which is filed as Exhibit 10.1 hereto, and incorporated by reference herein.

Item 8.01 Financial Statements and Exhibits.

On November 28, 2016, the Registrant issued a press release announcing the entry into the Demolition Compensation Agreement disclosed in Item 1.01 of this Current Report on Form 8-K.  A copy of the press release is furnished as Exhibit 99.1 hereto.


Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No. 
Description
 
10.1 
Taiwan Island Ecological Culture City Project Demolition Compensation Agreement for Factory #6 of Shouguang City Haoyuan Chemical Company Limited

99.1 
Press Release, dated November 28, 2016
 
 
 
 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
GULF RESOURCES, INC.
 
       
 
By:
/s/  Min Li  
  Name: 
Min Li
 
  Title:
Chief Financial Officer
 
       

Dated: November 29, 2016
 
 
 
 
 
Exhibit Index

Exhibit No. 
Description
 
10.1 
Taiwan Island Ecological Culture City Project Demolition Compensation Agreement for Factory #6 of Shouguang City Haoyuan Chemical Company Limited

99.1 
Press Release, dated November 28, 2016

 
 
Exhibit 10.1
 

Factory #6 of Shouguang City Haoyuan Chemical Company Limited

Party A: The Yangzi Street Office of Weifang City Binhai Economic-Technological Development Zone (hereinafter referred to as Party A)
Legal Representative: Xilei Yuan
 
Party B: Shouguang City Haoyuan Chemical Company Limited (hereinafter referred to as Party B)
Legal Representative: Ming Yang
 
For the Taiwan Island Ecological Culture City Project construction goes smoothly, there is the need for the demolition of the plant and equipment facilities on the premises of Factory #6 of Shouguang City Haoyuan Chemical Co. Ltd within the scope of the construction project. Based on the confirmation, from the Development Zone Evaluation Center, of the appraisal price of the structures and facilities that need to be demolished, Party A and Party B have entered into the agreement regarding the demolition and clean-up of such structures and facilities affected by the construction project on the ground premises belonging to Party B and the compensation matters as follows:
 
 
1.
Party A is responsible for the removal and disposal of the plant, buildings, machinery and equipment, water, brine wells (see attachment for more specific information) within the scope of construction project, Party B shall unconditionally cooperate with party A with the dismantling and disposal operations, and Party A shall compensate Party B with a total amount of RMB 18,529,225.67.
 
2.
Party A shall pay to Party B 60% of the total compensation amount, or RMB11, 117,535.40, within five days after the agreement is signed.
 
3.
Party A shall complete all the aforementioned demolition work within seven days after the signing of the agreement.
 
4.
Party A shall proceed with the procedure of the handover of the land usage with the construction unit within three business days upon completion of the demolition, and Party B shall unconditionally cooperate with party A with the whole process. Party A shall pay to Party B the remaining 40% of the total compensation amount, or RMB 7,411,690.27, within five business days upon the inspection and acceptance of the land.
 
 
 
 
 
 
5.
Responsibility for breach of contract: if one party breaches the contract, then party in breach shall pay to the other party 10% of the paid compensation amount.
 
6.
The agreement shall become effective on the date of its execution. Other matters not provided herein will be settled through negotiation.  If such negotiation fails, such matters must be resolved in accordance with the law.
 
7.
This Agreement may be executed in four (4) counterparts, with one each to part A and party B, one copy for the allocation unit, and one copy for filing purpose.
 
Party A: The Yangzi Street Office of Weifang City Binhai Economic-Technological Development Zone (Chop)
Legal Representative (signature): Xilei Yuan (signature)

Party B: Shouguang City Haoyuan Chemical Company Limited (Chop)
Representative (signature): Naihui Miao (signature)

Date: November 25, 2016
 
 
 
 
 
Demolition Compensation Assessment Schedule for Factory #6 of
Shouguang City Haoyuan Chemical Company Limited
 
 Index #
Name
The original value of fixed assets
Residue Ratio
Evaluation Value
Remarks
1
Warehouse
36,134.94
30%
10,840.48
　
2
Office
204,733.24
30%
61,419.97
　
3
Boiler Room
71,137.72
30%
21,341.32
　
4
Chemical Laboratory
71,137.72
30%
21,341.32
　
5
Sulfur Warehouse
72,269.89
30%
21,680.97
　
6
Central Control Room
94,535.81
30%
28,360.74
　
7
Accommodation
204,733.24
30%
61,419.97
　
8
Power Distribution Room
83,025.46
30%
24,907.64
　
9
Crude Salt Field
13,344,783.68
20%
2,668,956.74
　
10
Production Field
11,427,322.45
20%
2,285,464.49
　
11
Brine Reservoir
613,256.24
5%
30,662.81
　
12
Water Reservoir Pot
83,025.46
58%
48,154.77
　
13
Brine Aqueduct
16,660,241.70
15%
2,499,036.26
　
14
Brine Well
31,468,626.51
20%
6,293,725.30
　
15
Tea Water Boiler
18,869.42
6%
1,132.17
　
16
Boiler
264,171.92
6%
15,850.32
　
17
Draught Fan  and Air Duct
112,980.17
6%
6,778.81
　
18
Carburetor
125,796.15
6%
7,547.77
　
19
Sulphur-furnace
1,698,248.05
6%
101,894.88
　
20
Water Feeder
3,396,496.10
6%
203,789.77
　
21
Depositing Tank
3,773,884.56
6%
226,433.07
　
22
Water Pump
6,132.56
6%
367.95
　
23
Acid Pot
141,520.67
6%
8,491.24
　
24
Liquid chlorine cylinders
113,964.96
23%
26,211.94
　
25
Stripping Tower
8,962,975.83
20%
1,792,595.17
　
26
Absorbency
9,906,446.98
20%
1,981,289.40
　
27
Acid Pot
150,000.00
15%
22,500.00
　
28
Air Lift
30,800.00
15%
4,620.00
　
29
Ground Scales
14,100.00
19%
2,679.00
　
30
Bromine Storage Pot
311,000.00
16%
49,731.40
　
　
Total
103,462,351.43
　
18,529,225.67
　
           

 
 
EXHIBIT 99.1
 
Gulf Resources and the government of Weifang City announce a demolition compensation agreement for Factory #6 of Shouguang City Haoyuan Chemical Company Limited.
 
SHOUGUANG, China, Nov. 28, 2016 (GLOBE NEWSWIRE) -- Gulf Resources, Inc. (Nasdaq:GURE) ("Gulf Resources" or the "Company"), a leading manufacturer of bromine, crude salt and specialty chemical products in China, today announced that one of the Company’s subsidiaries Shouguang City Haoyuan Chemical Company Limited (SCHC) signed the demolition compensation agreement for its factory #6 with the Yangzi Street Office of Weifang City Binhai Economic-Technological Development Zone.
 
To improve the environment and increase tourism, the government of Weifang City has created the Taiwan Island Ecological Culture City Project in its Binhai Economic-Technological Development Zone. SCHC’s Factory #6 is located within this zone. In order to complete this project, the government and SCHC have reached a Demolition Compensation Agreement whereby the government will pay SCHC approximately USD$2,678,989 (based on the current exchange rate) for the demolition of Factory #6.  This amount is expected to be roughly slightly above the current book value of its fixed assets. SCHC will receive 60% of the funds within five days since signing the agreement and the remainder within five business days since the acceptance by construction unit. It is a relatively common experience in China for governments to acquire property for tourism, housing, infrastructure, and other uses and compensate the impacted companies accordingly.  
 
 
 
 
 
Factory #6
 
Factory #6 is in a different geographic region than Gulf’s other factories. Gulf believes that none of its other factories may be impacted by government actions in the foreseeable future.
 
Factory #6 contains 2,641 acres. It was acquired on January 8, 2008 with the total purchase price of USD$9,722,222. In 2015, Factory #6 had bromine capacity of 4.539 tons (10% of SCHC’s total). Production was 1,914 tons (10% of total). Sales were 1,944 tons (10% of total). The utilization ratio was 42%, slightly above the corporate average of 40%. Factory #6 also produced 36,500 tons of crude salt (11% of total). Details regarding Factory #6 are presented in Gulf Resources Annual Report on 10-K.
 
Financial Impact
 
Gulf Resources is operating at a relatively low utilization ratio. For the first nine months of 2016, the utilization rate for Bromine was 40%. Gulf Resources expects that virtually all sales from Factory #6 will be transferred to other factories. This should result in higher utilization for the company as a whole.
 
Costs should be reduced because Gulf Resources will be operating one less factory. This will mean lower rent, labor costs, utilities expenditures, depreciation and amortization. With higher utilization and lower costs, profits should benefit.
 
 
 
 
 
In addition, the government may force the demolition of other small bromine factories near the location of our Factory #6. This could lead to lower competition and further increases in utilization.
 
Mr. Xiaobin Liu, the CEO of Gulf Resources stated, “The demolition of Factory #6 will allow the government of Weifang to develop the Taiwan Island Ecological Culture City Project. We will transfer all business from Factory #6 to our other factories. Given our current low level of utilization in Bromine and the low margins in crude salt, demolishing this factory should allow us to increase our utilization and profits. While we never like to see one of our factories demolished, in this instance the demolition and sale should benefit our company.”
 
About Gulf Resources, Inc.
 
Gulf Resources, Inc. operates through four wholly-owned subsidiaries, Shouguang City Haoyuan Chemical Company Limited ("SCHC"), Shouguang Yuxin Chemical Industry Co., Limited ("SYCI"), Shouguang City Rongyuan Chemical Co, Limited (“SCRC”) and Daying County Haoyuan Chemical Company Limited (“DCHC”). The company believes that it is one of the largest producers of bromine in China. Elemental Bromine is used to manufacture a wide variety of compounds utilized in industry and agriculture. Through SYCI, the company manufactures chemical products utilized in a variety of applications, including oil and gas field explorations and papermaking chemical agents. SCRC is a leading manufacturer of materials for human and animal antibiotics in China and other parts of Asia. DCHC was established to further explore and develop natural gas and brine resources (including bromine and crude salt) in China. For more information, visit www.gulfresourcesinc.com.
 
 
 
 
 
Forward-Looking Statements
 
Certain statements in this news release contain forward-looking information about Gulf Resources and its subsidiaries business and products within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the Securities Exchange Act of 1934, and are subject to the safe harbor created by those rules. The actual results may differ materially depending on a number of risk factors including, but not limited to, the general economic and business conditions in the PRC, future product development and production capabilities, shipments to end customers, market acceptance of new and existing products, additional competition from existing and new competitors for bromine and other oilfield and power production chemicals, changes in technology, the ability to make future bromine asset purchases, and various other factors beyond its control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risks factors detailed in the company's reports filed with the Securities and Exchange Commission. Gulf Resources undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.
 
CONTACT: Gulf Resources, Inc.
         Web: http://www.gulfresourcesinc.com
         
         Director of Investor Relations
         Helen Xu (Haiyan Xu)
         beishengrong@vip.163.com