8-K

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): March 10, 2009

Gulf Resources, Inc.

(Exact name of registrant as specified in charter)

Delaware

(State or other jurisdiction of incorporation)

000-20936
(Commission File Number) 13-3637458
(IRS Employer Identification No.)

Chenming Industrial Park, Shouguang City, Shandong, China 262714

(Address of principal executive offices and zip code)

(646) 200-6316

(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 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On March 10, 2009, the Board of Directors of Gulf Resources, Inc. (the “Company”) by a board meeting ratified the acceptance on March 9, 2009 of the resignation of Mr. Ming Yang as Chief Executive Officer of the Company.  There were no disagreements between Mr. Yang and the Company on any matter relating to the Company’s operations, policies or practices, which resulted in his resignation.  Upon his resignation, Mr. Yang continues to serve as Chairman of the Board of Directors of the Company.

Similarly by such board meeting, effective as of March 10, 2009, the Board of Directors appointed Xiaobin Liu to serve as Chief Executive Officer and a director of the Company.  Mr. Liu serves as the Chief Executive Officer and a director on the terms agreed with the Company providing for a base salary of RMB25,000 per month and the receipt of options to purchase 100,000 shares of the Company’s Common Stock for his first year term with the Company.  Mr. Liu joined the Company as Vice President in January 2007.  Before he joined the Company, Mr. Liu had served as Vice President of Shenzhen Dasheng Corporation, a public company in China, from 2005 to 2006, Manager of the Securities Department with Saige International Trust and Investment Corporation from 2000 to 2005, Vice President with Hainan Wanquanhe Development Corporation from 1995 to 2000.  Prior to that, Mr. Liu worked in the Financial Department of Chinese Black Metal Limited Company from 1992 to 1995 and the Financial Department of Shaanxi Aircraft Manufacturing Company from 1988 to 1992.  Mr. Liu earned a masters degree from the Economic and Management School at Hong Kong City University.

Mr. Liu has no any family relationships with any of the executive officers or directors of the Company.  There have been no transactions in the past two years to which the Company or any of its subsidiaries was or is to be a party, in which Mr. Liu had, or will have, a direct or indirect material interest.

A copy of Employment Contract by and between the Company and Mr. Liu is incorporated herein by reference and is filed as Exhibit 10.1 to this Form 8-K.

Item 2.02. Results of Operations and Financial Condition.

See Item 7.01.

Item 7.01 Regulation FD Disclosure.

The following information is furnished under Item 7.01 - Regulation FD Disclosure:

On March 16, 2009, the Company issued a press release announcing the appointment of Mr. Liu as its new Chief Executive Officer and a director.  A copy of such press release is attached to this report as Exhibit 99.1 and is incorporated herein by reference.

On March 16, 2009, the Company issued a press release containing certain financial results for its fourth quarter of 2008 and fiscal year ended December 31, 2008.   A copy of such press release is attached to this report as Exhibit 99.2 and incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
10.1	Employment Contract
99.1	Press Release
99.2	Press Release

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: March 16, 2009

Exhibit Index

Exhibit No.	Description
10.1	Employment Contract
99.1	Press Release
99.2	Press Release

EX-10.1

Exhibit 10.1

-Unofficial Translation-

Employment Contract

Party A: Gulf Resources, Inc

Party B: Mr. Liu Xiaobin

Date: 12 March 2009

Comply with the <Chinese Employment Law>, <Chinese Employment Contract Law> and related regulation and law, both Party A and Party B agree to sign the contract and will comply with the all the clauses listed in this contract.

1. Basic Information

(1)   Party A:  Gulf Resources, Inc

Legal Representative:  Yang Ming

(2)   Party B  Liu Xiaobin  , Gender: Male

Type of Identity: Non Agricultural

ID:  612322196805132017

Start Working Date in Party A: March 12, 2009

Home Address: No.6 C, Building 17,Hongrui Park, Nanshan District, Shenzhen City, Guangdong Province,PRC

2 Contract Term

2.	The contract has a fixed term duration.
(3)	The contract start being effective from March 12, 2009 and will be terminated on the date of March 11,2012.

3. Main Work and Working Location

(4) Party B agrees to fill in the position as Director of the Board and CEO as needed by Party A.

(5) The working location is the Chinese real operation facility of Gulf Resources.

(6) The working of Party B should lead Gulf moving to NASDAQ through following US requirements.

4 ..Working hours and Holidays

(7) Party A will arrange a fixed working schedule of Party B. Party B will not work over 8 hours per day, not over 40 hours a week. If the workload of Party B over the stated time or have temporary work, Party A should obtain the permit from related regulator.

(8) The holidays issued for Party B will follow Chinese Public Holidays policy.

5. Compensation

(9) Party A will pay the monthly compensation to Party B before 20th each month, the monthly compensation is $3,525 ( RMB 25,000).

6. Other Welfare

(10) Party A and B will participate in Chinese Society Insurance Program, Party A will conduct the procedure for Party B and take certain obligation.

(11) If Party B is sick or Injured during the work, the expenses will following the related policies by the government.

(12) If Party B encounters occupational desease or Injured during the work, the expenses will following the related policies by the government.

7. Protection of Employment Terms and harm

(15) Due to the position requirement, Party A prepare the safety conduction and provide safety goods to Party B complying with government policy and regulation.

(16)  Party B should comply with Party A’s safety employment policy and prevent illegal action and accident to reduce occupation risks.

(17) Party A should enhance occupational desease management and establish related policies.

8 The termination of Contract and redeem

(18) Party A and B terminate or renew the contract should comply with the <Chinese Employment Contract Law>

(19) When the contract is terminated, Party A will provide a confirmation letter to Party B and finish all the related leaving matters within 15 days.

(20) Party B should pass the working depending the contract requirement, if need to be redeemed, should be done as working pass.

10. The conduction of disputant and others

(21) If there is disputant between two parties, can apply for intermediation to Intermediation Commission; if can’t be resolved, can apply to arbitrate commission.

(22) If there is any conflict to regulation or policies stated by Government and Beijing local government, can be conducted complying with regulation.

(23) There are two copies of the contract, each Party hold one copy.

Party A (Signature)               (signed by Ming Yang)

Party B ( Signature)                   (signed by Xiaobin Liu)

Legal Representative

Date: Mar 12, 2009

EX-99.1

Gulf Resources, Inc.	CCG Investor Relations, Inc.
Rena Xiao	Crocker Coulson, President
E-mail: renaxiao@gmail.com	Phone: +1-646-213-1915
	E-mail: crocker.coulson@ccgir.com
Helen Xu
E-mail: beishengrong@163.com	Linda Salo, Financial Writer Phone: +1-646-922-0894
Website: www.gulfresourcesinc.cn	E-mail: linda.salo@ccgir.com Website: http://www.ccgirasia.com/

Gulf Resources Appoints New Chief Executive Officer

New York & Shandong Province, March 16, 2009 - Gulf Resources, Inc. (OTCBB: GFRE) (“Gulf Resources” or the “Company”), a leading manufacturer of bromine, crude salt and specialty chemical products in China, today announced the appointment of Mr. Xiaobin Liu to be the Company’s new Chief Executive Officer and director, effective March 10, 2009. Mr. Liu replaces Mr. Ming Yang, who resigned from his position as Chief Executive Officer of the Company to devote more time to his other businesses. Mr. Yang will continue as Chairman of the Board of Directors.

Mr. Liu has been closely involved with Gulf Resources since January 2007.  Serving as Vice President, he was responsible for all the Company’s operations. From June 2005 to December 2006, he was the Vice President of Shenzhen SEG. Dasheng Co., Ltd., a Shenzhen-listed company engaged in the real estate and hotel industries.  From May 2000 to June 2005 he managed the securities department of Saige International Trust and Investment Corporation in Hainan province and was in charge of asset management. From May 1995 to May 2000, Mr. Liu served as the Vice President of Hainan Wanquanhe Development, where he was in charge of corporate operations and financial control. Prior to that, he worked in the finance departments of Chinese Black Metal, Ltd. and Shanxi Aircraft Manufacturing Company. He has a Master’s degree in international accounting from the City University of Hong Kong.

“We are pleased that Mr. Liu will officially take over as CEO of Gulf Resources and I will work with him closely to ensure a smooth transition,” commented Mr. Ming Yang, Chairman of Gulf Resources. “We believe his rich experience in key positions at large domestic public companies, knowledge of the capital markets and previous experience with Gulf Resources provide him with to the ideal skill set required to serve as the steward of our Company as we pursue our growth strategy.  I look forward to working with him in my current role as Chairman.”

“I am thrilled to take on the role as CEO and to lead our efforts in executing our growth strategy,” said Mr. Liu, newly appointed CEO of Gulf Resources. “We are determined to continue capitalizing on the ongoing consolidation of China’s bromine industry, in addition to leveraging our environmentally friendly initiatives in the chemical business segment.”

About Gulf Resources, Inc.

Gulf Resources, Inc. operates through two wholly-owned subsidiaries, Shouguang City Haoyuan Chemical Company Limited (“SCHC”) and Shouguang Yuxin Chemical Industry Co., Limited (“SYCI”). The Company believes that it is one of the largest producers of bromine in the People’s Republic of 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 & gas field explorations and as papermaking chemical agents. For more information, please visit www.gulfresourcesinc.cn.

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.

###

EX-99.2

Gulf Resources, Inc.	CCG Investor Relations
Rena Xiao	Mr. Crocker Coulson, President
E-mail: renaxiao@gmail.com	Phone: +1-646-213-1915
	E-mail: crocker.coulson@ccgir.com
Helen Xu
E-mail: beishengrong@163.com	Ms. Linda Salo, Financial Writer
	Phone: +1-646-922-0894
	E-mail: linda.salo@ccgir.com
	Website: http://www.ccgirasia.com/

Gulf Resources Reports Strong Fourth Quarter

and Fiscal Year 2008 Results

New York & Shandong Province, March 16 2009 - Gulf Resources, Inc. (OTCBB: GFRE) (“Gulf Resources” or the “Company”), a leading manufacturer of bromine, crude salt and specialty chemical products in China, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2008.

Fourth Quarter Highlights and Recent Events

·   Revenue was $24.1 million, a year-over-year increase of 57.6%

·   Gross profit was $9.9 million, a year-over-year increase of 61.4%

·   Gross margin increased to 40.9% from 40.0% for the fourth quarter of 2007

·   Operating margin was 35.2% compared to 34.0% for the fourth quarter of 2007

·   Net income was $6.2 million, or $0.06 per basic and diluted share, an increase of 136.8% from $2.6 million, or $0.03 per basic and diluted share a year ago

·   Cash totaled $30.9 million as of December 31, 2008

Full Year 2008 Highlights

·   Revenue was $87.5 million, a year-over-year increase of 61.8%

·   Gross profit was $35.2 million, an increase of 58.9%

·   Gross margin was 40.2%, compared to 41.2% in 2007

·   Net income was $22.4 million, or $0.22 per basic and diluted share, a year-over-year increase of 83.1% from $12.2 million, or $0.13 per basic and diluted share

·   Met revenue and net income guidance of  $84 million to $90 million in revenue and $20 million to $23 million in net income

Fourth Quarter 2008 Results

“During the fourth quarter, our bromine, crude salt, and chemical product sales recovered as expected from the slump caused by the Beijing 2008 Olympic Games, allowing us to meet both our revenue and net income guidance for fiscal year 2008,” said Xiaobin Liu, the new Chief Executive Officer of Gulf Resources. “Following our expansion into environmentally friendly chemical products in September 2008, the revenue from our chemical products segment reached 33.6% of total revenue for the quarter, compared to 25.3% for the third quarter of 2008.   Moving forward in 2009, we expect to see auxiliary revenue growth from crude salt sales in addition to sales of bromine and chemical products, as we have increased the extraction capacity of this bromine by-product by establishing halogen water pools.”

Gulf Resources’ revenue was $24.1 million for the fourth quarter of 2008, an increase of 56.9% from $15.4 million for the fourth quarter of 2007. The increase in net revenue was primarily attributable to the significant increase in sales of bromine and crude salt as the production assets acquired at the end of 2007 and in the beginning of 2008 reached full utilization. The bromine and crude salt segment contributed 66.4 % of total revenue for the fourth quarter of 2008. Due to the establishment of halogen water pools and improved utilization of halogen water, sales revenue from crude salt significantly increased to $1.5 million for the fourth quarter of 2008, from $80,158 for the same period of last fiscal year.

Revenue from the chemical products segment was $8.1 million, or 33.6% of total revenue, for the fourth quarter of 2008, an increase of 54.4% from $5.2 million in the corresponding period last year. The growth in sales of chemical products was due to the expansion of production capacity and the introduction of new environmentally friendly additive products, including solid lubricant and polyether lubricant used in oil and gas exploration, in September 2008. Revenue from the Company’s chemical business segment has returned to levels obtained for the first quarter of 2008 after the Beijing 2008 Olympic Games, which imposed restrictions on chemical production and distribution in Beijing and Qingdao.

Gross profit for the fourth quarter of 2008 totaled $9.9 million, compared to $6.1 million for the fourth quarter of 2007 and gross profit margin for the three months ended December 31, 2008 was 40.9%, compared to 40.0% for the corresponding three-month period last year. The improved gross profit margin was due to increased sales of newly introduced environmental friendly additive products and crude salt. Both of these products generate higher gross profit margins than bromine. In addition, declined raw material prices resulted in lower raw material costs during the fourth quarter of 2008, further supporting the Company’s overall gross margin.

Research and development and general and administrative expenses  for the fourth quarter of 2008 were $1.39 million, compared to $0.9 million in the fourth quarter of 2007. The increase was due to higher land tax fees, amortization of technology, and compensation fees for mineral resources.

Income from operations for the fourth quarter of 2008 was $8.5 million, an increase of 62.9% compared to $5.2 million for the corresponding quarter of 2007. Operating margin was 35.2% for the fourth quarter of 2008, compared to 34.0% for the fourth quarter of 2007.

Income taxes were $2.3 million for the fourth quarter of 2008, a decrease of 13.3% from $2.6 million for the fourth quarter of 2007. The Company’s income rate was 25% compared to 33% in the year ago period due to reductions in the Chinese corporate income tax rates, which became effective January 1, 2008. Adjustments to income taxes contributed to the exceptionally high effective income tax in the fourth quarter of 2007.

Net income was $6.2 million for the fourth quarter of 2008, an increase of 136.8% from $2.6 million for the fourth quarter of 2007. Basic and diluted earnings per share in fourth quarter of 2008 were $0.06 compared to $0.03 per fully diluted share in the fourth quarter of 2007. Weighted average number of diluted shares for the three months ended December 31, 2008 was 99,668,842.

Fiscal Year 2008 Financial Results

Revenue for fiscal year 2008 was $87.5 million, an increase of 61.3% from $54.2 million for fiscal year 2007. Gross profit was $35.2 million, an increase of 58.9% from $22.1 million for fiscal year 2007. Gross margin for fiscal 2008 was 40.2%, compared to 40.8% for fiscal year 2007. Operating income was $30.6 million, an increase of 52.7% from $20.0 million for fiscal year 2007. Net income was $22.4 million, or $0.22 per basic and diluted share, an increase of 83.1% from $12.2 million, or $0.13 per basic and diluted share, for fiscal year 2007.

Financial Condition

As of December 31, 2008, Gulf Resources had cash of $30.9 million, current liabilities of $18.6 million, long term debt of $18.3 million, and shareholders’ equity $52.5 million. At fiscal year end, the Company had working capital of $24.7 million and a current ratio of 2.3. For the twelve months ended December 31, 2008, the Company generated $24.9 million in cash flow from operations, primarily attributable to net income, and $17.4 million in cash flow from investing activities, mainly due to the addition of a new chemical production line and to the acquisition of additional mineral rights, property, plant and equipment to increase the Company’s bromine manufacturing capacity. The Company’s plans to invest $25 million to 30 million in 2009 in increasing bromine production capacity and upgrading chemical production lines, of which $11.5 million has already been used to acquire bromine and crude salt production assets.

Recent Developments

In February 2009, Gulf Resources completed the acquisition of manufacturing assets involved in bromine and crude salt production owned by three individual residents of the People’s Republic of China. Consideration for the bromine and crude salt manufacturing assets was $11.5 million, of which $10.0 million was paid in cash and $1.5 million was paid by the issuance of 1.5 million shares of the Company’s common stock at price of $1.00 per share. The Company expects the newly acquired manufacturing assets to contribute to additional annual production capacity of 3,000 metric tons of bromine and 200,000 metric tons of crude salt when put into production. The Company plans to begin production utilizing the assets in April 2009.

In February 2009, the Company entered into an agreement to issue 21.0 million shares of the Company’s common stock to three new shareholders at a price equal to $1.0137 per share in lieu of paying off in cash approximately $21.3 million in existing loans payable to Shenzhen Hua Yin Guaranty and Investment Limited Liability Company. The shares were issued on March 3, 2009, after which the non-interest bearing loans were deemed paid in full and cancelled. Following the transaction, the Company has a total of 122.2 million shares of common stock outstanding and no long term debt outstanding.

In March 2009, the Company’s subsidiary Shouguang Yuxin Chemical Industry Co., Limited (“SYCI”) signed an agreement with Kuerle City Xingdong Trading Co., Ltd. (“Xingdong”), a distributor of additive materials for oilfields in Xinjiang autonomous region, to deliver environmentally friendly chemical products valued at approximately $7.5 million. According to the purchase order, Gulf Resources will deliver 2,500 metric tons of environmentally friendly polyether lubricant, and 1,500 metric tons of environmentally friendly solid lubricant from March 2009 to December 2009.

Effective as of March 10, 2009, the Company appointed Mr. Xiaobin Liu as CEO and director.  Mr. Ming Yang, the Company’s former CEO, will continue as Chairman of the board.  Mr. Liu has been serving as Vice President of Gulf Resources since January 2007. From June 2005 to December 2006, he was the Vice President of Shenzhen SEG Dasheng Co., Ltd., a Shenzhen-listed company engaged in the real estate and hotel industries.  From May 2000 to June 2005 he managed the securities department of Saige International Trust and Investment Corporation in Hainan province where he was in charge of asset management. From May 1995 to May 2000, Mr. Liu served as the Vice President of Hainan Wanquanhe Development, where he was in charge of corporate operations and finance control. Prior to that, he worked in the finance departments of Chinese Black Metal, Ltd. and Shanxi Aircraft Manufacturing Company. He has a Master’s degree in international accounting from the City University of Hong Kong.

Business Outlook

Gulf Resources expects to continue following a two-pronged growth strategy, focusing on both expanding bromine production capacity and on developing its chemical product business segment. The Company is developing its environmentally friendly additive business by increasing capacity utilization of its second chemical production line. The line is currently working at 50% of total capacity. The Company also plans to upgrade the technology of the first chemical production line and enhancing the level of sophistication of its products in order to qualify for VAT rebates introduced by the Chinese government to promote the development of the domestic chemical industry. In addition, the Company is assessing opportunities to enter production of bromine-based pharmaceutical intermediates and fire retardants.

Thus far, the Company has received bromine orders valued at approximately $47.8 million, and crude salt orders valued at approximately $5.9 million to be delivered throughout fiscal 2009.

“Even though we have experienced a slight decline in bromine orders from our largest customers for 2009, we continue seeing strong demand from downstream industries utilizing bromine. We expect the government stimulus package to render support for infrastructure and construction, which in turn should boost demand for brominated flame retardants,” concluded Mr. Liu. “As we have reduced debt and continued to accumulate cash, we are well positioned to quickly pursue acquisition opportunities in both our bromine and chemical product business segments, should we identify suitable targets.”

Gulf Resources announces guidance for the first quarter of 2009, with expected revenue of $22.4 million, expected net income of $6.1 million, and expected diluted earnings per share of $0.05, using a share count of 122,168,842.

Conference Call

Gulf Resources’ management will host a conference call at 10:00 a.m. ET on Monday, March 16, 2009 to discuss its results for the period ended December 31, 2008. To participate in this live conference call, please dial 888-339-2688 five to ten minutes prior to the scheduled conference call time. International callers should call 617-847-3007. The conference pass code is 936 376 11.

A replay of the conference call will be available for 14 days starting from 12:00 a.m. ET on Monday, March 16. To access the replay, call 888-286-8010. International callers should call 617-801-6888. The replay pass code is 318 404 16.

About Gulf Resources, Inc.

Gulf Resources, Inc. operates through two wholly-owned subsidiaries, Shouguang City Haoyuan Chemical Company Limited (“SCHC”) and Shouguang Yuxin Chemical Industry Co., Limited (“SYCI”). 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 & gas field explorations and as papermaking chemical agents. For more information, visit www.gulfresourcesinc.cn.

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.

- Financial tables to follow-

GULF RESOURCES , INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
	Three Months Ended December 31,						Years Ended December 31,
	2008			2007			2008			2007
	(Unaudited)			(Unaudited)			(Audited)			(Audited)
REVENUE
Net sales		24,133,725			15,310,129			87,488,334		$	53,780,313
Maintenance service income					66,632			-			468,337
		24,133,725			15,376,761			87,488,334			54,248,650
OPERATING EXPENSES
Cost of net revenue		(14,251,114	)		(9,253,650	)		(52,302,085	)		(32,108,180	)
Consulting fees								-			-
Research and development cost		(124,927	)		(124,899	)		(514,780	)		(268,168	)
General and administrative expenses		(1,269,935	)		(787,691	)		(4,094,312	)		(1,847,374	)
		(15,645,976	)		(10,166,240	)		(56,911,177	)		(34,223,722	)
INCOME FROM OPERATIONS		8,487,749			5,210,521			30,577,157			20,024,928
OTHER INCOME (EXPENSES)
Interest expense					(87,979	)		(60,111	)		(161,577	)
Rental income					15,801		-				15,801
Sundry income					97,524			(3,764	)		97,524
Interest income		23,729			28,785			94,129			54,969
								30,254			6,717
INCOME BEFORE INCOME TAXES		8,511,478			5,264,652			30,607,411			20,031,645
INCOME TAXES		(2,286,407	)		(2,635,724	)		(8,211,939	)		(7,798,682	)
NET INCOME		6,225,071			2,628,928			22,395,472		$	12,232,963
EARNINGS PER SHARE
BASIC		0.06			0.03			0.22		$	0.13
DILUTED		0.06			0.03			0.22		$	0.13
WEIGHTED AVERAGE NUMBER OF SHARES
BASIC		99,668,842			99,668,842			99,668,842			96,688,504
DILUTED		99,668,842			99,668,842			99,668,842			96,688,504

GULF RESOURCES , INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
	Year ended December,
	2008		2007
CURRENT ASSETS
Cash	$	30,878,044	$	10,773,875
Accounts receivable		11,674,645		3,945,000
Inventories		418,259		413,391
Prepaid expenses		-		145,484
Prepayment and deposit		229,408		236,269
Prepaid land lease		15,849		13,521
Deferred tax asset		3,453		-
Other receivable		2,641		-
Total Current Assets		43,222,299		15,527,540
Property, Plant and Equipment, Net		45,399,456		30,105,185
Prepaid land lease, Net of current portion		737,711		697,107
Total Assets	$	89,359,466	$	46,329,832
Liabilities and stockholders’ Equity
Current Liabilities
Bank Loan		-		3,770,250
Accounts payable and accrued expenses	$	4,746,994	$	2,928,248
Loan payable		4,034,250		-
Note and loan payable – related parties		4,650,000		6,169,500
Due to related party		852,067		32,230
Taxes payable		4,269,442		1,477,296
Total Current Liabilities		18,552,753		14,377,524
Non Current Liabilities
Note payable, net of current portion		18,337,493		5,484,000
Total Liabilities		36,890,246		19,861,524
Stockholders’ Equity
PREFERED STOCK ; $0.001 par value; 1,000,000 shares
authorized none outstanding		-		-
COMMON STOCK; $0.0005 par value; 400,000,000 shares
authorized; 99,668,842 shares issued and outstanding		49,834		49,834
Additional Paid in Capital		13,035,293		11,924,616
Retained Earnings Unappropriated		31,817,465		11,323,518
Retained Earnings Appropriated		3,223,418		1,321,893
Cumulative Translation Adjustment		4,343,210		1,848,447
Total Stockholders’ Equity		52,469,220		26,468,308
Total Liabilities and stockholders’ Equity	$	89,359,466	$	46,329,832

GULF RESOURCES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
	Years Ended December 31,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	22,395,472		$	12,232,963
Adjustments to reconcile net income
Net cash provided by operating activities Amortization of warrants and options		979,144			-
Amortization of prepaid expenses		145,484			747,016
Depreciation and amortization		4,727,865			1,298,451
Stock-based compensation expense		-			97,054
(Increase) decrease in assets		-			-
Accounts receivable		(7,203,377	)		(2,347,199	)
Inventories		49,955			86,336
Prepaid expense		-			-
Prepayment and deposit		(588,542	)		(226,911	)
Deferred tax		(3,448	)		-
Income tax receivable		-			-
Increase (decrease) in liabilities		-			-
Accounts payable and accrued expenses		1,788,969			2,014,738
Taxes payable		2,604,784			2,065,580
Net cash provided by operating activities		24,896,306			15,968,028
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment		(17,365,195	)		(22,679,319
Net cash used in investing activities		(17,365,195	)		(22,679,319
CASH FLOWS FROM FINANCING ACTIVITIES
Advances to director		-			-
Capital contribution		-			50,000
Proceeds from bank loan		-			3,620,925
Proceeds from loan payable		4,023,250			-
Advances from/(to) related party		852,105			1,213,049
Proceeds from issuance of notes and loan payable - related parties		10,240,800			11,191,950
Repayment on bank loan		(3,843,675	)		-
Dividends paid		-			(4,739,600	)
Net cash provided by (used in) financing activities		11,272,480			11,336,324
EFFECTS OF EXCHANGE RATE CHANGE ON CASH		1,300,578			456,234
NET INCREASE IN CASH & CASH EQUIVALENT		20,104,169			5,081,267
CASH & CASH EQUIVALENT - BEGINNING OF YEAR		10,773,875			5,692,608
CASH & CASH EQUIVALENT - END OF YEAR	$	30,878,044		$	10,773,875

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