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SCHEDULE I - PARENT ONLY FINANCIAL INFORMATION

12 Months Ended

Dec. 31, 2019

Condensed Financial Information Disclosure [Abstract]

SCHEDULE I - PARENT ONLY FINANCIAL INFORMATION

The following presents condensed parent company only financial information of Gulf Resources, Inc.

Condensed Balance Sheets

		As of December 31,
		2019				2018

Current Assets
Prepayments and deposits		$	-			$	-
Total Current Assets			-				-
Non-Current Assets
Interests in subsidiaries			200,057,813				230,229,081
Amounts due from group companies			63,546,235				64,017,517
Total non-current assets			263,604,048				294,246,598
Total Assets		$	263,604,048			$	294,246,598

Liabilities and Stockholders’ Equity
Current Liabilities
Other payables and accrued expenses		$	354,247			$	250,493
Amounts due to group companies			142,701				142,701
Total Current Liability			496,948				393,194

Total Liabilities		$	496,948			$	393,194

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; 9,562,444 and 9,410,588 shares issued; and 9,516,614 and 9,360,758 shares outstanding as of December 31, 2019 and December 31, 2018			23,904				23,525
Treasury stock; 45,830 and 49,830 shares as of December 31, 2019 and December 31, 2018 at cost			(510,329	)			(554,870	)
Additional paid-in capital			95,043,388				95,020,808
Retained earnings unappropriated			159,808,400				185,608,445
Retained earnings appropriated			24,233,544			24,233,544
Cumulative translation adjustment			(15,491,807	)			(10,478,048	)
Total Stockholders’ Equity			263,107,100				293,853,404
Total Liabilities and Stockholders’ Equity		$	263,604,048			$	294,246,598

Condensed Statements of Loss

		Years Ended December 31,
		2019				2018

OPERATING EXPENSES
General and administrative expenses		$	(642,151	)		$	(1,061,674	)
TOTAL OPERATING EXPENSES			(642,151	)			(1,061,674	)
OTHER EXPENSES
Interest expense			(385	)			(500	)
TOTAL OTHER EXPENSES			(385	)			(500	)
TOTAL EXPENSES			(642,536	)			(1,062,174	)
Equity in net Loss of subsidiaries			(25,157,509	)			(68,901,812	)
LOSS BEFORE TAXES			(25,800,045	)			(69,963,986	)
TAXES			-				-
NET LOSS		$	(25,800,045	)		$	(69,963,986	)

Condensed Statements of Cash Flows

		Years Ended December 31,
		2019				2018

CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss		$	(25,800,045	)		$	(69,963,986	)
Adjustments to reconcile net Loss to net cash provided by operating activities:
Equity Loss in unconsolidated subsidiaries			25,157,509				68,901,812
Stock-based compensation expense-options			45,900				496,200
Shares issued from treasury stock for services			21,600				-
Changes in assets and liabilities:
Other payables and accrued expenses			103,754				4,888
Net cash used in operating activities			(471,282	)			(561,086	)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from group companies			471,282				561,086
Net cash provided by financing activities			471,282				561,086
NET INCREASE IN CASH AND CASH EQUIVALENTS			-				-
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR			-				-
CASH AND CASH EQUIVALENTS - END OF YEAR		$	-			$	-

(i)

Basis of presentation

In the condensed parent-company-only financial statements, the Company’s investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since the date of acquisition. The Company’s share of net loss of its subsidiaries is included in condensed statements of loss using the equity method. These condensed parent-company-only financial statements should be read in connection with the consolidated financial statements and notes thereto.

As of December 31, 2019, the Company itself has no purchase commitment, capital commitment and operating lease commitment.

(ii)

Restricted Net Assets

Schedule I of Rule 5-04 of Regulation S-X requires the condensed financial information of registrant shall be filed when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. For purposes of the above test, restricted net assets of consolidated subsidiaries shall mean that amount of the registrant’s proportionate share of net assets of consolidated subsidiaries (after intercompany eliminations) which as of the end of the most recent fiscal year may not be transferred to the parent company by subsidiaries in the form of loans, advances or cash dividends without the consent of a third party (i.e., lender, regulatory agency, foreign government, etc.).

The condensed parent company financial statements have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X as the restricted net assets of the subsidiaries of Gulf Resources, Inc. exceed 25% of the consolidated net assets of Gulf Resources, Inc. The ability of the Company’s Chinese operating subsidiaries to pay dividends may be restricted due to the foreign exchange control policies and availability of cash balances of the Chinese operating subsidiaries. Because a significant portion of the Company’s operations and revenues are conducted and generated in China, a significant portion of the revenues being earned and currency received are denominated in RMB. RMB is subject to the exchange control regulation in China, and, as a result, the Company may be unable to distribute any dividends outside of China due to PRC exchange control regulations that restrict the Company’s ability to convert RMB into US Dollars.