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Gulf Resources, Inc. ("GURE" or the "Company"), a leading manufacturer of bromine, crude salt and specialty chemical products in China has been the target of allegations related to the reliability of its filings with the SEC. GURE has been accused of inappropriate self-dealing and gross misrepresentation of its organizational structure and its financial results.
This report investigates these allegations as well as GURE’s responses to these allegations. We believe that GURE’s defenses have been insufficient in addressing concerns, and we will be presenting evidence that GURE has indeed been inflating its financial performance as well as misrepresenting its organization structure.
Our key findings include:
· An Ambiguous Corporate Structure
We believe that there is sufficient evidence proving that GURE and Haoyuan have maintained an ongoing relationship that would support self-dealing as well as inflated production and/or revenue figures for both companies. Not only is Haoyuan’s only chemical business (Holybang Chemical) a fake operation that appears to be a likely shell for one of GURE’s subsidiaries, GURE’s largest customer (Rongyuan) also appears to still operate under Haoyuan, despite claims otherwise.
· Exaggerated Production and Revenue
We believe that GURE has exaggerated its 2010 reported bromine production by 54%, at minimum. Based on our GURE site visits, interviews with bromine producers and suppliers, research from a local resource report, and comparative analysis against key players in the bromine industry, we maintain that all sources corroborate our findings.
In addition, GURE’s reported revenue per the Local Taxation bureau reflects a 458% difference below revenue from GURE’s 2010 financial report for the SEC, which we believe further corroborates allegations of inflated reported numbers.
· Illegal Land Occupation and the Effects of Pollution
The Chinese Media has published a report investigating illegal land occupation by GURE’s factories in Shouguang. The report states that that the land on which GURE’s bromine facilities has been built is illegally occupied and also that chlorine emissions from the plant have resulted in the deaths of two local people.
· False Claims for its Primary Construction Projects in 2010
GURE’s two primary construction projects in 2010 have previously come under attack as being false projects. We maintain that GURE’s response has been insufficient. Furthermore, of the named contractors working on the projects, one company confirmed that it was not working on the described project and the other company could not be found under any registration.