In the news release, " Gulf Resources, Inc. Announces Third Quarter 2007 Financial Results ", issued on Monday, Nov. 12, by Gulf Resources, Inc./ (OTC Bulletin Board: GUFR - News) over Xinhua PR Newswire, an incorrect paragraph was included in the release.

 

We are advised by the company that the last paragraph should read:

 

Guidance

 

Management is currently revising its guidance to incorporate the recent asset purchases and further integration of previously completed transactions. Management currently anticipates revenues of approximately $54 million, representing an increase of over 200 percent from the $17.8 million reported during calendar 2006. Specifically, management expects that its core bromine business "SCHC" and specialty chemical business "SYCI" will contribute approximately $38 million and $16 million in revenues respectively. Net income is expected to increase approximately 980 percent to at least $13 million from the $1.2 million reported in 2006, which included a $5.3 million non-cash equity compensation charge. Previously issued guidance for revenue and net income was $48 million and $11.6 million respectively.

 

These estimates do not include any potential future acquisitions or non- cash charges related to the amortization of goodwill from previously completed acquisitions.

 

Rather than:

 

Guidance

 

Since the recently completed asset purchases will only be contributing to our results for one quarter, the incremental impact on revenue and earnings will be minimal. Thus the Company is reaffirming its previously issued guidance and expects very moderate upside as of result of the integration of these 2 new bromine production facilities. Previously issued guidance includes 2007 revenues of $48 million, representing an increase of 170 percent from the $17.8 million reported during calendar 2006. Specifically, management expects that its core bromine business "SCHC" and specialty chemical business "SYCI" will contribute approximately $32 million and $16 million in revenues respectively. Net income is expected to increase approximately 867 percent to $11.6 million from the $1.2 million reported in 2006, which included a $5.3 million non-cash equity compensation charge.

 

These estimates do not include any potential future acquisitions or non- cash charges related to the amortization of goodwill from previously completed acquisitions.

 

Gulf Resources, Inc. Announces Third Quarter 2007 Financial Results

-         Third Quarter Net Revenues Increase 81% to $16.4 million- Third Quarter Net Income Increases 104% to $3.9 million with $0.08 in EPS- YTD Revenues of $38.9 million, $9.6 million in net income and $0.20 in EPS- Company Recently Completes Two Additional Bromine Asset Purchases

 

NEW YORK and SHANDONG, China, Nov. 12 /Xinhua-PRNewswire-FirstCall/ -- Gulf Resources, Inc. (the "Company") (OTC Bulletin Board: GUFR - News), which operates through its wholly-owned subsidiaries Shouguang City Haoyuan Chemical Company Limited ("SCHC") and Shouguang Yuxin Chemical Industry Company Limited ("SYCI"), today announced financial results for its third quarter, which ended September 30, 2007.

 

Net Revenues for the third quarter of 2007 increased 81.3 percent to $16.4 million compared to $9.1 million for the third quarter of 2006. The increase in net revenues was attributable to strong growth in sales of bromine and crude salt, which increased 132.1 percent from $4.7 million in the third quarter of 2006 to $10.9 million in the third quarter 2007 primarily as a result of the completion of 280 new bromine wells in December, 2006, the addition of three new customers, and the bromine asset purchases completed in April and July of 2007. 5,662 metric tons of bromine and 16,000 metric tons of crude salt were sold during the quarter at average prices of $1910 and $11.30 per metric ton, respectively. Another factor contributing to the increase in revenues was a 26.9 percent increase in chemical product sales to $5.5 million, compared to $4.4 million for the third quarter of 2006. Such increase resulted from equipment upgrades made during December 2006, the introduction of new products and the addition of new customers.

 

Cost of revenues for the third quarter of 2007 was $9.6 million, yielding a gross profit of $6.9 million and gross margins of 41.8 percent, compared to $3.0 million in gross profits and gross margins of 33.0 percent recorded during the third quarter of 2006. The favorable variation between the increase in revenues and costs associated with revenues resulted from increased bromine production capacity, economies of scale, tighter control of direct costs and indirect costs, and improved inventory control.

 

Operating income for the third quarter of 2007 totaled $6.2 million, representing a 112.8 percent increase from the $2.9 million reported for the third quarter of 2006 and resulted from growth in both product lines and a lower rate of increase in cost of net sales.

 

Operating margins were 37.7 percent and 32.1 percent for the third quarter of 2007 and 2006, respectively. For the third quarter of 2007, income from operations in the bromine and crude salt division and from the chemical products division was $4.6 million and $1.9 million, respectively, representing a 142.8 and 94.5 percent increase, respectively, compared to the third quarter of 2006.

 

For the third quarter of 2007, net income was $3.9 million, an increase of 104.2 percent from the $1.9 million for the third quarter of 2006, while earnings per share increased to $0.08 per share for the third quarter of 2007 (based on 49.8 million diluted weighted average number of shares) compared to $0.04 per share for the third quarter of 2006 (based on 43.2 million diluted weighted average number of shares). The Company incurred taxes of $2.2 million and $1.0 million for the third quarter of 2007 and 2006, respectively, which equated to an effective tax rate of 35.8 percent and 33.5 percent, respectively.

 

"The third quarter showed continued momentum in all our product lines as we brought additional bromine and crude salt production capacity online through our recent asset purchases and made further improvements in existing facilities," said Mr. Ming Yang, CEO of Gulf Resources. "Additionally, our wholly-owned SYCI subsidiary made two significant steps during the quarter. The first related to a partnership with East China University to build a Co-Op Research and Development Center for the purpose of creating new refined bromide compounds and end products. To date, the Center has tested two compounds that carry the names 3.4.5- Trimethoxybenzaldehyde (T.M.B.) and Mbromoanisole, which are utilized as raw materials by pharmaceutical manufacturers to produce various antibiotics. We estimate that global demand for T.M.B.'s is 5,000 tons annually while current supply is 3,500 to 4,000 tons. The second related to a Letter of Intent with Southwest Synthetic Pharmaceutical, which contemplates SYCI providing its 3.4.5- Trimethoxybenzaldehyde (T.M.B.) bromide based compound for Southwest's line of antibiotics. Currently, Southwest purchases approximately 500 tons, or $7.5 million worth of T.M.B.'s annually."

 

Nine-Month Results

 

For the nine months ended September 30, 2007, net revenues increased approximately 59.5 percent to $38.9 million compared to the nine-month period ended September 30, 2006. The growth in revenues reflects growth at both divisions coupled with additional bromine asset purchases. Gross profit was $16 million for the first nine months of 2007, representing an increase of $7.5 million, or nearly 90 percent from the first nine months of 2006. Gross margins were 41 percent for the first nine months of 2007 compared to 35 percent for the first nine months of 2006. Overall, income from operations was $14.8 million for the first nine months of 2007, representing an increase of 81 percent over the first nine months of 2006. Operating margins were 38.1 percent for the first nine months of 2007 compared to 33.6 percent for the first nine months of 2006. More specifically, income from operations from the bromine and crude salt division was $10.1 million, an increase of 100.7 percent, while income from operations from the chemical products division increased 72.1 percent to $5.4 million, both compared to the first nine months of 2006.

 

Net income was $9.6 million for nine months ended September 30, 2007, an increase of $4.2 million, or approximately 76.4%, from the same period of 2006. This equated to earnings of $0.20 per share for the first nine months of 2007 compared to $0.13 per share for the first nine months of 2006 based on 47.8 million and 43.2 million diluted weighted shares outstanding, respectively.

 

Balance Sheet and Cash Flow discussion

 

The Company had $11.4 million in cash and equivalents and $6 million in notes payable and debt on September 30, 2007, while maintaining a current ratio of 1.64 to 1. For the first nine months of 2007, the Company generated $11.8 million in cash flow from operations, the main variance from net income relating to a decrease in accounts receivable.

 

Mr. Yang further stated that "taking into account the two most recently announced asset purchases, in the Shouguang City Houxing Area and the Shouguang City Renjia Area, SCHC currently maintains approximately 26,700 metric tons of annual bromine production capacity and its facility is operating at approximately 70 percent of capacity utilization. We currently maintain 50-year leaseholds for land which contains approximately 1.7 million metric tons of proven and probable reserves and plan to pursue additional bromine asset purchases to further augment our business and asset base."

"We would also like to welcome Mr. Biagio Vignolo and Mr. Richard Khaleel who recently joined as independent board and audit committee members. These gentleman bring specific skill sets in the areas of tax, finance, M&A, marketing, and corporate governance, which we believe will be very beneficial to our Company as we further refine and expand our business plan, growth strategy and evolution as a public company," Mr. Yang concluded.

 

Guidance

Since the recently completed asset purchases will only be contributing to our results for one quarter, the incremental impact on revenue and earnings will be minimal. Thus the Company is reaffirming its previously issued guidance and expects very moderate upside as of result of the integration of these 2 new bromine production facilities. Previously issued guidance includes 2007 revenues of $48 million, representing an increase of 170 percent from the $17.8 million reported during calendar 2006. Specifically, management expects that its core bromine business "SCHC" and specialty chemical business "SYCI" will contribute approximately $32 million and $16 million in revenues respectively. Net income is expected to increase approximately 867 percent to $11.6 million from the $1.2 million reported in 2006, which included a $5.3 million non-cash equity compensation charge.

 

These estimates do not include any potential future acquisitions or non- cash charges related to the amortization of goodwill from previously completed acquisitions.