Item 1.01 Entry into a Material Definitive Agreement.
On December 22, 2011, Gulf Resources, Inc. (the “Registrant”) and Shouguang City Haoyuan Chemical Company Limited, a wholly owned subsidiary of the Registrant (the “SCHC”), entered into an Asset Purchase Agreement with Liangcai Zhang, a resident of the People’s Republic of China (the “Seller”), pursuant to which SCHC shall, upon closing, acquire all right, title and interest in and to all assets owned by the Seller utilized in the production of bromine, located at 3 kilometers west of the Yangkou Village, south of Youyi road in Shouguang City Yangkou Township including without limitation, machinery, equipment and inventory, and any warranties associated therewith (the “Purchased Assets”).
In consideration for the Purchased Assets and for the value of the rights to the leased property located at 3 kilometers west of the Yangkou Village, south of Youyi road in Shouguang City Yangkou Township (the “Leased Property”), SCHC shall pay to the Seller a purchase price of RMB 63 million Yuan (approximately $10 million) (the “Purchase Price”) in cash. An amount equal to RMB 12.6 million Yuan (approximately $2 million) of the Purchase Price shall be delivered to the Seller upon the execution of the Agreement as a security deposit (the “Security Deposit”) pending the final assessment of the condition of the Purchased Assets and the Leased Property. If the assessment is not acceptable to SCHC, the parties shall negotiate a reduction in the Purchase Price. If a mutually acceptable amount is not agreed, SCHC shall have the right to terminate the Agreement and have the Security Deposit returned. If the assessment is acceptable to SCHC, the remainder of the Purchase Price shall be delivered to the Sellers within ten (10) days from the date that SCHC receives a satisfactory assessment report (the “Closing Date”). Further, if SCHC is unable to deliver the remainder of the Purchase Price in the time frame prescribed, the Seller has the right to terminate the Agreement and to retain the Security Deposit.
As a result of this Agreement, the Purchased Assets including, without limitation, any and all bromine that can be produced on the Leased Property, buildings, equipment, wells, pipelines, and power circuits would be acquired by SCHC; provided, however, that SCHC shall not be liable for any debts, obligations and/or liabilities of the Seller relating to the Purchased Assets and the Leased Property.
Item 8.01 Other Events.
On December 22, 2011, the Registrant issued a press release announcing it had signed the aforesaid Asset Purchase Agreement with the Seller. A copy of such press release is attached to this report as Exhibit 99.1.