GFRE Gulf Resources, Inc. (MM)

Amendment No. 1

Filed by the Registrant x
Filed by a Party other than the Registrant o
Check the appropriate box:
o	Preliminary Proxy Statement
o	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x	Definitive Proxy Statement
o	Definitive Additional Materials
o	Soliciting Material Pursuant to §240.14a-12
Gulf Resources, Inc. (Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x	No fee required.
o	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
	(1)	Title of each class of securities to which transaction applies:
	(2)	Aggregate number of securities to which transaction applies:
	(3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
	(4)	Proposed maximum aggregate value of transaction:
	(5)	Total fee paid:
¨	Fee paid previously with preliminary materials.
o	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
	(1)	Amount Previously Paid:
	(2)	Form, Schedule or Registration Statement No.:
	(3)	Filing Party:
	(4)	Date Filed:

EXPLANATORY NOTE

This Amendment No. 1 to Schedule 14A amends and restates the definitive proxy statement for Gulf Resources, Inc.’s 2011 annual  meeting of stockholders, which was filed with the Securities and Exchange Commission on April 29, 2011. After the filing we noted an omission of two matters to be voted on by our stockholders at the annual meeting.  We are hereby amending and restating the Proxy Statement to reflect the addition of the following two matters:

1.  To conduct an advisory vote to approve the compensation paid to the Company’s named executive officers, as disclosed under the caption Election of Directors – Executive Compensation;

2. To conduct an advisory vote to indicate how frequently stockholders believe the Company should seek an advisory vote on the compensation of the Company’s named executive officers; and the correct record date.

Other than revisions related to this change, there are no material changes to the information contained in the Proxy Statement.

Gulf Resources, Inc.

99 Wenchang Road, Chenming Industrial Park,

Shouguang City, Shandong,

People’s Republic of China 262714

 

___________________________

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

to be held on June 22, 2011

___________________________

TO THE STOCKHOLDERS OF Gulf Resources, Inc.:

The Annual Meeting of the stockholders of Gulf Resources, Inc., a Delaware corporation (“Company”), will be held on June 22, 2011, at 9:00 a.m.(local time), at the company’s headquarters located at 99 Wenchang Road, Chenming Industrial Park, Shouguang City, Shandong Province, People’s Republic of China, for the following purposes:

 

1.

To elect seven directors, consisting of Ming Yang, Xiaobin Liu, Naihui Miao, Nan Li, Yang Zou, Shi Tong Jiang and Ya Fei Ji, to hold office for a one-year term or until their successors are elected and qualified;

 

2.

To ratify the appointment of BDO Limited, independent public accountants, as the auditor of the Company for the year 2011;

  

	3.	To approve an amendment to the 2007 Equity Incentive Plan to increase the number of shares of the Company’s common stock reserved for issuance under the plan to 4,341,989 shares;
	4.	To conduct an advisory vote to approve the compensation paid to the Company’s named executive officers, as disclosed under the caption Election of Directors – Executive Compensation;
	5.	To conduct an advisory vote to indicate how frequently stockholders believe the Company should seek an advisory vote on the compensation of the Company’s named executive officers; and

 

6.

To transact any other business as may properly be presented at the Annual Meeting or any adjournment thereof.

Stockholders of record of the Company’s common stock at the close of business on April 28, 2011 are entitled to notice of, and to vote at, the Annual Meeting or any adjournment or postponement thereof.

Your attention is directed to the Proxy Statement accompanying this Notice for a more complete statement of matters to be considered at the Annual Meeting.

All stockholders are cordially invited to attend the meeting.  Whether or not you expect to attend, you are respectfully requested by the Board of Directors to sign, date and return the enclosed proxy promptly, or follow the instructions contained in the Notice of Availability of Proxy Materials to vote on the Internet.  Stockholders who execute proxies retain the right to revoke them at any time prior to the voting thereof.  If you received this proxy statement in the mail, a return envelope is enclosed for your convenience.

YOUR VOTE IS IMPORTANT. YOU ARE REQUESTED TO CAREFULLY READ THE PROXY STATEMENT. PLEASE VOTE ON THE INTERNET. IF THIS PROXY STATEMENT WAS MAILED TO YOU, COMPLETE, DATE, SIGN AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE. YOU MAY ALSO ATTEND THE MEETING TO VOTE IN PERSON.

By Order of the Board of Directors,

/s/ Ming Yang                  

Ming Yang

Chairman of the Board of Directors

Dated: May 9, 2011 

 

 

GULF RESOURCES, INC.

99 Wechang Road, Chenming Industrial Park,

Shouguang City, Shandong,

People’s Republic of China 262714

___________________________

PROXY STATEMENT

for

Annual Meeting of Stockholders

to be held on June 22, 2011

___________________________

INTRODUCTION

Your proxy is solicited by the Board of Directors of Gulf Resources, Inc., a Delaware corporation (the “ Company, ” “ we, ” “ us ” or “ our ”),  for use at the Annual Meeting of Stockholders to be held on June 22, 2011, at 9:00 a.m.(local time) Beijing Standard Time, which is the equivalent to June 21, 2011 at 9:00 p.m. U.S. Eastern Standard Time (the “ Annual Meeting ”), at the company’s headquarters located at 99 Wenchang Road, Chenming Industrial Park, Shouguang City, Shandong Province, People’s Republic of China, for the following purposes:

 

1.

To elect seven directors, consisting of Ming Yang, Xiaobin Liu, Naihui Miao, Nan Li, Yang Zou, Shi Tong Jiang and Ya Fei Ji, to hold office for a one-year term or until their successors are elected and qualified;

 

2.

To ratify the appointment of BDO Limited, independent public accountants, as the auditor of the Company for the year 2011;

  

	3.	To approve an amendment to the 2007 Equity Incentive Plan to increase the number of shares of the Company’s common stock reserved for issuance under the plan to 4,341,989 shares;
	4.	To conduct an advisory vote to approve the compensation paid to the Company’s named executive officers, as disclosed under the caption Election of Directors – Executive Compensation;
	5.	To conduct an advisory vote to indicate how frequently stockholders believe the Company should seek an advisory vote on the compensation of the Company’s named executive officers; and

 

6.

To transact any other business as may properly be presented at the Annual Meeting or any adjournment thereof.

The Board of Directors set April 28, 2011 as the record date (the “ Record Date ”) to determine those holders of common stock, par value $0.0005 per share, of the Company (the “ Common Stock ”), who are entitled to notice of, and to vote at, the Annual Meeting.  A list of the stockholders entitled to vote at the meeting may be examined at the Company’s office at 99 Wenchang Road, Chenming Industrial Park, Shouguang City, Shandong Province, People’s Republic of China.

On or about May 13, 2011, the Company shall mail to all stockholders of record, as of the Record Date, a Notice of Availability of Proxy Materials (the “ Notice ”). Please carefully review the Notice for information on how to access the Notice of Annual Meeting, Proxy Statement, proxy card and Annual Report on www.proxyvote.com , in addition to instructions on how you may request to receive a paper or email copy of these documents. There is no charge to you for requesting a paper copy of these documents.

 

 

GENERAL INFORMATION ABOUT VOTING

Who can vote?

You can vote your shares of Common Stock if our records show that you owned the shares on the Record Date.  As of the close of business on the Record Date, a total of 34,735,912 shares of Common Stock are entitled to vote at the Annual Meeting.  Each share of Common Stock is entitled to one vote on matters presented at the Annual Meeting.

How do I vote by proxy?

If you have received a printed copy of these materials by mail, you may simply complete, sign and return your proxy card.  If you did not receive a printed copy of these materials by mail and are accessing them on the Internet, you may simply follow the instructions below to submit your proxy on the Internet.

What if I received a Notice of Availability of proxy materials?

In accordance with rules and regulations adopted by the Securities and Exchange Commission (the “ SEC ”), instead of mailing a printed copy of our proxy materials to each stockholder of record, we may now furnish proxy materials to our stockholders on the Internet. If you received a Notice by mail, you will not receive a printed copy of the proxy materials. Instead, the Notice will instruct you as to how you may access and review all of the important information contained in the proxy materials. The Notice also instructs you as to how you may submit your proxy on the Internet. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, including a proxy card, you should follow the instructions for requesting such materials included in the Notice.

If I am a stockholder of record, how do I cast my vote?

If you are a stockholder of record, you may vote in person at the Annual Meeting. We will give you a ballot when you arrive.

If you do not wish to vote in person or you will not be attending the Annual Meeting, you may vote by proxy. If you received a printed copy of these proxy materials by mail, you may vote by proxy using the enclosed proxy card, complete, sign and date your proxy card and return it promptly in the envelope provided.

If you received a Notice by mail, you may vote by proxy over the Internet by going to www.proxyvote.com to complete an electronic proxy card.

If you vote by proxy, your vote must be received by 5:00 p.m. U.S. Eastern Standard Time on June 21, 2011 to be counted.

We provide Internet proxy voting to allow you to vote your shares on-line, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies.

What if other matters come up at the Annual Meeting?

The matters described in this proxy statement are the only matters we know of that will be voted on at the Annual Meeting.  If other matters are properly presented at the meeting, the proxy holders will vote your shares as they see fit.

 

 

Can I change my vote after I return my proxy card?

Yes. You can revoke your proxy at any time before it is exercised at the Annual Meeting in any of three ways:

 

	·	by submitting written notice revoking your proxy card to the Secretary of the Company;
	·	by submitting another proxy via the Internet or by mail that is later dated and, if by mail, that is properly signed; or
	·	by voting in person at the Annual Meeting.

Can I vote in person at the Annual Meeting rather than by completing the proxy card?

Although we encourage you to complete and return the proxy card or vote by proxy on the Internet to ensure that your vote is counted, you can attend the Annual Meeting and vote your shares in person.

How are votes counted?

We will hold the Annual Meeting if holders representing a majority of the shares of Common Stock issued and outstanding and entitled to vote in person or by proxy either sign and return their proxy cards, submit their proxy on the Internet, or attend the meeting.  If you sign and return your proxy card, or submit your proxy on the Internet, your shares will be counted to determine whether we have a quorum even if you abstain or fail to vote on any of the proposals listed on the proxy card.

The election of directors under Proposal 1 will be by the affirmative vote of a plurality of the shares of Common Stock, represented in person or by proxy at the Annual Meeting.

Proposal 2 shall be approved upon the vote of a majority of shares present in person or represented by proxy at the meeting.  An abstention with respect to Proposal 2, will have the effect of a vote “AGAINST” such proposal.  Unless otherwise stated, the enclosed proxy will be voted in accordance with the instructions thereon.

Proposal 3 shall be approved upon the vote of a majority of shares present in person or represented by proxy at the meeting.  Abstentions and broker non-votes have no effect on the proposals being voted upon.

 

The advisory vote pursuant to Proposals 4 and 5 is not binding on the Company, the Board of Directors or management.  A majority of votes cast is necessary for approval of executive compensation.  Abstentions and broker non-votes have no effect on Proposals 4 and 5.

Brokers holding shares of the Common Stock in street name who do not receive instructions from the beneficial owners of those shares are entitled to vote on “ routine ” proposals such as the ratification of the Company’s independent auditors.  Abstentions and broker non-votes have no effect on the proposal being voted upon.

Who pays for this proxy solicitation?

We do.  In addition to sending you these materials and posting them on the Internet, some of our employees may contact you by telephone, by mail, by fax, by email, or in person.  None of these employees will receive any extra compensation for doing this.  We may reimburse brokerage firms and other custodians for their reasonable out-of-pocket costs in forwarding these proxy materials to stockholders.

Why are we seeking stockholder approval for these proposals?

Proposal No. 1 :  The Delaware Revised Statutes and the NASDAQ Stock Market require corporations to hold elections for directors each year.

Proposal No. 2 :  The Company appointed BDO Limited to serve as the Company’s independent auditors for the 2011 fiscal year.  The Company elects to have its stockholders ratify such appointment.

 

 

Proposal No. 3 :  The NASDAQ Stock Market  requires shareholder approval for material amendments of stock option plans.

 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding beneficial ownership of Common Stock, as of the record date of the meeting, by each of Company’s directors and executive officers; all executive officers and directors as a group, and each person known to Company to own beneficially more than 5% of Company’s Common Stock. Except as otherwise noted, the persons identified have sole voting and investment powers with respect to their shares.  As of April 28, 2011, there were 34,735,912 shares of the Company’s Common Stock outstanding.

Name of Beneficial Owner (1)		Number of Shares				Percent of Class
Ming Yang (Chairman)			13,391, 454	(2)			38.6	%
Xiaobin Liu (CEO)			239,831	(3)			*
Min Li (CFO)			239,831	(4)			*
Naihui Miao (COO)			239,831	(5)			*
Nan Li (Director)			12,500	(6)			*
Yang Zou ( Director)			12,500	(7)			*
Shi Tong Jiang (Director)			19,916	(8)			*
Ya Fei Ji (Director)			25,000	(9)			*
All Directors and Executive Officers as a Group (eight persons)			14,168,363				40.8	%
FMR LLC			3,336,590	(10)			9.6	%
HAP Trading, LLC			4,100,879	(11)			11.8	%

________________

*     Less than 1%.

(1) The address of each director and executive officer is c/o Gulf Resources, Inc., 99 Wenchang Road, Chenming Industrial Park, Shouguang City, Shandong, People’s Republic of China 262714

(2) Includes 2,512,200 shares owned by Ming Yang, 5,079,721 shares owned by Ms. Wenxiang Yu, the wife of Mr. Yang, 1,674,800 shares owned by Mr. Zhi Yang, Mr. Yang’s son, and 4,124,733 shares owned by  Shandong Haoyuan Industry Group Ltd. ("SHIG"), of which Mr. Yang is the controlling shareholder, chief executive officer and a director.  Mr. Yang disclaims beneficial ownership of the shares owned by his wife and SHIG.

(3) Includes 225,000 shares issuable upon exercise of options held by Mr. Liu.

(4) Includes 225,000 shares issuable upon exercise of options held by Mr. Li.

(5) Includes 225,000 shares issuable upon exercise of options held by Mr. Miao.

(6) Includes 12,500 shares issuable upon exercise of options held by Mr. Li.

(7) Includes 12,500 shares issuable upon exercise of options held by Mr. Zou.

(8)   Includes 12,500 shares issuable upon exercise of options held by Mr. Jiang.

(9) Includes 25,000 shares issuable upon exercise of options held by Mr. Ji.

(10) The address of Fidelity Management & Research Company ("Fidelity") is 82 Devonshire Street, Boston, Massachusetts 02109.  Fidelity is a wholly-owned subsidiary of FMR LLC and an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, is the beneficial owner of 3,336,590 shares or 9.632% of the Common Stock outstanding of the Company as a result of acting as investment adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940.

 

 

The ownership of one investment company, Fidelity Dividend Growth Fund, amounted to 2,476,460 shares or 7.15% of the common stock outstanding. Fidelity Dividend Growth Fund has its principal business office at 82 Devonshire Street, Boston, Massachusetts 02109.

Edward C. Johnson 3d and FMR LLC, through its control of Fidelity, and the funds each has sole power to dispose of the 3,336,596 shares owned by the Funds.  Members of the family of Edward C. Johnson 3d, Chairman of FMR LLC, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders' voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares.  Accordingly, through their ownership of voting common shares and the execution of the shareholders' voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC.

Neither FMR LLC nor Edward C. Johnson 3d, Chairman of FMR LLC, has the sole power to vote or direct the voting of the shares owned directly by the Fidelity Funds, which power resides with the Funds' Boards of Trustees. Fidelity carries out the voting of the shares under written guidelines established by the Funds' Boards of Trustees. The information was derived from a Schedule 13G filed on February 14, 2011.

(11) The address of HAP Trading, LLC is 33 Whitehall Street, 6 th Floor, New York, NY 10004. The information was derived from a Form 4 filed on March 30, 2011.

PROPOSAL 1

ELECTION OF DIRECTORS

Nominees of the Board of Directors

The Board of Directors has nominated seven (7) persons identified below for election as directors, to serve until the next annual meeting and their successors have been elected and qualified  If any nominee becomes unavailable for election, which is not expected, the persons named in the accompanying proxy intend to vote for any substitute whom the Board nominates.

Name		Age		Other positions with Company; other directorships held in last five years		Has served as Company director since
Ming Yang		44		Chairman of the Board of Director		December 2006
Xiaobin Liu		43		Chief Executive Officer and Director		March 2009
Naihui Miao		42		Secretary, Chief Operating Officer and Director		January 2006
Yang Zou (1)(3)		40		Independent Director		March 2011
Nan Li (1) (2)		36		Independent Director		November 2010
Shi Tong Jiang (1) (2)(3)		43		Independent Director		April 2008
Ya Fei Ji (2)(3)		47		Independent Director		June 2009

(1) Serves as a member of the Audit Committee.

(2) Serves as a member of the Compensation Committee.

(3) Serves as a member of the Nominating and Corporate Governance Committee.

 

 

Ming Yang , Chairman of the Board of Director – Mr. Yang has served as Chairman of Shouguang City Yuxin Chemical Company Limited since July 2000. Since May 2005, Mr. Yang has served as Chairman of Shouguang City Haoyuan Chemical Company Limited, Shouguang City He Mao Yuan Bromize Company Limited, and Shouguang City Qing River Real Estate Construction Company.  He was nominated as director of Qinghe Oil Field Office in 1993, where he managed operations. In 1997 he was appointed chairman and general manager of Shouguang Qinghe Shiye LLC and during the next three years its profits doubled. He took the position of general manager of Shouguang City Yu Xin Chemical Industry Co., Ltd. in 2000. During his stay, he focused on quality management and technology progress, which led to a 100 percent success rate of all products. He also helped the company successfully pass the ISO certification and become a private high-tech enterprise. In 2005 he was appointed to the position of chairman, where he has helped the company to become a leading producer of bromine and crude salt in China.  In 2006 he became the chairman of Gulf Resources, Inc. Mr. Yang has been the representative of Shandong Shouguang congress since 1995 and in 1998 he was awarded as Honorary Entrepreneur in Weifang City.

Xiaobin Liu , Chief Executive Officer and Director – Mr. Liu was appointed as Chief Executive Officer and Director on March 10, 2009. Mr. Liu joined the Company as Vice President in January 2007.  Before he joined the Company, Mr. Liu had served as Vice President of a subsidiary of Shenzhen Dasheng Corporation, a public company in China, from 2005 to 2006, Manager of Securities Department with Saige International Trust and Investment Corporation from 2000 to 2005, Vice President with Qionghai City Wanquanhe Hot Springs Tourism Development Co., Ltd. from 1995 to 2000.  Prior to that, Mr. Yang 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.

Naihui Miao, Secretary, Chief Operating Officer and Director – Mr. Miao has served as Vice President of Shouguang City Haoyuan Chemical Company Limited since January 2006.  Since January 2006, Mr. Miao has served as Director, Secretary and Vice President of Gulf Resources, Inc. and he is in charge of sales, human resource and business management.  From 2005 to 2006, Mr. Miao served as Vice President of Shouguang City Yuxin Chemical Company Limited as the deputy general manager.  From 1991 to 2005, Mr. Miao served as a Manager and then Vice President of Shouguang City Commercial Trading Center Company Limited.  He was the director of Shouguang Business Trade Center since 1986.

Yang Zou , Independent Director – Mr. Zou was appointed a director on March 2, 2011. Mr. Zou currently serves as auditing project leader at Beijing Zhongpingjianhuahao Certified Accountants Co., Ltd.  He is a Certified Public Accountant of China and holds the certificate of Certified Internal Auditor.  From March 2003 to September 2009, Mr. Zou was chief financial officer of Bohua Ziguang Zhiye Co., Ltd.  From July 2001 to January 2003, Mr. Zou was the audit department manager of financial center of Beijing Hengji Weiye Electronic Products Co., Ltd., where he was in charge of internal audit, financial budget management, and coordination with external audit. From July 1999 to June 2001, Mr. Zou was manager of finance and audit department of Zhonglian Online Information Development Co., Ltd. From September 1993 to June 1999, Mr. Zou had served as assistant auditor, auditor, and head of project audit of Hainan Zhongou Certified Public Accountants Co., Ltd. From July 1991 to August 1993, Mr. Zou was an accountant of department of finance of Hunan Department Store Co., Ltd.  Mr. Zou graduated from Beijing University with bachelor’s degree in finance.

Nan Li , Independent Director – Mr. Li was appointed a director on November 8, 2010. Mr. Li currently serves as Financial Controller at Global Pharm Holdings Group, Inc., an OTC Bulletin Board listed company.  He holds an Intermediate Accountant Certificate and is a Certified Public Accountant of China.  From 2005 to 2010, Mr. Li was audit manager and divisional manager at Shenzhen Tianhua Accounting Firm, where he participated or been responsible for auditing various Chinese large-scale financial institutions, securities companies, and listed companies, as well as acting as auditor or financial consultant to many U.S.-listed companies.  From March 2002 to July 2004  and from July 2004 to February 2005, he worked as an auditor in the internal control department of two Hong Kong listed companies, Suncorptech and Vision Grande Group, respectively.  Mr. Li holds a master’s degree in International Accountancy.

 

 

Shi Tong Jiang, Independent Director – Mr. Jiang was appointed a director on April 23, 2008.  Mr. Jiang is Chief of the Shouguang City Audit Bureau, Shandong Province, has been with the Audit bureau since 1990. During his career at the Shouguang City Audit Bureau he has held multiple positions including, Auditing Officer and Audit Section Deputy Chief. The Shouguang City Audit Bureau is responsible for the independent audit supervision of the affairs of the government. From 1987 to 1990 Mr. Jiang attended Shandong Financial Institution.

Ya Fei Ji, Independent Director - Mr. Ji was appointed a director on June 13, 2009.  Mr. Ji graduated from East China University in 1992 with a Master’s degree in Fine Chemicals. From 1992 through 1996, Mr. Ji worked as an assistant researcher at the Drug Research Institute of Anhui Province. Mr. Ji taught and conducted research at the China University of Mining and Technology (Beijing) from 1996 until 2001, where he became an Associate Professor in 1999 and received a doctorate degree in chemical engineering in 2001. From 2001 to 2003, Mr. Ji conducted post-doctorate research at the the Institute of Materia Medica, Chinese Academy of Medical Sciences and Peking Union Medical College. From 2003 to the present, Mr. Ji has taught and conducted research at the East China University of Science and Technology.  Mr. Ji has published over 40 articles and has applied for two patents.

The Board of Directors has determined that Nan Li, Yang Zou, Shi Tong Jiang and Ya Fei Ji are independent under Rule 5605(a)(2) of the NASDAQ Listing Rules.

Executive Officers and Significant Employees

Min Li, Chief Financial Officer – was appointed a director on October 30, 2007 and resigned on June 22, 2009.  He has served as Chief Financial Officer since December 2006 and as Chief Financial Officer for Shouguang City Haoyuan Chemical Company Limited. From 2004 to 2006, Mr. Li served as Manager of Financial and Asset Management Department for Shouguang City Yuxin Chemical Company Limited. From 2000 to 2004, Mr. Li served as Manager of the Accounting Department for the Yang Kou Branch of the China Construction Bank.  From 1998 to 1999, Mr Li worked at China Construction Bank Shandong branch and in 2000 Mr. Li worked at the Yangkou Office as the accounting manager.  Mr. Li has a bachelor degree in accounting from Weifang College.

Family Relationships

There are no family relationships among our executive officers, directors and significant employees

Involvement in Certain Legal Proceedings

To the best of our knowledge, there have been no events under any bankruptcy act, no criminal proceedings and no judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any director, executive officer, promoter or control person of our Company during the past ten years.

Board Operations

The positions of principal executive officer and chairman of the Board of Company are held by different persons.  The chairman of the Board chairs Board and stockholder meetings and participates in preparing their agendas.  The chairman of the Board also calls, plans, and chairs the independent directors’ executive sessions and serves as a focal point for communication between management and the Board between Board meetings, although there is no restriction on communication between directors and management.  Company believes that these arrangements afford the independent directors sufficient resources to supervise management effectively, without being overly engaged in day-to-day operations.

The Board plays an active role, as a whole and also at the committee level, in overseeing the management of the Company’s risks. The Board regularly reviews reports from members of senior management and committees on areas of material risk to the Company, including operational, financial, legal, strategic and regulatory risks.

 

 

The Board of Directors met held seven meetings and entered into six written consents during 2010. During 2010, no director attended fewer than 75% of the meetings of the Board of Directors and Board committees of which the director was a member.

The Board has adopted a code of ethics applicable to Company’s directors, officers, and employees.  The code of ethics is available at Company’s website, www.gulfresourcesinc.cn.

Board Committees

The Board of Directors has standing audit, compensation, and nominating committees, comprised solely of independent directors.  Each committee has a charter, which is available at Company’s website, www.gulfresourcesinc.cn.

Audit Committee

The Audit Committee is responsible for reviewing the results and scope of the audit, and other services provided by our independent auditors, and reviewing and evaluating our system of internal controls. Mr. Li is the Audit Committee Financial Expert and Mr. Jiang is the chair of the Audit Committee. Our audit committee met seven times and entered into one written consent during 2010. Our Board of Directors has determined that Messrs. Li, Zou and Jiang are “independent directors” within the meaning of Rule 10A-3 under the Exchange Act, as determined based upon the criteria for “independence” set forth in the rules of The NASDAQ Stock Market.

Audit Committee Report

With respect to the audit of Company’s financial statements for the year ended December 31, 2010, the Audit Committee

	·	has reviewed and discussed the audited financial statements with management;
	·	has discussed with Company’s independent accountants the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T; and

·

has received the written disclosures and the letter from the independent accountant required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's communications with the Audit Committee concerning independence and has discussed with the independent accountant the independent accountant's independence.

Based on these reviews and discussions, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the company's annual report on Form 10-K for the year ended December, 2010.

Shi Tong Jiang, Chair

Yang Zou

Nan Li

Compensation Committee

The compensation committee is responsible for (a) reviewing and providing recommendations to the board of directors on matters relating to employee compensation and benefit plans, and (b) assisting the board in determining the compensation of the chief executive officer and making recommendations to the board with respect to the compensation of the chief financial officer, other executive officers of the Company and independent directors. Each of Ya Fei Ji, Shi Tong Jiang and Nan Li are members of the compensation committee. The compensation committee operates under a written charter. Mr. Ji is the chairman of compensation committee.

 

 

The Compensation Committee took action by written consent two times in 2010.  Further information regarding Company’s processes and procedures for determining executive compensation are set forth under the caption, Compensation Discussion and Analysis.

Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis set forth beginning on page 10 and , based on the review and discussions, recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement.

Shi Tong Jiang, Chair

Ya Fei Ji

Nan Li

Nominating and Corporate Governance Committee

Our Board of Directors established a nomination and corporate governance committee in June 2009.The purpose of the nominating and corporate governance committee is to assist our board of directors in identifying qualified individuals to become board members, in determining the composition of the board of directors and in monitoring the process to assess board effectiveness. Each of Ya Fei Ji, Shi Tong Jiang and Yang Zou are members of the nominating and corporate governance committee. The nominating and corporate governance committee operates under a written charter. Mr. Jiang is the chairman of nominating and corporate governance committee.

The Nominating and Corporate Governance Committee took action by written consent one time in 2010.  The Nominating and Corporate Governance Committee will consider director candidates recommended by security holders. Potential nominees to the Board of Directors are required to have such experience in business or financial matters as would make such nominee an asset to the Board of Directors and may, under certain circumstances, be required to be “independent”, as such term is defined under Rule 5605 of the listing standards of NASDAQ and applicable SEC regulations. Security holders wishing to submit the name of a person as a potential nominee to the Board of Directors must send the name, address, and a brief (no more than 500 words) biographical description of such potential nominee to the Nominating and Corporate Governance Committee at the following address: Nominating and Corporate Governance Committee of the Board of Directors, c/o Gulf Resources, Inc., 99 Wenchang Road, Chenming Industrial Park, Shouguang City, Shandong, People’s Republic of China 262714. Potential director nominees will be evaluated by personal interview, such interview to be conducted by one or more members of the Nominating and Corporate Governance Committee, and/or any other method the Nominating and Corporate Governance Committee deems appropriate, which may, but needs not, include a questionnaire. The Nominating and Corporate Governance Committee may solicit or receive information concerning potential nominees from any source it deems appropriate. The Nominating and Corporate Governance Committee need not engage in an evaluation process unless (i) there is a vacancy on the Board of Directors, (ii) a director is not standing for re-election, or (iii) the Nominating and Corporate Governance Committee does not intend to recommend the nomination of a sitting director for re-election. A potential director nominee recommended by a security holder will not be evaluated differently from any other potential nominee. Although it has not done so in the past, the Nominating and Corporate Governance Committee may retain search firms to assist in identifying suitable director candidates.

The Board does not have a formal policy on Board candidate qualifications.  The Board may consider those factors it deems appropriate in evaluating director nominees made either by the Board or stockholders, including judgment, skill, strength of character, experience with businesses and organizations comparable in size or scope to the Company, experience and skill relative to other Board members, and specialized knowledge or experience.  Depending upon the current needs of the Board, certain factors may be weighed more or less heavily.  In considering candidates for the Board, the directors evaluate the entirety of each candidate’s credentials and do not have any specific minimum qualifications that must be met. “Diversity,” as such, is not a criterion that the Committee considers . The directors will consider candidates from any reasonable source, including current Board members, stockholders, professional search firms or other persons.  The directors will not evaluate candidates differently based on who has made the recommendation.

 

 

Stockholder Communications

Stockholders can mail communications to the Board of Directors, c/o Secretary, Gulf Resources, Inc., 99 Wenchang Road, Chenming Industrial Park, Shouguang City, Shandong, People’s Republic of China 262714, who will forward the correspondence to each addressee.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires Company’s directors and executive officers and any beneficial owner of more than 10% of any class of Company equity security to file reports of ownership and changes in ownership with the Securities and Exchange Commission and furnish copies of the reports to Company.  Based solely on the Company’s review of copies of such forms and written representations by Company’s executive officers and directors received by it, Company believes that during 2010, all such reports were filed timely, except that a Form 4 for each of Nan Li, Min Li, Xiaobin Liu, Naihui Miao, and Shitong Jiang and two Form 4s for Richard Khaleel were filed late.

Executive Compensation

Compensation Discussion and Analysis

This compensation discussion describes the overall compensation practices at the Company and specifically describes the compensation for the following named executive officers (“Named Executive Officers”):

	·	Xiaobin Liu, Chief Executive Officer
	·	Min Li, Chief Financial Officer
	·	Naihui Miao, Chief Operating Officer

The Board of Directors appointed the Compensation Committee of our Board of Directors to evaluate and determine the compensation programs of the Company’s Named Executive Officers, including the Chief Executive Officer and the Chief Financial Officer.

Compensation Philosophy and Objectives

Our primary goal with respect to our compensation programs has been to attract and retain the most talented and dedicated employees in key positions in order to compete effectively in the market place, successfully execute our growth strategies, and create lasting shareholder value. The Compensation Committee evaluates both individual and Company performance when determining the compensation of our executives. Our executives’ overall compensation is tied to the Company financial and operational performance, as measured by revenues and net income, as well as to accomplishing strategic goals such as merger and acquisitions and fund raising. The Compensation Committee believes that a significant portion of our executive’s total compensation should be at-risk compensation that is linked to stock-based incentives to align their interests with those of shareholders.

Additionally, the Compensation Committee has determined that an executive officer who is a Chinese national and is based in China will be entitled to a locally competitive package and an executive officer who is an expatriate or who is based in the U.S. will be paid a salary commensurate with those paid to the executives in the U.S. The Compensation Committee evaluates the appropriateness of the compensation programs annually and may make adjustments after taking account the subjective evaluation described previously.

 

 

We apply our compensation policies consistently for determining compensation of our Chief Executive Officer as we do with the other executives. The Compensation Committee assesses the performance of our Chief Executive Officer annually and determines the base salary and incentive compensation of our chief executive officer.

Our Chief Executive Officer is primarily responsible for the assessment of our other executive officers’ performance. Ultimately, it is the Compensation Committee’s evaluation of the chief executive officer’s assessment along with competitive market data that determines each executive’s total compensation.

Elements of Our Executive Compensation Programs

Base Salary . All full time executives are paid a base salary. Base salaries for our named executives are set based on their professional qualifications and experiences, education background, scope of their responsibilities, taking into account competitive market compensation levels paid by other similar sized companies for similar positions and reasonableness and fairness when compared to other similar positions of responsibility within the Company. Base salaries are reviewed annually by the Compensation Committee, and may be adjusted annually as needed.

Annual Bonuses . The Company does not pay guaranteed annual bonuses to our executives or to employees at any level because we emphasize pay-for-performance. The Compensation Committee determines cash bonuses towards the end of each fiscal year to award our executive officers including our Chief Executive Officer and Chief Financial Officer based upon a subjective assessment of the Company’s overall performance and the contributions of the executive officers during the relevant period.

Equity Incentive Compensation . A key element of our pay-for-performance philosophy is our reliance on performance-based equity awards through the Company’s stock option plan. This program aligns executives’ and shareholders’ interests by providing executives an ownership stake in the Company. Our Compensation Committee has the authority to award equity incentive compensation, i.e. stock options, to our executive officers in such amounts and on such terms as the Compensation Committee determines in its sole discretion. The Compensation Committee reviews each executive’s individual performance and his or her contribution to our strategic goals and determines the amount of stock options to be awarded towards the end of the fiscal year. The Compensation Committee grants equity incentive compensation at times when there are not material non-public information to avoid timing issues and the appearance that such awards are made based on any such information. The exercise price is not less than 85% of the closing market price on the day prior to the date of the grant.

Other Compensation . We provide our executives with certain other benefits, including reimbursement of business and entertainment expenses, health insurance, vacation and sick leave plan. The Compensation Committee in its discretion may revise, amend or add to the officer’s executive benefits as it deems necessary. We believe that these benefits are typically provided to senior executives of similar companies in China and in the U.S.

Summary Compensation Table

The following table sets forth information regarding compensation of the named executive officers for each of the three fiscal years in the period ended December 31, 2010.

 

 

FISCAL 2010 COMPENSATION TABLE

Name and Principal Position

Year

Salary ($)

Bonus($)

Stock Awards($)

Option Awards$(1)

Non-Equity Incentive Plan Compensation ($)

Nonqualified Deferred Compensation Earnings ($)

All Other Compensation ($)

Total ($)

Ming Yang, CEO (2)

2009 2008

0 20,724

N/A N/A

N/A N/A

N/A N/A

N/A N/A

N/A N/A

N/A N/A

O 20,724

Xiaobin Liu, CEO (3)

2010 2009

44,010 43,924

N/A N/A

N/A N/A

187,838 23,970

N/A N/A

N/A N/A

N/A N/A

231,848 67,894

Min Li, CFO

2010 2009 2008

26,802 17,574 14,004

N/A N/A N/A

N/A N/A N/A

187,838 23,970

N/A N/A N/A

N/A N/A N/A

N/A N/A N/A

214,640 41,544 14,004

Naihui Miao, COO (4)

2010 2009

26,802 26,340

N/A N/A

N/A N/A

187,838 23,970

N/A N/A

N/A N/A

N/A N/A

214,640 40,310

 

(1) Represents the dollar amount recognized for financial statement reporting purposes in accordance with FAS 123R.

(2) Mr. Yang became our Chief Executive Officer on December 29, 2006, and resigned as Chief Executive Officer on March 9, 2009.  Mr. Yang remains the Chairman of our Board of Directors.

(3) Mr. Liu became our Chief Executive Officer on March 10, 2009.

(4)  Mr. Miao became our Chief Operating Officer on July 10, 2009.

Except as disclosed below under the caption “Directors Compensation,” we have not paid or accrued any fees to any of our executive directors for serving as a member of our Board of Directors. We do not have any retirement, pension, profit sharing or stock option plans or insurance or medical reimbursement plans covering our officers and directors.

During each of the last two fiscal years, none of our other officers had salary and bonus greater than $100,000. Our executive officers are reimbursed by us for any out-of-pocket expenses incurred in connection with activities conducted on our behalf. There is no limit on the amount of these out-of-pocket expenses and there will be no review of the reasonableness of such expenses by anyone other than our board of directors, which includes persons who may seek reimbursement, or a court of competent jurisdiction if such reimbursement is challenged.

Grants of Plan-Based Awards

The following table sets forth information regarding each award made to the named executive officers, under Company’s 2007 Equity Incentive Plan, during fiscal 2010.

 

 

FISCAL 2010 GRANTS OF PLAN-BASED AWARDS

Estimated Future Payouts Under Non-Equity Incentive Plan Awards

Estimated Future Payouts Under Equity Incentive Plan Awards

All Other Stock Awards: Number of Shares of

Option Awards: Number of Securities

Exercise or Base Price of

Grant Date Fair Value of Stock

Name

Grant Date

Threshold

Target

Maximum

Threshold

Target

Maximum

Stocks or Units

Underlying Options

Option Award

and Options

Xiaobin Liu, CEO

12,500

$8.25

187,830

Min Li, CFO

12,500

$8.25

187,830

Naihui Miao, COO

12,500

$8.25

187,830

Narrative Discussion

The following employment agreements were entered into by the Company and the following executive officers:

Xiaobin Liu

The Company entered into an employment agreement with Xiaobin Liu on March 12, 2009 to serve as Chief Executive Officer and a member of the board of directors for a term of three years.  Pursuant to the agreement Mr. Liu will receive annual compensation equal to $44,010  In addition Mr. Liu is entitled to participate in any and all benefit plans from time to time, in effect for employees, along with vacation, sick and holiday pay in accordance with policies established and in effect from time to time.

Min Li

The Company entered into an employment agreement with Min Li on January 1, 2010 to serve as chief financial officer for a term of one year.  Pursuant to the agreement Mr. Li is entitled to participate in any and all benefit plans from time to time, in effect for employees, along with vacation, sick and holiday pay in accordance with policies established and in effect from time to time.

Naihui Miao

The Company entered into an employment agreement with Naihui Miao on July 10, 2009 to serve as Chief Operating  Officer for a term of three years.  Pursuant to the agreement Mr. Miao will receive annual compensation equal to $26,802.  In addition Mr. Miao is entitled to participate in any and all benefit plans from time to time, in effect for employees, along with vacation, sick and holiday pay in accordance with policies established and in effect from time to time.

Assuming the employment of the Company’s named executive officers were to be terminated without cause or for good reason or in the event of change in control, as of December 31, 2010, the following individuals would have been entitled to payments in the amounts set forth opposite to their name in the below table:

 

 

Name		Cash Payment
Xiaboin Liu		$0
Min Li		$0
Naihui Miao		$0

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth, for each named executive officer, information regarding unexercised stock options, unvested stock awards, and equity incentive plan awards outstanding as of December 31, 2010.

 

OUTSTANDING EQUITY AWARDS AT 2010 FISCAL YEAR END
OPTION AWARDS												STOCK AWARDS
Name		Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)		Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares or Units of Stock That Have Not Vested ($)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Xiaobin Liu, CEO		25,000		-		-		8.25		2/4/13		-		-		-		-
Min Li, CFO		25,000		-		-		8.25		2/4/13		-		-		-		-
Naihui Miao		25,000		-		-		8.25		2/4/13		-		-		-		-

Option Exercises and Stock Vested

The following table sets forth aggregate information with respect to each executive officer regarding exercise of stock options, stock appreciation rights, and similar instruments and vesting of restricted stock, restricted stock units and similar instruments, for fiscal 2010.

 

 

FISCAL 2010 OPTION EXERCISES AND STOCK VESTED
		OPTION AWARDS				STOCK AWARDS
Name		Number of Shares Acquired on Exercise (#)		Value Realized on Exercise ($)		Number of Shares Acquired on Vesting (#)		Value Realized on Vesting ($)
Xiaobin Liu, CEO		14,831		175,000		0		0
Min Li, CFO		14,831		175,000		0		0
Naihui Miao		14,831		175,000		0		0

Pension Benefits Table

The Company does not provide to any of its named executive officers any plans that provide for payments or other benefits at, following, or in connection with retirement.

Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans Table

None of our named executive officer had any non-qualified defined contribution or other plan that provides for the deferral of compensation, for fiscal 2010.

Compensation of Directors

The following table sets forth information regarding compensation of each director, other than named executive officers, for fiscal 2010.

 

FISCAL 2010 DIRECTOR COMPENSATION

Name

Fees Earned or Paid in Cash ($)

Stock Awards ($)

Option Awards $(l)

Non-Equity Incentive Plan Compensation ($)

Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)

All Other Compensation ($)

Total ($)

Ming Yang

31,318

N/A

N/A

N/A

N/A

N/A

31,318

Nan Li

0

N/A

46,731

N/A

N/A

N/A

46,731

Shi Tong Jiang

0

N/A

N/A

N/A

N/A

N/A

0

Ya Fei Ji

0

N/A

N/A

N/A

N/A

N/A

0

 

(1) Represents the dollar amount recognized for financial statement reporting purposes in accordance with FAS 123R.

We have entered into agreements on November 8, 2010 and March 2, 2011 with Nan Li and Yang Zou, respectively pursuant to which we grant them options to purchase 12,500 shares of our common stock upon execution of the agreements, and on the anniversary of that date in 2011 and 2012 for Mr. Li, and `2012 and 2013 for Mr. Zou, at an exercise price not less than the closing sale price of such stock on the date of grant.  The granting of future options is contingent upon the individual’s continued service with our company. We do not pay Nan Li and Yang Zou any cash compensation for serving as directors.

We do not pay Shi Tong Jiang any cash compensation to serve as a director.  In each of March and May of 2009, we granted to Shi Tong Jiang options to purchase 12,500 shares of our common stock at an exercise of $4.80 per share.

 

 

We do not pay Ya Fei Ji any cash compensation for serving as a director.  In June 2009 we granted Ya Fei Ji an option to purchase 25,000 shares of our common stock at an exercise price of $4.80 per share for his first year as a director with the Company.

Certain Relationships and Related Transactions

The following table provides a summary of our related party transaction during 2009 and 2010.