Gulf Resources, Inc. — financial distress indicators
Financial-health summary
Gulf Resources, Inc.'s reported numbers place it in the 'Weak' financial-health band (distress score 54/100). The main indicators are market-implied default probability >20%, revenue collapse and current liabilities exceed current assets. Independently, the Ohlson accounting model puts its 1-year failure probability at 48% and the market-implied (Merton) default probability is 59.1%. In its favour: operating cash flow is positive over the latest 12 months.
Stress by dimension
Share price — last 12 months
Indicators behind the score
Each red flag shows the evidence from the company’s own filings and the financial or legal principle behind it. Points add to the 0–100 score.
Merton distance-to-default -0.23 σ → PD 59%.
Structural (Merton/KMV) model: equity is a call option on assets; low distance-to-default means assets are close to the default point.
Revenue changed -75% year over year.
A >30% sales drop typically breaches leverage covenants and starves fixed-cost coverage.
Current ratio is 0.92.
Short-term obligations exceed short-term resources — the company relies on rolling over credit.
Recurring net losses.
Repeated losses are a core input in both Ohlson and Altman failure models.
Price is -65% from its 52-week high.
For financial firms a share-price run often precedes a deposit or funding run (confidence channel).
Operating margin fell from 25% to -278% in two years.
Sharp margin compression signals loss of pricing power or cost control.
Revenue vs net income
Cash generation
Debt vs cash vs equity
✅ Mitigating factors
- Operating cash flow is positive over the latest 12 months.
📰 Recent news scan
- Gulf Resources, Inc. Regains Compliance with Nasdaq Listing RequirementsYahoo Finance · 2026-10-06
- Gulf Resources, Inc. Receives NASDAQ Notice to Late Filing of Its Quarterly ReportYahoo Finance · 2026-08-28
- Gulf Resources Announces International Expansion Plan and Strategic Cooperation Agreement with a Brazilian company, Montes Verdes Participacoes Ltda.Yahoo Finance · 2026-08-26
- Gulf Resources, Inc. Receives NASDAQ Notice to Late Filing of Its Annual ReportYahoo Finance · 2026-04-27
- Gulf Resources Explained Delay in Filing Its 10-K for 2025Yahoo Finance · 2026-04-16
⚖️ U.S. legal pathway — Title 11, U.S. Code
Which chapter would apply?
- Chapter 11 — reorganisation. Management usually stays in control as debtor-in-possession; the automatic stay (§362) halts collection; a plan must meet the best-interests test (§1129(a)(7)) and the absolute priority rule (§1129(b)) — creditors are paid before shareholders, who are frequently wiped out.
- Chapter 7 — liquidation. A trustee sells assets and distributes proceeds by statutory priority (§§507, 726).
- Subchapter V (“Chapter 5”) is a fast track for small-business debtors under a statutory debt cap, but SEC-reporting companies are excluded (§101(51D)) — so it rarely applies to listed companies.
What typically triggers a filing
- Payment default or covenant breach lenders will not waive; a debt maturity that cannot be refinanced.
- Auditor going-concern doubt (ASC 205-40 / PCAOB AS 2415) — often itself a default trigger in loan agreements.
- Creditors can force a case with an involuntary petition (§303) if debts are not paid as they come due.
- Delisting after sustained sub-$1 prices or equity deficits cuts off equity funding.
Transactions shortly before filing can be clawed back (preferences — 90 days, §547; fraudulent transfers — 2 years, §548).
Frequently asked questions
What do Gulf Resources, Inc.'s financial-health indicators show?
As of 2026-10-08, Gulf Resources, Inc.'s public financial data places it in the 'Weak' band with a distress score of 54/100, driven by market-implied default probability >20%, revenue collapse and current liabilities exceed current assets. This is a statistical screen of reported numbers — it does not mean the company is insolvent, has defaulted or will enter insolvency proceedings.
What is Gulf Resources, Inc.'s financial distress score?
54/100 ('Weak'). Ohlson O-score -0.08 (model 1-year failure probability 48%). Merton distance-to-default -0.23 σ (model default probability 59.1%).
What works in Gulf Resources, Inc.'s favour?
Operating cash flow is positive over the latest 12 months.
How are shareholders treated if a company enters insolvency?
In a Chapter 11 reorganisation the absolute priority rule pays secured lenders, then unsecured creditors, before shareholders — so existing shares are usually cancelled or heavily diluted. In Chapter 7 the company is liquidated and shareholders rarely recover anything.
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Methodology
Score = capped sum of rule-based red flags across seven dimensions (liquidity, solvency, profitability, cash flow, sales trend, market signal, news). Ohlson O-score (1980) gives an accounting-based 1-year failure probability; Merton distance-to-default (Bharath & Shumway 2008) gives a market-implied probability. Financial institutions use a capital-based rule set. Recalculated every trading day from the latest filings, prices and news.