What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-15 compared with 2022-05-13 · 456 added, 332 removed, 749 unchanged (51% of the section changed)

4 unchanged sentences

(Expressed in U.S.

March 31, 2022

June 30, 2022

December 31, 2021

Current Assets

$ 105,661,999

Accounts receivable

35 unchanged sentences

10,517,754 shares issued;

and 10,471,924 shares outstanding as of March 31 31, 2022 and December 31, 2021

and 10,471,924 shares outstanding as of June 30, 2022 and December 31, 2021, respectively

Treasury stock;

45,830 shares as of March 31, 2022 and December 31, 2021 at cost

45,830 and 45,830 shares as of June 30, 2022 and December 31, 2021 at cost

Additional paid-in capital

1 unchanged sentence

Retained earnings appropriated

Accumulated other comprehensive income

Accumulated other comprehensive loss

( 2,985,581 )

Total Stockholders’ Equity

5 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE

INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND

COMPREHENSIVE LOSS

(Expressed in U.S.

Three-Month Period Ended

OPERATING EXPENSE

Three-Month Period Ended June 30,

Six-Month Period Ended June 30,

OPERATING INCOME (EXPENSE)

Cost of net revenue

1 unchanged sentence

( 6,915,774 )

( 12,651,088 )

( 11,097,163 )

Sales, marketing and other operating expenses

2 unchanged sentences

( 1,394,717 )

( 4,111,888 )

( 4,008,200 )

General and administrative expenses

1 unchanged sentence

( 2,799,590 )

( 6,940,951 )

Other operating expense

Total operating expense

Total operating income (expense)

( 10,602,551 )

( 13,530,817 )

LOSS FROM OPERATIONS

( 19,598,375 )

( 22,071,484 )

PROFIT (LOSS) FROM OPERATIONS

( 2,382,809 )

( 5,664,233 )

OTHER INCOME (EXPENSE)

1 unchanged sentence

Interest income

LOSS BEFORE TAXES

Income (Loss) BEFORE TAXES

( 2,346,740 )

INCOME TAX BENEFIT

( 5,592,573 )

( 1,249,621 )

COMPREHENSIVE LOSS:

( 1,345,316 )

NET PROFIT (LOSS)

$ ( 2,703,220 )

OTHER COMPREHENSIVE LOSS

$ ( 5,205,344 )

COMPREHENSIVE Profit (LOSS)

NET Profit (LOSS)

$ ( 2,703,220 )

$ ( 5,205,344 )

- Foreign currency translation adjustments

( 16,393,444 )

COMPREHENSIVE INCOME (LOSS)

( 14,844,410 )

LOSS PER SHARE:

COMPREHENSIVE Profit (LOSS)

$ ( 12,491,650 )

$ ( 11,062,562 )

$ ( 2,055,798 )

Earnings (LOSS) PER SHARE:

BASIC AND DILUTED

4 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

THREE-MONTH PERIOD ENDED MARCH 31, 2022 AND 2021

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’

SIX-MONTH PERIOD ENDED JUNE 30, 2022

(Expressed in U.S.

1 unchanged sentence

unappropriated

BALANCE AT DECEMBER 31, 2021 (Audited)

BALANCE AT MARCH 31, 2022 (Unaudited)

$ ( 510,329 )

2 unchanged sentences

$ 288,068,305

Restricted shares

Translation adjustment

Net loss for three-month period

ended March 31, 2022

BALANCE AT MARCH 31, 2022

( 16,393,444 )

Net profit (loss) for three-month period ended June 30, 2022

BALANCE AT JUNE 30, 2022 (Unaudited)

$ ( 510,329 )

$ 100,569,159

$ 154,245,486

$ ( 2,985,581 )

$ 275,576,655

comprehensive

unappropriated

BALANCE AT MARCH 31, 2021 (Unaudited)

$ ( 510,329 )

$ 148,886,232

$ 272,337,459

Restricted shares

Translation adjustment

Net profit (loss) for three-month period ended June 30, 2021

( 2,703,220 )

BALANCE AT JUNE 30, 2021 (Unaudited)

$ ( 510,329 )

$ 100,569,160

$ 146,183,012

$ 278,102,555

comprehensive

unappropriated

BALANCE AT DECEMBER 31, 2021 (Audited)

2 unchanged sentences

$ 150,463,638

$ 286,639,217

Restricted shares

Translation adjustment

1 unchanged sentence

( 14,844,410 )

Net loss for three-month period

ended March 31, 2021

Net profit (loss) for six-month period ended June 30, 2022

BALANCE AT JUNE 30, 2022 (Unaudited)

$ ( 510,329 )

$ 100,569,159

BALANCE AT MARCH 31, 2021

$ 154,245,486

1 unchanged sentence

$ 275,576,655

comprehensive

unappropriated

BALANCE AT DECEMBER 31, 2020 (Audited)

$ ( 510,329 )

$ 151,388,356

$ 277,024,273

Restricted shares

Translation adjustment

Net profit (loss) for six-month period ended June 30, 2021

( 5,205,344 )

BALANCE AT JUNE 30, 2021 (Unaudited)

$ ( 510,329 )

$ 100,569,160

$ 146,183,012

$ 278,102,555

See accompanying notes to the condensed consolidated financial statements.

7 unchanged sentences

(Expressed in U.S.

Three-Month Period Ended March 31,

Six-Month Period Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

$ ( 119,946 )

Net Income (Loss)

$ ( 5,205,344 )

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Interest on capital lease obligation

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Interest on finance lease obligation

Depreciation and amortization

Unrealized exchange (gain) loss on translation of inter-company balances

Unrealized exchange gain on translation of inter-company balances

Deferred tax asset

Common stock issued for services

Issuance of stock options to employee

Changes in assets and liabilities:

1 unchanged sentence

Prepayments and deposits

( 2,790,331 )

Other receivables

3 unchanged sentences

Prepaid land leases

Operating leases

Operating lease

( 1,073,677 )

Net cash provided by operating activities

Net cash provided by (used in) by operating activities

CASH FLOWS USED IN INVESTING ACTIVITIES

Purchase of property, plant and equipment

( 33,217,987 )

( 5,806,435 )

Net cash used in investing activities

EFFECTS OF EXCHANGE RATE CHANGES

ON CASH AND CASH EQUIVALENTS

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

( 33,217,987 )

( 5,806,435 )

CASH FLOWS USED IN FINANCING ACTIVITIES

Repayment of finance lease obligation

Net cash used in financing activities

EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

( 1,642,327 )

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

( 16,651,832 )

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS - END OF PERIOD

$ 105,661,999

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the periods for:

Operating right-of-use assets obtained in exchange for lease obligations

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

See accompanying notes to the condensed consolidated financial statements.

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

JUNE 30, 2022

(Expressed in U.S.

10 unchanged sentences

owns 100% of Shouguang City Haoyuan Chemical Company Limited (“SCHC”) which owns 100% of Shouguang Yuxin Chemical Industry

Co., Limited (“SYCI”) and Daying County Haoyuan Chemical Company Limited (“DCHC”).

All material intercompany

transactions have been eliminated on consolidation.

of the Business

The Company manufactures and trades bromine and

crude salt through its wholly-owned subsidiary, Shouguang City Haoyuan Chemical Company Limited (“SCHC”) and manufactures

chemical products for use in the oil industry, pesticides, paper manufacturing industry and for human and animal antibiotics through its

wholly-owned subsidiary, Shouguang Yuxin Chemical Industry Co., Limited (“SYCI”) in the People’s Republic of China (“PRC”).

DCHC was established to further explore and develop natural gas and brine resources (including bromine and crude salt) in the PRC.

business commenced trial operation in January 2019 but suspended production temporarily in May 2019 as required by the government to obtain

project approval (see Note 1 (b)(iii)).

On March 11, 2020, the World Health Organization (WHO) officially declared

COVID-19 a pandemic.

The duration and intensity of the impact of the COVID-19 and resulting disruption to the Company’s operations

and financial position is uncertain.

While our operations are currently not materially affected, it is unknown whether or how they may

be affected if such a pandemic persists for an extended period.

While not yet quantifiable, the Company believes this situation did not

have a material adverse impact on its operating results in the year of 2021 and will continue to assess the financial impact.

outbreak slightly delayed the commencement of the operations for Factory No.1, No.4, No.7, No.9, and it may also delay the approval for

the remaining three factories No.2, No.8 and No.10.

Co., Limited (“SYCI”) ,Daying County Haoyuan Chemical Company Limited (“DCHC”) and Shouguang

Hengde Salt Industry Co.

All material intercompany transactions have been eliminated on consolidation.

The Company manufactures and trades bromine through

its wholly-owned subsidiary, Shouguang City Haoyuan Chemical Company Limited (“SCHC”) ;manufactures and trades crude salt

through its wholly-owned subsidiary, SHSI;

and manufactures chemical products for use in

the oil industry, pesticides, paper manufacturing industry and for human and animal antibiotics through its wholly-owned subsidiary, Shouguang

Yuxin Chemical Industry Co., Limited (“SYCI”) in the People’s Republic of China (“PRC”).

DCHC was established

to further explore and develop natural gas and brine resources (including bromine and crude salt) in the PRC.

DCHC’s business commenced

trial operation in January 2019 but suspended production temporarily in May 2019 as required by the government to obtain project approval

(see Note 1 (b)(iii)).

On March 11, 2020, the World Health Organization

(WHO) officially declared COVID-19 a pandemic.

The duration and intensity of the impact of the COVID-19 and resulting disruption to the

Company’s operations and financial position is uncertain.

While not fully quantifiable, the Company believes this situation did

not have a material adverse impact on its operating results in the year of 2021 \.

In 2022, COVID may have a slightly larger impact.

government is conducting frequent unannounced inspections, somewhat disrupting production.

In addition, the Company believes the focus

on COVID may have slightly delayed the approval process for one or more of the closed factories.

The virus outbreak and resulting supply

chain issues has impacted the overall Chinese economy and thus impacted demand from end customers.

It has delayed the delivery of machinery

and other equipment for the Yuxin Chemical factory causing a postponement in its completion and opening.

The Company believes the virus

outbreak has delayed the finalization of the Sichuan Province environmental plan, causing a further delay for the Company’s project

in Sichuan Province.

(i) Bromine and Crude Salt Segments

5 unchanged sentences

City issued a notice ordering all bromine facilities in Shouguang City, including the Company’s bromine facilities, including Factory

No.1 and Factory No.

1 and Factory No.

7, to temporarily stop production from December 16, 2019 to February 10, 2020.

2 unchanged sentences

Subsequently, the

Company received an approval dated February 27, 2020 issued by the local governmental authority which allowed the Company to resume production

Company received an approval dated February 27, 2020 issued by the local governmental authority allowing the Company to resume production

after the winter temporary closure.

Further, the Company received another approval from the Shouguang Yangkou People’s Government

dated March 5, 2020 allowing the Company to resume production at its bromine factories No.1, No.

dated March 5, 2020 allowing the Company to resume production at its bromine factories No.

4, No.7 and No.

4 unchanged sentences

commenced commercial production on May 6, 2020.

The company is still waiting for governmental approval for factories

#2, #8, and #10.

To our knowledge, the government is currently completing its planning process for all mining areas including that for

prevention of flood.

As a result, we may be required to make some modifications to our current wells and aqueducts prior to commencement

of operations of these factories to satisfy the local government's requirements.

Nevertheless, the Company expects to receive approval

to open at least one and potentially more of its closed factories in 2022.

The Company is still waiting for governmental

approval for Factories No.

To our knowledge, the government is currently completing its planning process for all

mining areas including that for prevention of flood.

As a result, we may be required to make some modifications to our current wells and

aqueducts prior to commencement of operations of these factories to satisfy the local government's requirements.

Nevertheless, The company

expects that it will receive permission to open one of these factories in 2022 and perhaps try its best effort to get another in early

Pursuant to the notification issued from the government

of Shouguang City, all bromine facilities in Shouguang City had to be temporarily closed from December 28, 2021 until February 21, 2022.

To comply with such notification, the Company had temporarily stopped production at its bromine facilities during the aforesaid period

and resumed production as scheduled on February 21, 2022.

of Shouguang City, all bromine facilities in Shouguang City were temporarily closed from December 28, 2021 to February 21, 2022.

with such notification, the Company had temporarily stopped production at its bromine facilities during the aforesaid period and resumed

production as scheduled on February 21, 2022.

2022, Shouguang Hengde Salt Industry Co.

Ltd, our subsidiary, was incorporated in Shandong Province, China, for crude salt production

This subsidiary was created in response to a new government policy that required bromine and crude salt companies to have

separate registrations.

The creation of this subsidiary and the separation of bromine and crude salt will not impact sales or overall

However, there are likely to be minor adjustments cost allocations between the two businesses.

(ii) Chemical Segment

2 unchanged sentences

the second living area of the Qinghe Oil Extraction to the Bohai Marine Fine Chemical Industrial Park (“Bohai Park”).

This is because the two plants are located in a residential area and their production activities will impact the living environment of

This was because the two plants were located in a residential area and their production activities impacted the living environment of

the residents.

This is as a result of the country’s effort to improve the development of the chemical industry, manage safe production

This was as a result of the country’s effort to improve the development of the chemical industry, manage safe production

and curb environmental pollution accidents effectively, and ensure the quality of the living environment of residents.

All chemical enterprises

which do not comply with the requirements of the safety and environmental protection regulations will be ordered to shut down.

In December 2017, the Company secured from the government the land

use rights for its chemical plants located at the Bohai Park and in June 2018, the Company presented a completed construction design draft

and other related documents to the local authorities for approval.

In January 2020, the Company received the environmental protection

approval by the government of Shouguang City, Shandong Province for the proposed Yuxin Chemical factory.

The Company began the construction

on its new chemical facilities located at Bohai Marine Fine Chemical Industrial Park in June 2020 and basically completed the civil works

by end of June 2021.

15, 2021, the company announced due to the supply chain issues as well as the electric restrictions in China,

the delivery of some equipment, the equipment installation and testing and beginning trial production at the chemical factory had been

On February 22, 2022, the company announced that discussions with the government have convinced management that the electricity

restrictions are being eased.

Accordingly, the Company has contacted its suppliers and will have the remainder of the equipment produced

and delivered, so the Company can complete installation and begin testing and trial production.

The Company estimates this relocation process

will cost approximately $ 69 million in total.

The Company incurred relocation costs comprising prepaid land lease, professional fees

related to the design of the new chemical factory, purchase of plant and equipment and construction costs and installation costs incurred

for the new chemical factory in the amount of $ 45,584,344 and $ 45,584,344 , which were recorded in the Property, plant and equipment in

the consolidated balance sheets as of March 31, 2022 and December 31, 2021.

which did not comply with the requirements of the safety and environmental protection regulations were ordered to shut down.

In December 2017, the Company secured from the

government the land use rights for its chemical plants located at the Bohai Park and in June 2018, the Company presented a completed construction

design draft and other related documents to the local authorities for approval.

In January 2020, the Company received the environmental

protection approval by the government of Shouguang City, Shandong Province for the proposed Yuxin Chemical factory.

The Company began

the construction on its new chemical facilities located at Bohai Marine Fine Chemical Industrial Park in June 2020 and basically completed

the civil works by the end of June 2021.

On November 15, 2021, the Company announced that due to the supply chain issues as well as the

electric restrictions in China, the delivery of some equipment, the equipment installation and testing and beginning trial production

at the chemical factory had been delayed.

On February 22, 2022, the Company announced that discussions with the government have convinced

management that the electricity restrictions are being eased.

Accordingly, the Company has contacted its suppliers and will have the remainder

of the equipment produced and delivered, so the Company can complete installation and begin testing and trial production.

The COVID restrictions and resulting national

and international supply chain issues as well as permitting issues have caused delays in receiving some previously ordered machinery and

The Company is working with its existing suppliers and may identify new suppliers so that it can complete construction of its

factory based on the delivery.

Currently, the Company can not estimate when construction will be completed and production can

The Company believes this relocation process will

cost approximately $ 69 million in total.

The Company incurred relocation costs comprising prepaid land lease, professional fees related

to the design of the new chemical factory, and progress payment and deposit for the construction of the new factory building in the amount

of $ 45,584,344 and $ 45,584,344 , which were recorded in the prepaid land leases and property, plant and equipment in the consolidated balance

sheets as of June 30, 2022 and December 31, 2021.

The Company does not believe the delay in opening the factory will materially impact

the overall cost of the project.

(iii) Natural Gas Segment

In January 2017, the Company completed the first

brine water and natural gas well field construction in Daying located in Sichuan Province and commenced trial production in January 2019.

On May 29, 2019, the Company received a verbal notice from the government of Tianbao Town, Daying County, Sichuan Province, whereby the

Company is required to obtain project approval for its well located in Daying, including the whole natural gas and brine water project,

brine water and natural gas well field construction in Daying located in Sichuan Province, China, and commenced trial production in January

On May 29, 2019, the Company received a verbal notice from the government of Tianbao Town, Daying County, Sichuan Province, whereby

the Company is required to obtain project approval for its well located in Daying, including the whole natural gas and brine water project,

and approvals for safety production inspection, environmental protection assessment, and to solve the related land issue.

11 unchanged sentences

for Doubtful Accounts

As of March 31, 2022 and December 31, 2021, there

As of June 30, 2022 and December 31, 2021, there

were no allowances for doubtful accounts.

No allowances for doubtful accounts were charged to the condensed consolidated statements of

loss for the three-month periods ended March 31, 2022 and 2021.

loss for the three-month and six-month periods ended June 30, 2022 and 2021.

(d) Concentration

6 unchanged sentences

The Company placed $ 79,115,431

and $ 95,767,263 with these institutions as of March 31, 2022 and December 31, 2021, respectively.

and $ 95,767,263 with these institutions as of June 30, 2022 and December 31, 2021, respectively.

The Company has not experienced

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

JUNE 30, 2022

(Expressed in U.S.

6 unchanged sentences

Expenditures for new facilities or equipment, and major expenditures for betterment

of existing facilities or equipment are capitalized and depreciated using the straight-line method at rates sufficient to depreciate such

costs less 5% residual value over the estimated productive lives.

All other ordinary repair and maintenance costs are expensed as incurred.

of existing facilities or equipment are capitalized and depreciated, when available for intended use, using the straight-line method at

rates sufficient to depreciate such costs less 5% residual value over the estimated productive lives.

All other ordinary repair and maintenance

costs are expensed as incurred.

Mineral rights are recorded at cost less accumulated

12 unchanged sentences

Plant and machinery (including protective shells, transmission channels and ducts)

Motor vehicles

Motor Vehicles

Motor vehicles Motor Vehicles

Furniture, fixtures and equipment

4 unchanged sentences

Common facilities that are built specifically to service production

directly attributed to designated oil and gas properties are depreciated based on the proved developed reserves of the respective oil

and gas properties on a pro-rata basis.

Common facilities that are not built specifically to service identified oil and gas properties

are depreciated using the straight-line method over their estimated useful lives.

Costs associated with significant development projects

are not depreciated until commercial production commences and the reserves related to those costs are excluded from the calculation of

depreciation.

directly attributed to designate oil and gas properties are depreciated based on the proved developed reserves of the respective oil and

gas properties on a pro-rata basis.

Common facilities that are not built specifically to service identified oil and gas properties are

depreciated using the straight-line method over their estimated useful lives.

Costs associated with significant development projects are

not depreciated until commercial production commences and the reserves related to those costs are excluded from the calculation of depreciation.

(f) Retirement

3 unchanged sentences

The required contributions

under the retirement plans are charged to the condensed consolidated statement of income on an accrual basis when they are due.

under the retirement plans are charged to the condensed consolidated statement of loss on an accrual basis when they are due.

The Company’s

contributions totaled $ 201,265 and $ 246,622 for the three-month periods ended March 31, 2022 and 2021, respectively.

contributions totaled $ 145,512 and $ 220,968 for the three-month period ended June 30, 2022 and 2021, respectively, and totaled $ 346,777

and $ 467,590 for the six-month period ended June 30, 2022 and 2021, respectively.

Net revenue is net of discount and value added

11 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

JUNE 30, 2022

(Expressed in U.S.

19 unchanged sentences

their estimated salvage value in connection with the decision to dispose of such assets.

For the three-month period ended March 31, 2022

and 2021, the Company determined that there were no events or circumstances indicating possible additional impairment of its long-lived

and Diluted Net Income per Share of Common Stock

For the three and six months period ended June

30, 2022 and 2021, the Company determined that there were no events or circumstances indicating possible impairment of its long-lived

and Diluted Earnings per Share of Common Stock

Basic earnings per common share are based on the

6 unchanged sentences

stock options were greater than the market price of the common stock.

Anti-dilutive common stock equivalents which were excluded from

the calculation of number of dilutive common stock equivalents amounted to 0 and 62,704 shares for the three-month periods ended March

31, 2022 and 2021, respectively.

Because the Company reported a net loss for the

three-month periods ended March 31, 2022 and 2021, common stock equivalents including stock options and warrants were anti-dilutive, therefore

the amounts reported for basic and diluted loss per share were the same.

The Company had no outstanding options in the three month periods

ending June 30, 2021 and 2022.

It had no options outstanding in the six months period ending June 30,2022.

In the six month period ending

June 30,2021, it had 31,352 options outstanding.

Because the Company has a net loss during this period, the options were anti-dilutive.

GULF RESOURCES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

JUNE 30, 2022

(Expressed in U.S.

47 unchanged sentences

ROU assets and liabilities arising from lease arrangements with lease term of twelve months or less.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION AND

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(n) Stock-based Compensation

(n) Stock-based

Stock-based awards issued to employees are recorded

33 unchanged sentences

Recent accounting pronouncements adopted

There were no recent accounting pronouncements adopted during the three

months ended March 31, 2022.

There were no recent accounting pronouncements adopted during the six

months ended June 30, 2022.

Recently Issued Accounting Pronouncements Not

7 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

JUNE 30, 2022

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES – Continued

receivables, and any other financial assets that have the contractual

right to receive cash.

The ASU requires an entity to recognize expected credit losses rather than incurred losses for financial assets.

For public entities, the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within

those fiscal years.

For the Company which is a smaller reporting company, ASU No.

2019-10 extends the effective dates for two years.

Company is currently evaluating the effect of this on the condensed consolidated financial statements and related disclosure.

NOTE 2 – INVENTORIES

5 unchanged sentences

There was no allowance for slow-moving inventories

as of March 31, 2022 and 2021.

as of June 30, 2022 and 2021.

NOTE 3 – PREPAID LAND LEASES

18 unchanged sentences

The lease term expires on August 12,

The amount paid was recorded as prepaid land leases, net of current portion in the consolidated balance sheet as of March 31 2022

The amount paid was recorded as prepaid land leases, net of current portion in the consolidated balance sheet as of June 30 2022

and December 31, 2021.

As of March 31, 2022, the prepaid land lease increased to $ 10,419,032 due to an additional amount paid for stamp

As of June 30, 2022, the prepaid land lease increased to $ 9,862,218 due to an additional amount paid for stamp

duty and related land use rights fees.

Amortization of this prepaid land lease will commence when the chemical factory is built and placed

In June 2020, the construction of the new chemical

factory commenced and is expected to complete around June 2021.

Amortization of this prepaid land lease will commence when the chemical factory is completed and

placed in service.

GULF RESOURCES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

JUNE 30, 2022

(Expressed in U.S.

18 unchanged sentences

The aggregate carrying

values of these properties situated on parcels of the land are $ 17,526,711 and $ 17,911,910 as at March 31, 2022 and December 31, 2021,

values of these properties situated on parcels of the land are $ 16,193,695 and $ 17,911,910 as at June 30, 2022 and December 31, 2021,

respectively.

During the three-month period ended March 31,

2022, depreciation and amortization expense totaled $ 5,001,619 , of which $ 1,761,068 , $ 1,197,687 and $ 2,042,864 were recorded in direct

labor and factory overheads incurred during plant shutdown, administrative expenses and cost of net revenue, respectively.

During the three-month period ended March 31,

During the three-month period ended June 30,

2022, depreciation and amortization expense totaled $ 5,271,395

of which $ 1,532,788 ,

and $ 3,567,899 were

recorded in direct labor and factory overheads incurred during plant shutdown, administrative expenses and cost of net revenue.

During the six-month period ended June 30, 2022, depreciation and amortization expense totaled $ 10,273,014 ,

of which $ 3,293,856 , $ 1,368,395 and $ 5,610,763 were recorded in direct labor and factory overheads incurred during plant shutdown,

administrative expenses and cost of net revenue.

During the three-month period ended June 30, 2021,

depreciation and amortization expense totaled $ 4,119,073 of which $ 758,445 , $ 163,868 and $ 3,196,760 were recorded in direct labor and

factory overheads incurred during plant shutdown, administrative expenses and cost of net revenue.

During the six-month period ended June

30, 2021, depreciation and amortization expense totaled $ 8,222,022 , of which $ 2,575,227 , $ 327,101 and $ 5,319,694 were recorded in direct

labor and factory overheads incurred during plant shutdown, administrative expenses and cost of net revenue, respectively.

NOTE 5 – FINANCE LEASE RIGHT-OF-USE ASSETS

Property, plant and equipment under finance lease, net consist of the

labor and factory overheads incurred during plant shutdown, administrative expenses and cost of net revenue.

5 – FINANCE LEASE RIGHT-OF-USE ASSETS

Property, plant and equipment under finance leases, net consist of

the following:

Finance Lease Right-Of-Use Assets - Schedule of Property,

10 unchanged sentences

certificates over these buildings as the Company could not obtain land use rights certificates on the underlying parcels of land.

During the three-month period ended March 31,

2022, depreciation and amortization expense totaled $ 1,459 , which was recorded in direct labor and factory overheads incurred during plant

During the three-month period ended March 31, 2021, depreciation and amortization expense totaled $ 1,428 , which was recorded

in direct labor and factory overheads incurred during plant shutdown.

During the three and six months period ended June

30, 2022, depreciation and amortization expense totaled $ 1,401 and $ 2,860 , respectively, which was recorded in direct labor and factory

overheads incurred during plant shutdown.

During the three and six months period ended June

30, 2021, depreciation and amortization expense totaled $ 1,434 and $ 2,862 , respectively, which was recorded in direct labor and factory

overheads incurred during plant shutdown.

GULF RESOURCES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

JUNE 30, 2022

(Expressed in U.S.

NOTE 6 – OPERATING LEASE RIGHT-OF USE ASSETS

As of March 31, 2022, the total operating lease

6 – OPERATING LEASE RIGHT– OF USE ASSETS

As of June 30, 2022, the total operating lease

ROU assets was $ 8,886,582 .

The total operating lease cost for the three-month

period ended March 31, 2022 and 2021 was $ 258,398 and $ 240,150 , respectively.

The total operating lease cost for the six-month

period ended June 30, 2022 and 2021 was $ 506,537 and $ 481,295 .

The Company has the rights to use certain parcels

of land located in Shouguang, the PRC, through lease agreements signed with local townships or the government authority.

For parcels of

land that are collectively owned by local townships, the Company cannot obtain land use rights certificates.

The parcels of land of which

the Company cannot obtain land use rights certificates covers a total of approximately 38.6 square kilometers of aggregate carrying value

of $ 10,486,921 as at March 31, 2022.

NOTE 7 – ACCOUNTS AND OTHER PAYABLE AND

ACCRUED EXPENSES

Accounts and other payable and accrued expenses

of land located in Shouguang, PRC, through lease agreements signed with local townships or the government authority (See Note 3).

parcels of land that are collectively owned by local townships, the Company cannot obtain land use rights certificates.

The parcels of

land of which the Company cannot obtain land use rights certificates covers a total of approximately 38.6 square kilometers of aggregate

carrying value of $ 9,774,975 as at June 30, 2022.

NOTE 7 – ACCOUNTS PAYABLE, OTHER PAYABLE

AND ACCRUED EXPENSES

Accounts payable, other payable and accrued expenses

consist of the following:

3 unchanged sentences

Salary payable

Other payable-related party (see Note 8)

Other payable

Accrued expense for construction

Accrued expense-others

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(Expressed in U.S.

NOTE 8 – RELATED PARTY TRANSACTIONS

NOTE 8 – RELATED PARTY

On September 25, 2012, the Company purchased five

5 unchanged sentences

management services for an annual amount of approximately $ 92,956 for five years from January 1, 2018 to December 31, 2022.

associated with this agreement for the three months ended March 31, 2022 and 2021 was approximately $ 24,568 and $ 23,735 .

associated with this agreement for the three and six months ended June 30, 2021 was approximately $ 23,239 and $ 47,807 .

The expense associated

with this agreement for the three and six months ended June 30, 2021 was approximately $ 24,144 and $ 47,878 .

NOTE 8 – RELATED PARTY TRANSACTIONS –

13 unchanged sentences

Land use tax payable

10 – LEASE LIABILITIES-FINANCE AND OPERATING LEASE

NOTE 10 – LEASE LIABILITIES-FINANCE

AND OPERATING LEASE

The components of finance lease liabilities were

5 unchanged sentences

Finance lease liability, net of current portion

Interest expenses from a finance lease liability

amounted to $ 33,622 and $ 35,538 for the three-month periods ended March 31, 2022 and 2021, respectively, were charged to the condensed

consolidated statement of loss.

Interest expenses from capital lease obligations

amounted to $ 36,074 and $ 35,659 for the three-month period ended June 30, 2022 and 2021, respectively, which were charged to the condensed

consolidated statement of income (loss).

Interest expenses from capital lease obligations amounted to $ 69,696 and $ 71,197 for the six-month

period ended June 30, 2022 and 2021, respectively, which were charged to the condensed consolidated statement of income (loss).

The components of operating lease liabilities

6 unchanged sentences

The weighted average remaining operating lease

term at March 31, 2022 was 20 years and the weighted average discounts rate was 4.89 %.

This discount rates used are based on the base

rate quoted by the People's Bank of China and vary with the remaining term of the lease.

Lease payment in the three-months ended March

31, 2022 and 2021 was $ 257,879 and $ 204,951 .

term at June 30, 2022 was 20 years and the weighted average discounts rate was 4.89 %.

Lease payments for the three-month period ended

June 30, 2022 and 2021, respectively, were $ 565,917 and $ 575,242 .

Lease payments for the six-month period ended June 30, 2022 and 2021,

respectively, were $ 823,796 and $ 780,193 .

Maturities of lease liabilities were as follows:

11 unchanged sentences

Present value of net minimum lease payments

NOTE 11 – EQUITY

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2022

(Expressed in U.S.

Restricted Shares

16 unchanged sentences

Statutory Common Reserve Funds

SCHC, SYCI and DCHC are required each year to

transfer at least 10% of the profit after tax as reported under the PRC statutory financial statements to the Statutory Common Reserve

SCHC, SYCI, SHSI and DCHC are required each year

to transfer at least 10% of the profit after tax as reported under the PRC statutory financial statements to the Statutory Common Reserve

Funds until the balance reaches 50% of the registered share capital.

3 unchanged sentences

reserve balance falling below 25% of the registered capital.

The Statutory Common Reserve Fund as of March 31, 2022 for SCHC, SYCI and

DCHC is 16%, 14% and 0% of its registered capital respectively.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(Expressed in U.S.

The Statutory Common Reserve Fund as of June 30, 2022 for SCHC, SYCI, SHSI,

and DCHC is 16%, 14%, 0% and 0% of its registered capital, respectively.

NOTE 12 – STOCK-BASED COMPENSATION

6 unchanged sentences

of the 2007 Plan and applicable award agreement.

As of March 31, 2022, the number of shares of the Company’s common stock available

for grant of stock options and issuance under the 2019 Plan is 1,056,801 shares.

As of June 30, 2022, the number of shares of the Company’s common stock available

for grant of awards under the 2019 Plan was 1,056,801 shares.

The fair value of each option award is estimated

3 unchanged sentences

on the annualized historical stock price volatility of the Company, and the expected life is based on the historical option exercise pattern.

For the three months ended March 31, 2022 and

For the three months ended June 30, 2022 and 2021,

total compensation costs for options issued recorded in the consolidated statement of loss were $ 0 .

During the three months ended March 31, 2022, there were no options

issued to employees or non-employees.

During the three and six months ended June 30, 2022, there were no

options granted to employees or non-employees.

The following table summarizes all Company stock

option transactions between January 1, 2022 and March 31, 2022.

option transactions between January 1, 2022 and June 30, 2022.

Stock-Based Compensation - Schedule of Stock

8 unchanged sentences

Expired during the period

Balance, March 31, 2022

Stock Options and Warrants Outstanding and Exercisable

Balance, June 30, 2022

Stock Options Outstanding and Exercisable

Weighted Average

Outstanding at March 31, 2022

Outstanding at June 30, 2022

Exercise Prices

2 unchanged sentences

The aggregate intrinsic value of options outstanding and exercisable

as of March 31, 2022 and 2021 was $ 0 and $ 4,710 .

During the three months ended March 31, 2022 and

2021, there were no options exercised.

as of June 30, 2022 was $ 0 .

During the three and six months ended June 30,

2022 and 2021, there were no options exercised.

GULF RESOURCES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

JUNE 30, 2022

(Expressed in U.S.

2 unchanged sentences

of accounting for income taxes in accordance with FASB ASC 740-10.

If it is more likely than not that some portion or all of a deferred

tax asset will not be realized, a valuation allowance is recognized.

States (“US”)

United States (“US”)

United States

3 unchanged sentences

No provision for the US federal income taxes has been made as the Company had no US taxable

income for the three-month periods ended March 31, 2022 and 2021, and management believes that its earnings are permanently invested in

Virgin Islands (“BVI”)

income for the three-month and six-month periods ended June 30, 2022 and 2021, and management believes that its earnings are permanently

invested in the PRC.

British Virgin Islands (“BVI”)

Upper Class Group Limited, a subsidiary of Gulf

Resources, Inc., was incorporated in the BVI and, under the current laws of the BVI, it is not subject to tax on income or capital gain

Upper Class Group Limited did not generate assessable profit for the three-month periods ended March 31, 2022 and 2021.

Upper Class Group Limited did not generate assessable profit for the three-month and six-month periods ended June 30, 2022

HKJI, a subsidiary of Upper Class Group Limited, was

1 unchanged sentence

from Hong Kong.

No provision for income tax has been made as it has no taxable income for the three-month periods ended March

31, 2022 and 2021.

The applicable statutory tax rates for the three-month periods ended March 31, 2022 and 2021 are 16.5 %.

No provision for income tax has been made as it has no taxable income for the three-month and six-month periods

ended June 30, 2022 and 2021.

The applicable statutory tax rates for the three-month and six-month periods ended June 30, 2022

and 2021 are 16.5 %.

There is no dividend withholding tax in Hong Kong.

Enterprise income tax (“EIT”) for

SCHC, SYCI and DCHC in the PRC is charged at 25 % of the assessable profits.

The operating subsidiaries SCHC, SYCI and DCHC

are wholly foreign-owned enterprises (“FIE”) incorporated in the PRC and are subject to PRC Local Income Tax Law.

tax losses may be carried forward to be utilized against future taxable profit for ten years for High-tech enterprises and small and medium-sized

enterprises of science and technology and for five years for other companies.

Tax losses of the operating subsidiaries of the Company

may be carried forward for five years.

Enterprise income tax (“EIT”) for SCHC, SYCI , SHSI and

DCHC in the PRC is charged at 25 % of the assessable profits.

The operating subsidiaries SCHC is a wholly foreign-owned enterprises (“FIE”) , SYCI , DCHC, and SHSI are incorporated in

the PRC and are subject to PRC Local Income Tax Law.

The PRC tax losses may be

carried forward to be utilized against future taxable profit for ten years for High-tech enterprises and small and medium-sized enterprises

of science and technology and for five years for other companies.

Tax losses of the operating subsidiaries of the Company may be carried

forward for five years.

On February 22, 2008, the Ministry of Finance

3 unchanged sentences

January 1, 2008 to its foreign investor(s) shall be subject to WHT at 5% effective tax rate.

As of March 31, 2022 and December 31, 2021, the accumulated distributable

earnings under the Generally Accepted Accounting Principles (GAAP”) of PRC that are subject to WHT are $ 140,728,940 and $ 140,006,862 ,

respectively.

Since the Company intends to reinvest its earnings to further expand its businesses in mainland China, its foreign invested

enterprises do not intend to declare dividends to their immediate foreign holding companies in the foreseeable future.

Accordingly, as

of March 31, 2022 and December 31, 2021, the Company has not recorded any WHT on the cumulative amount of distributable retained earnings

of its foreign invested enterprises that are subject to WHT in China.

As of March 31, 2022 and December 31, 2021, the unrecognized WHT

are $ 5,963,592 and $ 5,932,051 , respectively.

As of June 30, 2022 and December 31, 2021, the

accumulated distributable earnings under the Generally Accepted Accounting Principles (GAAP”) of PRC that are subject to WHT were

$ 137,684,848 and $ 140,006,862 , respectively.

Since the Company intends to reinvest its earnings to further expand its businesses in mainland

China, its foreign invested enterprises do not intend to declare dividends to their immediate foreign holding companies in the foreseeable

Accordingly, as of June 30, 2022 and December 31, 2021, the Company has not recorded any WHT on the cumulative amount of distributable

retained earnings of its foreign invested enterprises that are subject to WHT in China.

As of June 30, 2022 and December 31, 2021, the

unrecognized WHT were $ 5,869,416 and $ 5,932,051 , respectively.

The Company’s income tax returns are subject

11 unchanged sentences

in every four years.

The tax returns for 2014 and 2018 are currently subject to examination.

The components of the provision for income tax

benefit (expense) from continuing operations are:

The tax returns for 2014 and 2018 have been examined, and there is no Hong Kong Profits Tax was charged.

The components of the income tax benefit from

continuing operations are:

Income Taxes - Schedule of Components of Income Tax Expense Benefit

Three-Month Period Ended March 31,

Three-Month Period Ended June 30,

Six-Month Period Ended June 30,

Current taxes – PRC

Deferred tax – PRC entities

Deferred taxes – US entity

Deferred taxes

Change in valuation allowance

Tax Expense Benefit

$ ( 356,480 )

Significant components of the Company’s

deferred tax assets and liabilities at March 31, 2022 and December 31, 2021 are as follows:

deferred tax assets and liabilities at June 30, 2022 and December 31, 2021 are as follows:

Income Taxes - Schedule of Deferred

11 unchanged sentences

The increase in valuation allowance for the three-month

period ended March 31, 2022 is $ 22,653 .

The decrease in valuation allowance for the three-month

period ended March 31, 2021 is $ 86,964 .

period ended June 30, 2022 is $ 11,523 .

The increase in valuation allowance for the three-month

period ended June 30, 2021 is $ 144,890 .

The increase in valuation allowance for the six-month

period ended June 30, 2022 is $ 34,176 .

The increase in valuation allowance for the six-month

period ended June 30, 2021 is $ 57,926 .

There were no unrecognized tax benefits and accrual

for uncertain tax positions as of March 31, 2022 and December 31, 2021 and no amounts accrued for penalties and interest for the three

months ended March 31, 2022 and 2021.

NOTE 14 – BUSINESS SEGMENTS

The Company has four reportable segments:

crude salt, chemical products and natural gas.

The reportable segments are consistent with how management views the markets served by

the Company and the financial information that is reviewed by its chief operating decision maker.

for uncertain tax positions as of June 30, 2022 and December 31, 2021 and no amounts accrued for penalties and interest for the three

and six months ended June 30, 2022 and 2021.

GULF RESOURCES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

JUNE 30, 2022

(Expressed in U.S.

NOTE 14 – BUSINESS SEGMENTS – Continued

NOTE 14 – BUSINESS SEGMENTS

An operating segment’s performance is primarily

6 unchanged sentences

All the customers are located in PRC.

Three-Month Period Ended March 31, 2022

(external customers)

(intersegment)

Loss from operations before income benefit

Income tax benefit

Loss from operations after income taxes(benefit)

Income(loss) from operations before income tax benefit

Income tax benefit (expense)

( 1,320,295 )

( 1,249,621 )

Income (loss) from operations after

income tax benefit (expense)

Depreciation and amortization

Capital expenditures

Three-Month Period Ended March 31, 2021

(external customers)

(intersegment)

Loss from operations before income benefit

Income(loss) from operations before income tax benefit (expense)

( 3,682,445 )

( 2,382,809 )

Income tax benefit (expense)

Income (loss) from operations after

income tax benefit (expense)

( 3,682,445 )

( 2,739,289 )

Income tax benefit

Loss from operations after income taxes(benefit)

Depreciation and amortization

Capital expenditures

* Certain common production overheads, operating

and administrative expenses and asset items (mainly cash and certain office equipment) of bromine and crude salt segments in SCHC were

split by reference to the average selling price and production volume of each respective segment through April 2022.

Commencing May 2022,

costs were assigned to the two subsidiaries (SCHC and SHSI) by independent accounting.

NOTE 14 – BUSINESS SEGMENTS – Continued

(external customers)

(intersegment)

Income (loss) from operations before income tax benefit (expense)

Income tax benefit (expense)

( 1,662,456 )

( 1,345,316 )

Loss from operations after income tax benefit (expense)

Depreciation and amortization

Capital expenditures

(external customers)

(intersegment)

Income (loss) from operations before income tax benefit

( 1,588,020 )

( 1,487,781 )

( 1,790,770 )

( 3,873,463 )

( 5,664,233 )

Income tax benefit (expense)

Income (loss from operations after income tax benefit (expense)

( 1,190,554 )

( 1,144,190 )

( 1,403,541 )

( 3,873,463 )

( 5,277,004 )

Depreciation and amortization

Capital expenditures

* Certain common production overheads, operating

and administrative expenses and asset items (mainly cash and certain office equipment) of bromine and crude salt segments in SCHC were

split by reference to the average selling price and production volume of respective segment.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(Expressed in U.S.

split by reference to the average selling price and production volume of the respective segment until April 2022.

Commencing May 2022,

costs were assigned to the two subsidiaries (SCHC and SHSI) by independent accounting.

NOTE 14 – BUSINESS SEGMENTS – Continued

Three-Month Period Ended March 31,

Three-Month Period Ended June 30,

Six-Month Period Ended June 30,

Reconciliations

Total segment operating loss

Total segment operating Income (loss)

$ ( 1,790,770 )

Corporate costs

Unrealized gain (loss) on translation of intercompany balance

Loss from operations

Loss before income taxes

The following table shows the major customers

(10% or more) for the three-month period ended March 31, 2022.

( 3,193,107 )

( 3,279,313 )

Unrealized gain on translation of intercompany balance

Income (loss) from operations

( 2,382,809 )

( 5,664,233 )

Other income, net of expense

Income (loss) before taxes

$ ( 2,346,740 )

$ ( 5,592,573 )

The following table shows the major customer(s)

(10% or more) for the three-month period ended June 30, 2022.

Business Segments - Schedule of

1 unchanged sentence

Chemical Products

Percentage of Total Revenue (%)

Shandong Morui Chemical Company Limited

Shandong Brother Technology Limited

Shouguang Weidong Chemical Company Limited

The following table shows the major customer(s)

(10% or more) for the six-month period ended June 30, 2022.

Chemical Products

Percentage of

1 unchanged sentence

Shandong Brother Technology Limited

The following table shows the major customers

(10% or more) for the three-month period ended March 31, 2021.

Shouguang Weidong Chemical Company Limited

The following table shows the major customer(s)

(10% or more) for the three-month period ended June 30, 2021.

Chemical Products

Percentage of Total Revenue (%)

Shandong Morui Chemical Company Limited

Shouguang Weidong Chemical Company Limited

Shandong Brother Technology Limited

The following table shows the major customer(s)

(10% or more) for the six-month period ended June 30, 2021.

Chemical Products

Percentage of

2 unchanged sentences

Shandong Brother Technology Limited

Shandong Shouguang Shenrunfa Ocean Chemical Company Limited

Dongying Bomeite Chemical Company Limited

15 – CUSTOMER CONCENTRATION

During the three-month period ended March 31,

2022, the Company sold 49 % of its products to its top five customers.

As of March 31, 2022, amounts due from these customers were $ 7,115,008 .

During the three-month period ended March 31,

2021, the Company sold 74.5 % of its products to its top five customers.

As of March 31, 2021, amounts due from these customers were $ 3,571,150 .

During the six-month period ended June 30, 2022,

the Company sold 52.9 % of its products to its top five customers, respectively.

As of June 30, 2022, amounts due from these customers

were $ 5,166,271 .

During the six-month period ended June 30, 2021,

the Company sold 66.4 % of its products to its top five customers, respectively.

As of June 30, 2021, amounts due from these customers

were $ 2,878,885 .

NOTE 16 – MAJOR SUPPLIERS

During the three-month period ended March 31,

During the six-month period ended June 30, 2022

the Company purchased 100 % of its raw materials from its top five suppliers.

As of March 31, 2022, amounts due to those

suppliers were $ 623,523 .

During the three-month period ended March 31,

As of June 30, 2022, amounts due to those suppliers

were $ 594,208 .

During the six-month period ended June 30, 2021

the Company purchased 100 % of its raw materials from its top five suppliers.

As of March 31, 2021, amounts due to those

suppliers were $ 1,040,950 .

As of June 30, 2021, amounts due to those suppliers

were $ 412,601 .

NOTE 17 – FAIR VALUE OF FINANCIAL INSTRUMENTS

2 unchanged sentences

nature of these instruments.

There were no material unrecognized financial assets and liabilities as of March 31, 2022 and

December 31, 2021.

There were no material unrecognized financial assets and liabilities as of June 30, 2022 and December

NOTE 18 – CAPITAL COMMITMENT AND OTHER SERVICE

CONTRACTUAL OBLIGATIONS

The Company has no purchase commitments as of

March 31, 2022.

The following table sets forth the Company’s

contractual obligations as of March 31, 2022:

contractual obligations as of June 30, 2022:

Capital Commitment and Other Service

6 unchanged sentences

the next 25 to 36 months

19 – LOSS CONTINGENCIES

NOTE 19 – LOSS CONTINGENCIES

Settled Litigation

44 unchanged sentences

waiting for approval from the higher authority.

The Company is in the process of resolving

the issues in connection with SCHC’s land use and planning diligently.

The Company has been in discussions closely with the

local government authorities with the help from Shouguang City Bromine Association to seek reliefs and, based on verbal confirmation

by local government authorities, believes the administrative penalties imposed by the Bureau according to the Written Decisions are

being re-assessed by local government authorities and may be revoked.

Pursuant to a Written Application dated October 28, 2019

addressed to the Court by the Bureau, the Bureau withdrew its application for the enforcement proceedings regarding the

administrative penalty imposed on Factory No.

7, Factory No.

The Company is in the process of resolving the

issues in connection with SCHC’s land use and planning diligently.

The Company has been in discussions closely with the local government

authorities with the help from Shouguang City Bromine Association to seek reliefs and, based on verbal confirmation by local government

authorities, believes the administrative penalties imposed by the Bureau according to the Written Decisions are being re-assessed by local

government authorities and may be revoked.

Pursuant to a Written Application dated October 28, 2019 addressed to the Court by the Bureau,

the Bureau withdrew its application for the enforcement proceedings regarding the administrative penalty imposed on Factory No.

8 and Factory No.

Pursuant to a written decisions of administrative

ruling captioned (2019) Lu 0783 Xing Shen No.

389 Zhi Yi, dated November 25, 2020, the Court orders to terminate the enforcement of

the case captioned (2019) Lu 0783 Xing Shen No.

Production of Factory No.

Pursuant to a written decisions of administrative ruling captioned (2019) Lu 0783 Xing Shen No.

dated November 25, 2020, the Court orders to terminate the enforcement of the case captioned (2019) Lu 0783 Xing Shen No.

of Factory No.

7 was allowed to resume in April 2019.

received a notification from the Shouguang City Government in February 2019 informing the Company that Factory No.

The Company received a notification from the Shouguang City Government in February

2019 informing the Company that Factory No.

9 have passed inspection and were approved to resume operation

13 unchanged sentences

In view of the above facts and circumstances,

the Company believes that it is not necessary to accrue for any estimated losses or impairment as of March 31, 2022.

the Company believes that it is not necessary to accrue for any estimated losses or impairment as of June 30, 2022.

NOTE 20 - SUBSEQUENT EVENT

There was a wholly-owned subsidiary, Shouguang

Hengde Salt Industry Co.

LTD, was registered on April, 2022 in Shandong Province, China, for future crude salt production and trading.

At present, this subsidiary does not have any operations.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements