What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-15 compared with 2022-05-13 · 419 added, 217 removed, 218 unchanged (74% of the section changed)

18 unchanged sentences

bromine, crude salt, chemical products and natural gas.

Through our wholly-owned subsidiary, SCHC, we

produce and trade bromine and crude salt.

We are one of the largest producers of bromine in China, as measured by production output.

Elemental bromine is used to manufacture a wide variety of bromine compounds used in industry and agriculture.

Bromine also is used to

form intermediary chemical compounds such as Tetramethylbenzidine.

Bromine is commonly used in brominated flame retardants,

fumigants, water purification compounds, dyes, medicines and disinfectants.

Crude salt is the principal material in alkali

production as well as chlorine alkali production and is widely used in the chemical, food and beverage, and other industries.

Through our wholly-owned subsidiary, SCHC we produce

and trade bromine;

and through our wholly-owned subsidiary, SHSI, we manufacture and sell crude salt.

We are one of the largest

producers of bromine in China, as measured by production output.

Elemental bromine is used to manufacture a wide variety of bromine compounds

used in industry and agriculture.

Bromine also is used to form intermediary chemical compounds such as Tetramethylbenzidine.

is commonly used in brominated flame retardants, fumigants, water purification compounds, dyes, medicines and disinfectants.

salt is the principal material in alkali production as well as chlorine alkali production and is widely used in the chemical, food and

beverage, and other industries.

Through our wholly-owned subsidiary, SYCI, we

33 unchanged sentences

from the local government that it has been coordinating with several government agencies to solve these three outstanding approval issues

in a timely manner and that all the affected bromine plants willnot be allowed to commence production prior to obtaining those approvals.

in a timely manner and that all the affected bromine plants will not be allowed to commence production prior to obtaining those approvals.

In February 2019, the Company received a notification from the local

15 unchanged sentences

The Company is still waiting for governmental

approval for factories No.2, No.8, and No.10.

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

areas including that for prevention of flood.

As a result, the Company 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.

approval for factories No.

8, and No.10.

The Company expects to receive approval to open one of these factories in 2022 and perhaps

try its best effort to get another one in early 2023.

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

all mining areas including that for prevention of flood.

As a result, the Company 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.

On November 24, 2017, Gulf Resources received

5 unchanged sentences

in compliance with regulations, they were also close to a residential area.

As a result, the government determined we should relocate

to the Bohai park.

Chemical companies that are not being asked to move into the park are being permanently closed.

Since our factories

closed, the Company has secured from the government the land use rights for its chemical plant On January 6, 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 due

to the COVID-19 in China.

The construction is expected to take approximately one year, and an additional six months to complete the equipment

installation and testing, Which was delayed due to the supply chain issues as well as the electric restrictions impacted by the Word &

Chinese Economy.

On February 22, 2022, the Company announced that While the Company did not receive a formal notice from the government

regarding the electricity needed for its Yuxin Chemical factory, 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.

As a result, the government determined the Company should

relocate to the Bohai park.

Chemical companies that were not asked to move into the park have been closed.

Since the closure of

our factories, the Company has secured from the government the land use rights for its chemical plant.

On January 6, 2020, the Company

received the environmental protection approval by the government of Shouguang City, Shandong Province for the proposed Yuxin Chemical

The Company began the construction on its new chemical facilities located at Bohai Marine Fine Chemical Industrial Park in June

The completion of construction has been delayed due to COVID-19 related restrictions, supply chain disruption and electric restrictions.

On February 22, 2022, the Company announced that while the Company did not receive a formal notice from the government regarding the electricity

needed for its Yuxin Chemical factory, discussions with the government have convinced management that the electricity restrictions are

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

so the Company can complete installation.

Because of supply chain issues, largely related to COVID 19, the delivery of some of the equipment

has been delayed.

At this time, the Company cannot estimate when construction will be completed.

In January 2017, the Company completed the first

1 unchanged sentence

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.

approvals have been received, the Company has to temporarily halt trial production at its natural gas well in Daying.

In compliance with

the Chinese government new policies, the Company is also required to obtain an exploration license and a mining license for bromine and

natural gas, respectively.

Pursuant to the Opinions of the Ministry of Natural Resources on Several Issues in Promoting the Reform of

Mineral Resources Management (Trial) promulgated by the Ministry of Natural Resources of PRC on January 9, 2020, which came into effect

on May 1, 2020, privately owned enterprises are allowed to participate in the natural gas production.

The Company plans to proceed with

its applications for the natural gas and brine project approvals with related government departments until after the governmental planning

has been finalized the land and resource planning for Sichuan Province.

As a result of our acquisitions of SCHC and SYCI,

our historical consolidated financial statements and the information presented below reflects the accounts of SCHC, SYCI and DCHC,

the consolidated financial statements and the information presented below as of and for the year ended December 31, 2021.

The following

discussion should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this report.

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

approvals for safety production inspection, environmental protection assessment, as well as related land issues.

Until these approvals

have been received, the Company has temporarily halted trial production at its natural gas well in Daying.

In compliance with the Chinese

government new policies, the Company is also required to obtain exploration and mining licenses for both bromine and natural gas.

to the Opinions of the Ministry of Natural Resources on Several Issues in Promoting the Reform of Mineral Resources Management (Trial)

promulgated by the Ministry of Natural Resources of PRC on January 9, 2020, which came into effect on May 1, 2020, privately owned enterprises

are allowed to participate in the natural gas production.

The Company plans to proceed with its applications for the natural gas and brine

project approvals with related government departments after the governmental planning has been finalized and the land and resource planning

for Sichuan Province has been approved.

As a result of our acquisitions of SCHC and SYCI, our historical consolidated

financial statements and the information presented below reflects the accounts of SCHC, SYCI , SHSI and DCHC, the consolidated financial

statements and the information presented below as of and for the year ended June 30, 2022.

The following discussion should be read

in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this report.

On January 28, 2020 we completed a 1-for-5 reverse

3 unchanged sentences

Our current corporate structure chart is set forth in the following

As a result of our acquisitions of SCHC and SYCI,

our historical financial statements and the information presented below reflects the accounts of SCHC, SYCI and DCHC.

The following discussion

should be read in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere in this report.

As a result of our acquisitions of SCHC and SYCI, our historical financial

statements and the information presented below reflects the accounts of SCHC, SYCI, SHSI and DCHC.

The following discussion should be

read in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere in this report.

RESULTS OF OPERATIONS

The following table presents certain information

derived from the condensed consolidated statements of income, cash flows and stockholders’ equity for the three-month periods ended

March 31, 2022 and 2021.

Comparison of the Three-Month Periods Ended

March 31, 2022 and 2021

derived from the condensed consolidated statements of operations, cash flows and stockholders equity for the three-month and six-month

periods ended June 30, 2022 and 2021.

Comparison of the Three-Month Period Ended

June 30, 2022 and 2021

Three-Month Period

Ended March 31, 2022

Ended June 30, 2022

Three-Month Period

Ended March 31, 2021

Ended June 30, 2021

Percent Change

Increase/ (Decrease)

Cost of net revenue

$ (4,549,968 )

$ (4,181,389 )

Gross profit (loss)

Sales, marketing and other operating expenses

Direct labor and factory overheads incurred during plant shutdown

$ (2,184,591 )

Other operating expense

General and administrative expenses

$ (2,242,501 )

$ (1,736,250 )

Loss from operations

$ (3,281,424 )

Other income, net

Loss before taxes

$ (3,245,833 )

Income(loss) from operations

Income (loss) before taxes

Income tax benefit

$ (2,502,124 )

Net revenue The table below

shows the changes in net revenue in the respective segment of the Company for the three-month period ended March 31, 2022 compared to

the same period in 2021:

Net Income (loss)

below shows the changes in net revenue in the respective segment of the Company for the three-month period ended June 30, 2022 as compared

to the same period in 2021:

Net Revenue by Segment

2 unchanged sentences

Percent Change

March 31, 2022

March 31, 2021

June 30, 2022

June 30, 2021

of Net Revenue

Chemical Products

1 unchanged sentence

Percentage Change

Bromine and crude salt segments product sold in tonnes

March 31, 2022

March 31, 2021

Bromine (excluded volume sold to SYCI)

Three-Month Period Ended

Percentage Change

Natural gas segments product sold in cubic metre

March 31, 2022

March 31, 2021

Bromine and crude salt segments

product sold in tonnes

June 30, 2022

June 30, 2021

Increase (Decrease)

Bromine segment

For the three-month periods ended March 31, 2022

and 2021, the net revenue for the bromine segment was $8,126,015 and $4,810,990.

This increase was due to the 5% increase in tonnes sold

and a 60% increase in average selling price.

For the three-month periods ended June 30, 2022 and 2021, the net revenue

for the bromine segment was $13,893,809 and $10,025,438, respectively.

The increase of the net revenue of bromine was due to an increase

in selling prices of bromine in the second quarter of 2022.

During the second quarter of 2022, in order to control COVID, the government

made a series of unannounced inspections of our bromine and crude salt facilities.

These inspections caused the Company to shut and then

reopen its facilities.

During the second quarter of 2021, the government made an inspection that also caused the Company to close and

reopen its facilities.

However, the Company believes the inspections in the second quarter of 2022 had a far more significant impact on

production than did those in the second quarter of 2021.

The average selling price of bromine in the second quarter was $7,740

compared to $5,556 of the second quarter previous year.

Crude salt segment

For the three-month periods ended March 31, 2022

and 2021, the net revenue for the crude salt was $754,044 and $448,253.

This increase was due to increases in crude salt unit price.

For the three-month periods ended June 30, 2022 and 2021, the net revenue

for the crude salt was $1,817,904 and $1,122,570, respectively.

The increase of net revenue of crude salt was mainly due to the 10% increase

in tonnes sold and a 47% increase in average selling price of crude salt.

During the second quarter of 2022, in order to control COVID,

the government made a series of unannounced inspections of our bromine and crude salt facilities.

These inspections caused the Company

to shut and then reopen its facilities.

During the second quarter of 2021, the government made an inspection that also caused the Company

to close and reopen its facilities.

However, the Company believes the inspections in the second quarter of 2022 had a far more significant

impact on production than did those in the second quarter of 2021.

Chemical products segment

For the three-month periods ended March 31, 2022

For the three-month periods ended June 30, 2022

and 2021, the net revenue for the chemical products segment was $0 due to the closure of our chemical factories since September 1, 2017.

As a result there were no chemical products for sale for the three-month period ended March 31, 2022.

Our new chemical factory is under

construction in Bohai Park.

Natural gas segment

For the three-month period ended March 31, 2022

and 2021, the net revenue for the rental of equipment was $50,678 and $0.

For the three-month period ended June 30, 2022

and 2021, the net revenue for the natural gas was $0.

Cost of Net Revenue

3 unchanged sentences

Three-Month Period Ended

March 31, 2022

March 31, 2021

June 30, 2022

June 30, 2021

Chemical Products

Cost of net revenue reflects mainly

the raw materials consumed and the direct salaries and benefits of staff engaged in the production process, electricity, depreciation

and amortization of manufacturing plant and machinery and other manufacturing costs.

the raw materials consumed, the direct salaries and benefits of staff engaged in the production process, electricity, depreciation and

amortization of manufacturing plant and machinery and other manufacturing costs.

Bromine production capacity and utilization

3 unchanged sentences

Annual Production Capacity (in tonnes)

Three-month period ended March 31, 2021

Three-month period ended March 31, 2022

Variance of the three-month periods ended March 31, 2022and 2021

Three-month period ended June 30, 2021

Three-month period ended June 30, 2022

Variance of the three-month period ended June 30, 2022 and 2021

(i) Utilization ratio is calculated based on the

annualized actual production volume in tonnes for the periods divided by the annual production capacity in tonnes.

annualized actual production volume in tonnes for the periods divided by the annual production capacity in tonnes of all the seven factories

including those that have not commenced operations.

Our utilization ratio was 23% for the three-month

period ended June 30, 2022, the same as compared to the three-month period ended June 30, 2021.

Bromine segment

For the three-month period ended March 31, 2022

For the three-month period ended June 30, 2022,

the cost of net revenue for the bromine segment was $6,865,832.

For the three-month period ended March 31, 2021

The increase of $1,312,339 in cost of net revenue for the bromine segment

was primarily due to an increase in manufacturing unit overhead, which was mainly due to the split between the bromine and crude salt

businesses in May 2022.

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

the cost of net revenue for the bromine segment was $5,553,493.

Crude salt segment

For the three-month period ended March 31, 2022

For the three-month period ended June 30, 2022

the cost of net revenue for the crude salt segment was $1,235,288.

For the three-month period ended March 31, 2021

The reason for the decrease is that there is no further cost split

with bromine segment , because the Company started independent accounting by each subsidiary since May 2022 for SCHC and SHSI.

For the three-month period ended June 30, 2021

the cost of net revenue for the crude salt segment was $1,362,281.

1 unchanged sentence

Cost of net revenue for our chemical products

segment for the three-month period ended March 31, 2022 and 2021 was $0.

segment for the three-month period ended June 30, 2022 and 2021 was $0.

Natural gas segment

Cost of net revenue for our natural gas segment

for the three-month period ended March 31, 2022 and 2021 was $83 and $0.

Gross Profit (Loss) Gross profit

was $4,380,769, or 49%, of net revenue for three-month period ended March 31, 2022 compared to $1,077,854, or 21%, of net revenue for

three-month period ended March 31, 2021.

Profit (Loss) by Segment

for the three-month period ended June 30, 2022 and 2021 was $0.

Gross Profit.

Gross profit was $7,610,594,

or 48%, of net revenue for the three-month period ended June 30, 2022, representing an increase of $3,378,360, as compared to a gross

profit of $4,232,234, or 38%, of net revenue for the same period in 2021.

Gross Profit (Loss) by Segment

% Point Change

1 unchanged sentence

Three-Month Period Ended

March 31, 2022

March 31, 2021

Profit (Loss) Margin

June 30, 2022

June 30, 2021

Profit Margin

Gross Profit Margin

1 unchanged sentence

Chemical Products

Total Gross Profit (Loss)

Total Gross Profit

Bromine segment

For the three-month period ended March 31, 2022,

For the three-month period ended June 30, 2022,

the gross profit margin for our bromine segment was 51%.

This increase was primarily attributable to the higher average selling price

of bromine of $8,082 per ton in the three-month period ended March 31, 2022 compared to $5,039 per ton in the three-month period ended

March 31, 2021

For the three-month period ended March 31, 2021,

the gross loss margin for our bromine segment was 27%.

Crude salt segmen t

For the three-month period ended March 31, 2022,

the gross profit margin for our crude salt segment was 17%, compared to (49%) in three-month period ended March 31, 2021, representing

a 66% increase.

This increase was primarily attributable to the higher average selling price of crude salt of $49 per ton in three-month

period ended March 31, 2022 compared to $22 per ton in three-month period ended March 31, 2021.

For the three-month period ended March 31, 2021,

This 6% increase was due to the increase in the selling price of bromine sold

in the second quarter of 2022.

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

the gross profit margin for our bromine segment was 45%.

Crude salt segment

For the three-month period ended June 30, 2022,

the gross profit margin for our crude salt segment was 32%.

The increase of net revenue of crude salt was mainly due to the 10% increase

in tonnes sold and a 47% increase in average selling price of crude salt.

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

the gross loss margin for our crude salt segment was 21%.

The swing from a loss to a profit was due to an increase in volume and selling

price as well as the new accounting which shifted some costs away from crude salt to bromine

Direct labor and factory overheads incurred

during plant shutdown On September 1, 2017, the Company received notification from the government of Yangkou County, Shouguang

City of PRC that stated that production at all its bromine and crude salt and chemical factories should be halted with immediate effect

in order for the Company to perform rectification and improvement in accordance with the county’s new safety and environmental protection

requirements.

On November 24, 2017, the Company received a letter from the Government of Yangkou County, Shouguang City notifying the

Company to relocate its two chemical production plants located in the second living area of the Qinghe Oil Extraction Plant to Bohai

As a result, direct labor and factory overhead costs (including depreciation of plant and machinery) in the amount of $2,184,591

and $2,613,483 incurred for the three-month periods ended March 31, 2022 and 2021, respectively, of factories that have not resumed production

were presented as part of the operating expense.

General and Administrative Expenses

General and administrative expenses were $2,242,501 for the three-month period ended March 31, 2022, an increase of $506,251 (or 29%)

as compared to $1,736,250 for the same period in 2021.

The increase was mainly due to the unrealized foreign currency transaction loss

on intercompany balance recorded in three-month period ended March 31, 2022 compared to an unrealized foreign currency transaction gain

on intercompany balance recorded in the same period in the previous year.

Loss from Operations Loss from operations

was $65,087 the three-month period ended March 31, 2022, compared to loss from operation of $3,281,424 in the same period in 2021.

Loss from Operations by Segment

during plant shutdown The direct labor and factory overhead costs (including depreciation of plant and machinery) in the amount

of $1,927,297 and $1,394,717 incurred for the three-month period end June 30, 2022 and 2021, respectively, were that of the factories

that have not resumed operations in the three-month periods ended June 30, 2022 and 2021.

On September 1, 2017, the Company received notification

from the government of Yangkou County, Shouguang City of PRC that stated that production at all its bromine and crude salt and chemical

factories should be halted with immediate effect in order for the Company to perform rectification and improvement in accordance with

the county’s new safety and environmental protection requirements.

On November 24, 2017, the Company received a letter from the

Government of Yangkou County, Shouguang City notifying the Company to relocate its two chemical production plants located in the second

living area of the Qinghe Oil Extraction Plant to Bohai Park.

As a result, direct labor and factory overhead costs (including depreciation

of plant and machinery) in the amount of $1,927,297 and $1,394,717 incurred for the three-month periods ended June 30, 2022 and 2021,

respectively, of factories that have not resumed production were presented as part of the operating expense.

Corporate Costs

Corporate costs declined to $67,987 from $3,193,107.

In the second quarter of 2021, we incurred $3,133,140 in corporate charges for the stock grants to management.

Income (loss) from Operations Income

from operations was $5,109,163 for the three-month period ended June 30, 2022, compared to loss from operations of $2,382,809 in the same

period in 2021.

Income (loss) from Operations by Segment

Three-Month Period Ended

March 31, 2022

June 30, 2022

Three-Month Period Ended

March 31, 2021

June 30, 2021

Chemical Products

Loss from operations before corporate costs

Corporate cost

Unrealized gain (loss) on translation of intercompany balance

Loss from operations

Income (loss) from operations before corporate costs

Corporate costs

Unrealized gain on translation of Intercompany balance

Income (loss) from operations

$ (2,382,809 )

Bromine segment

Income from operations from our bromine segment

was $1,348,834 for the three-month period ended March 31, 2022, compared to loss from operations of $1,279,565 in the same period in 2021.

This increase was due to the 5% increase in tonnes sold and a 60% increase in average selling price.

was $5,325,541 for the three-month period ended June 30, 2022, compared to income from operations of $2,682,233 in the same period in

This increase was due to a 39% increase in average selling price of bromine, slightly offset by increased expense allocation commencing

Crude salt segment

Income from operations from our crude salt segment

was $142,968 for the three-month period ended June 30, 2022, compared to loss from operations of $578,435 in the same period in 2021.

This increase in income from operation was due to a 10% increase in tonnes sold, a 47% increase in average selling price of crude salt,

and a reallocation of some expenses commencing May 2022.

Chemical products segment

Loss from operations from our chemical products

segment was $475,201 for the three-month period ended June 30, 2022, compared to loss from operations of $741,312 in the same period in

Natural gas segment

Loss from operations from our natural gas segment

was $61,699 for the three -month period ended June 30, 2022, compared to a loss from operations of $62,850 in the same period in 2021.

Other Income, Net Other income,

net of $42,252 represented bank interest income, net of capital lease interest expense for the three-month period ended June 30, 2022,

an increase of $6,1831 (or approximately 17%) as compared to the same period in 2021.

Corporate Costs

Corporate costs declined to $67,987 from $3,193,107.

In the second quarter of 2021, we incurred approximately $3.1 million in corporate charges for the stock grants to management.

Net Income (loss) Net income was

$3,901,794 for the three-month period ended June 30, 2022, compared to a net loss of $2,703,220 in the same period in 2021.

Net Income Per Share

For the three months ended June 30, 2022, net

income per share was $0.37 compared to a loss of $0.26 in the period ending June 30, 2021.

There were 10,471,924 shares outstanding compared

to 10,469,477 shares.

Foreign Currency Translation Adjustment

For the three months ending June 30, 2022, the

Company had a negative foreign currency translation adjustment of $16,393,444 versus a positive adjustment of $5,334,236 in the previous

The cause of this currency translation adjustment was due to an approximate 6.1% decline of the RMB vs.

This adjustment

impacts all balance sheet translations into U.S.

Comparison of the Six-Month Period Ended

June 30, 2022 and 2021

Six-Month Period

Ended June 30, 2022

Six-Month Period

Ended June 30, 2021

Percent Change

Cost of net revenue

Sales, marketing and other operating expenses

Direct labor and factory overheads incurred during plant shutdown

Other operating expense

General and administrative expenses

Income (loss) from operations

Income (loss) before taxes

Income (loss) tax benefit

Net Income (loss)

below shows the changes in net revenue in the respective segment of the Company for the six-month period ended June 30, 2022 as compared

to the same period in 2021:

Net Revenue by Segment

Six-Month Period Ended

Percent Increase

June 30, 2022

June 30, 2021

of Net Revenue

Chemical Products

Bromine and crude salt segments

Six-Month Period Ended

Percentage Change

product sold in tonnes

June 30, 2022

June 30, 20210

Bromine (excluding volume sold to SYCI)

Bromine segment

Net revenue from our bromine segment increased

to $22,019,825 for the six-month period ended June 30, 2022 compared to $14,836,428 for the same period in 2021 due to the higher selling

price of bromine.

Crude salt segment

Net revenue from our crude salt segment increased

to $2,571,948 for the six-month period ended June 30, 2022 compared $1,570,823 for the same period in 2021 due to the higher selling price

of crude salt.

Chemical products segment

For the six-month period ended June 30, 2022 and

2021, the net revenue for the chemical products segment was $0 due to the closure of our chemical factories since September 1, 2017.

Natural gas segment

For the six-month period ended June 30, 2022 and

2021, the net revenue for the rental of equipment was $50,678 and $0, respectively.

Cost of Net Revenue

Cost of Net Revenue by Segment

Six-Month Period Ended

June 30, 2022

June 30, 2021

Chemical Products

Cost of net revenue reflects mainly

the raw materials consumed-direct salaries and benefits of staff engaged in the production process, electricity, depreciation and amortization

of manufacturing plant and machinery and other manufacturing costs.

Bromine production capacity and utilization

of our factories

The table below represents the annual capacity

and utilization ratios for all of our bromine producing properties:

Annual Production Capacity (in tonnes)

Six-month period ended June 30, 2021

Six-month period ended June 30, 2022

Variance of the six-month period ended June 30, 2022 and 2021

(i) Utilization ratio is calculated based on the annualized actual production volume in tonnes for the periods

divided by the annual production capacity in tonnes of all the seven factories including those that have not commenced operations.

Bromine segment

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

the cost of net revenue for the bromine segment was $10,786,157.

This $1,718,618 increase was mainly because that some expenses have no

longer been split between bromine and crude salt segments since May 2022 SHSI started the crude salt sales.

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

the cost of net revenue for the bromine segment was $9,067,539.

Crude salt segment

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

the cost of net revenue for the crude salt segment was $1,864,848.

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

the cost of net revenue for the crude salt segment was $2,029,624.

The reason for the decrease is that there is that

with the creation of SHSI, some costs formerly allocated to crude sale were allocated to bromine.

Natural gas segment

Cost of net revenue for our natural gas segment

for the six-month period ended June 30, 2022 and 2021 was $83 and $0, respectively.

Gross Profit.

Gross profit was $11,991,363,

or 49%, of net revenue for six-month period ended June 30, 2022 compared to $5,310,088, or 32%, of net revenue for the same period in

Gross Profit (Loss) by Segment

% Point Change

Six-Month Period Ended

June 30, 2022

June 30, 2021

Profit Margin

Gross Profit (loss) Margin

Gross Profit Margin

Chemical Products

Total Gross Profit

Bromine segment

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

the gross profit margin for our bromine segment was 51%.

This 12% increase was primarily due to the higher selling price.

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

the gross profit margin for our bromine segment was 39%.

Crude salt segment

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

the gross profit margin for our crude salt segment was 28%.

The increase of net revenue of crude salt was mainly due to the 65% increase

in average selling price of crude salt as well as the change in accounting related to the creation of SHSI,

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

gross loss margin for our crude salt segment was 29%.

Chemical products segment

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

the gross profit margin for our chemical segment was 0% due to the closure of our plant and factories to perform rectification and improvement.

As a result, there were no chemical products for sale for the six-month period ended June 30, 2022.

Direct labor and factory overheads incurred

during plant shutdown The direct labor and factory overhead costs (including depreciation of plant and machinery) in the amount

of $4,111,888 and $4,008,200 incurred for the six-month period end June 30, 2022 and 2021, respectively, were for factories that have

not resumed production in the six-month periods ended June 30, 2022 and 2021.

General and Administrative Expenses.

General and administrative expenses were $2,799,590 for the six-month period ended June 30, 2022, a decrease of $4,141,361 (or 60%) as

compared to $6,940,951 for the same period in 2021, the major reason for this was due to the cost of approximately $3.1 million for stock

grants in the second quarter of year 2021.

Income (Loss) from Operations.

from operations was $5,044,076 for the six-month period ended June 30, 2022, compared to a loss from operations of $5,664,23 in the same

period in 2021.

Income(loss) from Operations by Segment

Six-Month Period Ended

June 30, 2022

Six-Month Period Ended

June 30, 2021

Chemical Products

Income(loss) from operations before corporate costs

Corporate costs

Unrealized gain on translation of intercompany balance

Income(loss) from operations before taxes

Bromine segment

Income from operations from our bromine segment

was $6,674,375 for the six-month period ended June 30, 2022, compared to an income from operations of $1,402,668 in the same period in

The increase in income was primarily due to a 39% increase in average selling price partially offset by additional cost allocations

from the new divisional structure.

Crude salt segment

Loss from operations from our crude salt segment

was $521,921 for the three-month period ended March 31, 2022, compared to loss from operations of $1,009,585 in the same period in 2021.

This decrease was due to increases in crude salt unit price.

was $378,953 for the six-month period ended June 30, 2022, compared to a loss from operations of $1,588,020 in the same period in 2021.

The reason for this was due to cost allocations from the new divisional structure.

Chemical products segment

Loss from operations from our chemical products

segment was $513,282 for the three-month period ended March 31, 2022, compared to loss from operations of $746,469 in the same period

This decrease was due to fewer employees and therefore fewer wages.

segment was $988,483 for the six-month period ended June 30, 2022, compared to a loss from operations of $1,487,781 in the same period

Natural gas segment

Loss from operations from our natural gas segment

was $26,739 for the three -month period ended March 31, 2022, compared to a loss of $54,787 in the same period in 2021.

Other Income Net Other income, net

of $40,836 represented bank interest income, net of finance lease interest expense for the three -month period ended March 31, 2022, an

increase of $5,245 (or approximately 15%) as compared to the same period in 2021.

Net Loss Net loss was $119,946 for

the three-month period ended March 31, 2022, compared to a net loss of $2,502,124 in the same period in 2021.

was $88,438 for the six-month period ended June 30, 2022, compared to a loss from operations of $117,637 in the same period in 2021.

Other Income, Net.

Other income,

net of $83,088 represented bank interest income, net of capital lease interest expense for the six -month period ended June 30, 2022,

a decrease of $11,428 (or approximately 16%) as compared to the same period in 2021.

Net Income (Loss).

Net income was

$3,781,848 for the six-month period ended June 30, 2022, compared to a net loss of $5,205,344 in the same period in 2021.

2021 includes approximately $3.1 million in charges for share grants to management.

Net Income Per Share

For the six months ended June 30, 2022, net income

per share was $0.36 compared to a loss of $0.50 in the period ending June 30, 2021.

There were 10,471,924 shares outstanding compared

to 10,469,477 shares.

Foreign Currency Translation Adjustment

For the six months ending June 30, 2022, the Company

had a negative foreign currency translation adjustment of $14,844,410 versus a positive adjustment of $3,149,546 in the previous year.

The cause of this currency translation adjustment was due to an approximate 6.1% decline of the RMB vs.

This adjustment impacts

all balance sheet translations into U.S.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2022, cash and cash equivalents

As of June 30, 2022, cash and cash equivalents

were $79,115,431 as compared to $95,767,263 as of December 31, 2021.

The components of this increase of $9,894,736 are reflected below.

The components of this decrease of $16,651,832 are reflected below.

Statement of Cash Flows

Three-Month Period Ended March 31,

Net cash provided by operating activities

Six-Month Period Ended June 30,

Net cash (used in) provided by operating activities

Net cash used in investing activities

(33,217,987 )

Net cash used in financing activities

Effects of exchange rate changes on cash and cash equivalents

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$ (16,651,832 )

For the three-month period ended March 31, 2022,

we met our working capital and capital investment requirements mainly by using cash on hand.

Net Cash Provided by Operating Activities

During the three -month period ended March 31,

2022, cash flow provided by operating activities of approximately $8.4 million was mainly due to a decrease in accounts receivable of

$3.5 million, and a non-cash adjustment related to depreciation and amortization of property, plant and equipment, reduced by a net loss

of $0.12 million and an adjustment for income tax benefit of $0.1 million.

During the three -month period ended March 31,

2021, cash flow provided by operating activities of approximately $3.3 million was mainly due to a decrease in accounts receivable of

$1.6 million, and a non-cash adjustment related to depreciation and amortization of property, plant and equipment, reduced by a net loss

of $2.5 million and an adjustment for income tax benefit of $0.7 million.

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

we met our working capital and capital investment requirements by using cash on hand.

Net Cash (used in) Provided by Operating Activities

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

cash flow provided by operating activities of approximately $18.5 million was mainly due to a net income of $3.8 million, a decrease in

accounts receivable of $4.68 million, an increase in accounts payable of $2.2 million, an increase in deferred taxes of $1.3 million,

and a non-cash adjustment related to depreciation and amortization of property, plant and equipment of $10.28 million, offset by increases

in operating leases, and prepayments.

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

cash flow provided by operating activities of approximately $7.02 million was mainly due to a net loss of $5.2 million offset by depreciation

and amortization of $8.2 million, stock awards charges of $3.1 million, a decrease in accounts receivable of $1.8 million, and other charges.

Accounts receivable

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a major impact on our overall liquidity.

The following table presents the aging analysis of our accounts receivable as of March 31, 2022

The following table presents the aging analysis of our accounts receivable as of June 30, 2022

and December 31, 2021.

March 31, 2022

June 30, 2022

December 31, 2021

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The overall accounts receivable balance as of

March 31, 2022 decreased by $3,423,768, as compared to those of December 31, 2021.

We have policies in place to ensure that sales are

made to customers with an appropriate credit history.

June 30, 2022 decreased by $5,223,405, as compared to those of December 31, 2021.

We have policies in place to ensure that sales are made

to customers with an appropriate credit history.

We perform ongoing credit evaluation on the financial condition of our customers.

No allowance for doubtful accounts for the three-month period ended March 31, 2022 is required.

allowance for doubtful accounts for the three-month and six-month periods ended June 30, 2022 is required.

Our inventory consists of the following:

March 31, 2022

June 30, 2022

December 31, 2021

1 unchanged sentence

Finished goods

The net inventory level as of March 31, 2022 decreased

The net inventory level as of June 30, 2022 decreased

by $119,403 (or 17%), as compared to the net inventory level as of December 31, 2021.

Raw materials increased by $9,578 as of March

Raw materials increased by $24,782 as of June

30, 2022 as compared to December 31, 2021.

Our finished goods decreased by $144,185 as of

March 31, 2022 as compared to December 31, 2021.

June 30, 2022 as compared to December 31, 2021.

Net Cash Used in Investing Activities

For the three-month period ended March 31, 2022,

we used approximately $0.4 million to acquire property, plant and equipment.

For the three-month period ended March 31, 2021,

we have no investing activities.

For the six-month period ended June 30,

2022, we used approximately $33.2 million to acquire property, plant and equipment, which mainly include the cost for bromi ne

wells, aqueducts and the installation of high and low voltage lines for bromine Wells.

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

we used approximately $5.8 million to acquire property, plant and equipment, primarily for our chemical plant.

Net Cash Used in Financing Activities.

We have no financing activities for the three-month

periods ended March 31, 2022 and 2021.

For the six-month period ended June 30, 2022 and

2021, we used $0.3 million to fulfil finance lease obligations.

We believe that our available funds and cash flows

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next twelve (12) months.

We had available cash of approximately $105.7

million at March 31, 2022, most of which is in highly liquid current deposits which earn no or little interest.

We do not anticipate paying

cash dividends in the foreseeable future.

We intend to continue to focus our efforts on

the activities of SCHC, SYCI and DCHC as these segments continue to expand within the Chinese market.

We had available cash of approximately $79 million

at June 30, 2022, all which is in highly liquid current deposits earning no or little interest.

We do not anticipate paying cash dividends

in the foreseeable future.

We intend to continue to focus our efforts on the activities of SCHC,

SYCI , SHSI and DCHC as these segments continue to expand within the Chinese market.

We may not be able to identify, successfully integrate

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We have no significant contractual obligations

not fully recorded on our condensed consolidated balance sheets or fully disclosed in the notes to our condensed consolidated financial

Additional information regarding our contractual obligations and commitments at March 31, 2022 is provided in the notes to

our condensed consolidated financial statements.

See “Notes to Condensed Consolidated Financial Statements, Note 18– Capital

Commitment and Other Service Contractual Obligations”.

not fully recorded on our consolidated balance sheets or fully disclosed in the notes to our consolidated financial statements.

information regarding our contractual obligations and commitments at June 30, 2022 is provided in the notes to our consolidated financial

See “Notes to Condensed Consolidated Financial Statements, Note 17 – Capital Commitment and Operating Lease Commitments”.

Material Off-Balance Sheet Arrangements

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used by us in the preparation of our financial statements:

accounts receivable and allowance for doubtful accounts, inventories and allowance

for obsolescence, assets retirement obligation, property, plant and equipment, recoverability of long-lived assets, mineral rights, leases,

revenue recognition, income taxes, and loss contingencies.

These policies and estimates are described in the Company’s Form 10-Q

for the three months ended March 31, 2022.

accounts receivable and allowance for doubtful accounts, leases, property,

plant and equipment, recoverability of long lived assets, revenue recognition, income taxes, loss contingencies, and stock-based compensation.

These policies and estimates are described in the Company’s 2021 Form 10-K.

Quantitative and Qualitative Disclosures About Market Risk

3 unchanged sentences

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 2. Management’s Discussion and Analysis