What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-15 compared with 2022-11-14 · 364 added, 428 removed, 746 unchanged (51% of the section changed)

4 unchanged sentences

(Expressed in U.S.

September 30, 2022

March 31, 2023

December 31, 2022

Current Assets

$ 115,771,833

$ 108,226,214

Accounts receivable

35 unchanged sentences

10,717,754 shares issued;

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

and 10,431,924 shares outstanding as of March 31, 2023 and December 31, 2022

Treasury stock;

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

285,830 shares as of March 31, 2023 and December 31, 2022 at cost

( 1,372,673 )

Additional paid-in capital

1 unchanged sentence

Retained earnings appropriated

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

( 9,247,787 )

( 13,027,289 )

Total Stockholders’ Equity

5 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND

COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE

INCOME (LOSS)

(Expressed in U.S.

Three-Month Period Ended September 30,

Nine -Month Period Ended September 30,

OPERATING INCOME (EXPENSE)

Three-Month Period Ended

OPERATING EXPENSE

Cost of net revenue

1 unchanged sentence

( 4,549,968 )

( 21,056,782 )

( 19,294,860 )

Sales, marketing and other operating expenses

2 unchanged sentences

( 2,184,591 )

( 6,022,206 )

( 5,237,258 )

General and administrative expenses

( 2,242,501 )

( 3,384,063 )

( 8,150,769 )

Other operating income (loss)

Other operating expense

Total operating income (expense)

1 unchanged sentence

( 8,995,824 )

( 30,518,578 )

( 32,727,178 )

INCOME(LOSS) FROM OPERATIONS

LOSS FROM OPERATIONS

OTHER INCOME (EXPENSE)

1 unchanged sentence

Interest income

Other (income) expenses

INCOME(LOSS) BEFORE TAXES

INCOME TAX EXPENSE

( 3,010,967 )

( 1,750,283 )

LOSS BEFORE INCOME TAXES

INCOME TAX (EXPENSE) BENEFIT

$ ( 557,747 )

$ ( 119,946 )

NET INCOME(LOSS)

COMPREHENSIVE LOSS:

NET INCOME(LOSS)

OTHER COMPREHENSIVE LOSS

- Foreign currency translation adjustments

$ ( 557,747 )

$ ( 119,946 )

( 30,774,686 )

OTHER COMPREHENSIVE INCOME

- Foreign currency translation adjustments

COMPREHENSIVE INCOME (LOSS)

$ ( 6,962,896 )

$ ( 18,025,458 )

INCOME(LOSS) PER SHARE:

BASIC AND DILUTED

WEIGHTED AVERAGE NUMBER OF SHARES:

BASIC AND DILUTED

BASIC AND DILUTED LOSS PER SHARE

BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF SHARES:

See accompanying notes to the condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022

THREE-MONTH PERIOD ENDED MARCH 31, 2023 AND 2022

(Expressed in U.S.

1 unchanged sentence

unappropriated

BALANCE AT JUNE 30, 2022 ( Una udited)

Restricted shares

Translation adjustment

Net income for three-month period ended September 30, 2022

BALANCE AT SEPTEMBER 30, 2022 (Unaudited)

comprehensive

unappropriated

BALANCE AT JUNE 30, 2021 ( Una udited)

Restricted shares

Translation adjustment

Net income for three-month period ended September 30, 2021

BALANCE AT SEPTEMBER 30, 2021 (Unaudited)

comprehensive

unappropriated

BALANCE AT DECEMBER 31, 2022 (Audited)

Restricted shares

( 1,372,673 )

$ 158,089,535

$ ( 13,027,289 )

$ 271,618,205

Translation adjustment

Net income for nine-month period ended September 30, 2022

BALANCE AT SEPTEMBER 30, 2022 (Unaudited)

Net loss for three-month period ended March 31, 2023

BALANCE AT MARCH 31, 2023(Unaudited)

( 1,372,673 )

$ 157,531,788

$ ( 9,247,787 )

$ 274,839,960

comprehensive

1 unchanged sentence

BALANCE AT DECEMBER 31, 2021 (Audited)

Restricted shares

$ ( 510,329 )

$ 100,569,159

$ 150,463,638

$ 286,639,217

Translation adjustment

Net income for nine-month period ended September 30, 2021

BALANCE AT SEPTEMBER 30, 2021 (Unaudited)

Net loss for three-month period ended March 31, 2022

BALANCE AT MARCH 31, 2022 (Unaudited)

$ ( 510,329 )

$ 100,569,159

$ 150,343,692

$ 288,068,305

See accompanying notes to the condensed consolidated financial statements.

7 unchanged sentences

(Expressed in U.S.

Nine-Month Period Ended September 30,

Three-Month Period Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

Net income(loss)

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

$ ( 557,747 )

$ ( 119,946 )

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

Amortization on capital lease obligation

Depreciation and amortization

Unrealized exchange gain on translation of inter-company balances

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

Deferred tax asset

Common stock issued for services

Changes in assets and liabilities

Accounts receivable

( 6,890,373 )

Prepayments and deposits

( 2,744,904 )

Other receivables

Accounts and Other payable and accrued expenses

Retention payable

Taxes payable

Operating lease

Net cash provided by (used in) by operating activities

Operating leases

( 1,258,066 )

Net cash provided by operating activities

CASH FLOWS USED IN INVESTING ACTIVITIES

Purchase of property, plant and equipment

( 33,217,987 )

( 8,560,152 )

Net cash used in investing activities

( 33,217,987 )

( 8,560,152 )

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

( 6,728,107 )

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

( 3,128,985 )

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS - END OF PERIOD

$ 115,771,833

$ 105,661,999

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Expressed in U.S.

Years Ended March 31,

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the periods for:

Cash paid for income taxes

Cash paid for interest

Cash paid during the year for:

Paid for taxes

Interest on finance lease obligation

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

MARCH 31, 2023

(Expressed in U.S.

1 unchanged sentence

of Presentation and Consolidation

The accompanying unaudited consolidated financial

The accompanying audited consolidated financial

statements have been prepared by Gulf Resources, Inc.

6 unchanged sentences

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

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

Hengde Salt Industry Co.

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

All material intercompany transactions have been eliminated on consolidation.

Nature of Business

of the Business

The Company manufactures and trades bromine through

1 unchanged sentence

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)).

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

40 unchanged sentences

8 to resume production in August 2022.

The Company expects that the Factory No.

8 will generate revenue in the

fourth quarter 2022.

The Company is still waiting for governmental

4 unchanged sentences

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

Pursuant to the notification issued from

the government of Shouguang City, all bromine facilities in Shouguang City were temporarily closed from December 28, 2021 to February

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.

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.

Pursuant to the notification from the government

of Shouguang City, all bromine facilities in Shouguang City were temporarily closed from December 10, 2022 until February 1, 2023 8:00

AM China Time.

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

period and reopened the operating bromine and crude salt factories in February2023.

(ii) Chemical Segment

23 unchanged sentences

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 accelerated 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 September 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.

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 equipment.

is working with its existing suppliers and may identify new suppliers so that it can complete construction of its factory based on accelerated

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

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, 2023 and December 31, 2022.

On March 23, 2023, the Company issued a

press release detailing the delays in the opening of our Yuxin chemical factory due to COVID and stricter government regulations.

noted in the press release, the Company believes that once all of the equipment is delivered, it will take 3 to 4 months to get

them installed.

After installation, the testing process is anticipated to take 2 to 3 months, after which it will be in a position

to apply for environmental and safety approval.

After we get the approval, it will take us 4 months to conduct trial production, and

then we may start commercial production.

(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, 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.

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 the governmental planning has

been finalized.

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, and approvals for safety production inspection, environmental protection assessment, and to solve the

related land issue.

Until these approvals have been received, the Company has had 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 the governmental planning has been finalized.

for Doubtful Accounts

As of September 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 and nine-month periods ended September 30, 2022 and 2021.

We make estimates of the uncollectibility

of accounts receivable, especially analyzing accounts receivable and historical bad debts, customer concentrations, customer credit-worthiness,

current economic trends and changes in customer payment terms, when evaluating the adequacy of the allowance for doubtful accounts.

evaluations are undertaken for all major sale transactions before shipment is authorized.

On a quarterly basis, we evaluate aged items

in the accounts receivable aging report and provide an allowance in an amount we deem adequate for doubtful accounts.

If management were

to make different judgments or utilize different estimates, material differences in the amount of our reported operating expenses could

(d) Concentration

of Credit Risk

The Company is exposed to credit risk in the

normal course of business, primarily related to accounts receivable and cash and cash equivalents.

Substantially all of the

Company’s cash and cash equivalents are maintained with financial institutions in the PRC, namely, Industrial and Commercial

Bank of China Limited, China Merchants Bank Company Limited and Sichuan Rural Credit Union, which are not insured or otherwise

The Company is exposed to credit risk in the normal

course of business, primarily related to accounts receivable and cash and cash equivalents.

Substantially all of the Company’s cash

and cash equivalents are maintained with financial institutions in the PRC, namely, Industrial and Commercial Bank of China Limited, China

Merchants Bank Company Limited and Sichuan Rural Credit Union, which are not insured or otherwise protected.

The Company placed $ 115,771,833

and $ 95,767,263 with

these institutions as of September 30, 2022 and December 31, 2021, respectively.

The Company has not experienced any

losses in such accounts in the PRC.

and $ 108,226,214 with these institutions as of March 31, 2023 and December 31, 2022, respectively.

The Company has not experienced

any losses in such accounts in the PRC.

GULF RESOURCES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

MARCH 31, 2023

(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, 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.

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.

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

Property, plant and equipment under the finance

lease are depreciated over their expected useful lives on the same basis as owned assets, or where shorter, the term of the lease, which

Property, plant and equipment under the

capital lease are depreciated over their expected useful lives on the same basis as owned assets, or if where shorter, the term of

Producing oil and gas properties are depreciated

1 unchanged sentence

Common facilities that are built specifically to service production

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.

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.

(f) Retirement

3 unchanged sentences

The required contributions

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

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

The Company’s

contributions totaled $ 141,996 and $ 186,074 for the three-month period ended September 30, 2022 and 2021, respectively, and totaled $ 488,773

and $ 653,664 for the nine-month period ended September 30, 2022 and 2021, respectively.

contributions totaled $ 154,184 and $ 201,265 for the three-month periods ended March 31, 2023 and 2022, respectively.

Net revenue is net of discount and value added

11 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

MARCH 31, 2023

(Expressed in U.S.

19 unchanged sentences

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

For the three and nine months period ended September

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

For the three-month period ended March 31, 2023

and 2022, 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

Basic earnings per common share are based on the

7 unchanged sentences

Anti-dilutive common stock equivalents which were excluded from

the calculation of number of dilutive common stock equivalents amounted to 0 and 0 shares for the three-month period ended September 30,

2022 and 2021, respectively, and amounted to 0 and 20,901 shares for the nine-month period ended September 30, 2022 and 2021, respectively.

These awards could be dilutive in the future if the market price of the common stock increases and is greater than the exercise price

of these awards.

the calculation of number of dilutive common stock equivalents amounted to 0 and 0 shares for the three-month periods ended March 31,

2023 and 2022, respectively.

Because the Company reported a net loss for the

three-month periods ended March 31, 2023 and 2022, 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.

GULF RESOURCES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

MARCH 31, 2023

(Expressed in U.S.

12 unchanged sentences

Adjustments resulting from the translation of the balance sheets of the Company’s

PRC subsidiaries are recorded in stockholders’ equity as part of accumulated other comprehensive loss.

The statement of loss and

comprehensive loss is translated at average rate during the reporting period.

PRC subsidiaries are recorded in stockholders’ equity as part of accumulated other comprehensive income.

The statement of income

and comprehensive income is translated at average rate during the reporting period.

Gains or losses resulting from transactions in currencies

other than the functional currencies are recognized in net loss for the reporting periods as part of general and administrative expense.

other than the functional currencies are recognized in net income for the reporting periods as part of general and administrative expense.

The statement of cash flows is translated at average rate during the reporting period, with the exception of the consideration paid for

28 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, 2023

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION AND

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(n) Stock-based Compensation

31 unchanged sentences

Interests and penalties associated with unrecognized tax benefits are included within the (benefit from) provision for income

tax in the consolidated statement of income (loss).

tax in the consolidated statement of profit (loss).

Accounting Pronouncements

Recent accounting pronouncements adopted

There were no recent accounting pronouncements adopted during the nine

months ended September 30, 2022.

There were no recent accounting pronouncements adopted during the three

months ended March 31, 2023.

Recently Issued Accounting Pronouncements Not

7 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

MARCH 31, 2023

(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.

2 – ACCOUNTS RECEIVABLE, NET

Accounts receivable

Allowance for doubtful debt

Accounts receivable, net

The overall accounts receivable balance as of March 31, 2023 decreased

by $ 138,297 , as compared to those of December 31, 2022.

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.

NOTE 3 – INVENTORIES

1 unchanged sentence

Inventories - Schedule of Inventories, Current

September 30,

Raw materials

Finished goods

There was no allowance for slow-moving inventories

as of September 30, 2022 and 2021.

Inventory, net

The Company recorded impairment

charges for slow moving inventory in the amounts of $ 0 and $ 0 for the three months ended March 31, 2023 and 2022

NOTE 4 – 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 September 30

The amount paid was recorded as prepaid land leases, net of current portion in the consolidated balance sheet as of March 31 2023

and December 31, 2022.

As of September 30, 2022, the prepaid land lease increased to $ 9,329,586 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 completed

and placed in service.

As of March 31, 2023, the prepaid land lease increased to $ 9,641,075 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

GULF RESOURCES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

MARCH 31, 2023

(Expressed in U.S.

3 unchanged sentences

Schedule of Property, Plant and Equipment

September 30,

Mineral rights

13 unchanged sentences

The aggregate carrying

values of these properties situated on parcels of the land are $ 14,943,968 and $ 17,911,910 as at September 30, 2022 and December 31,

values of these properties situated on parcels of the land are $ 14,535,866 and $ 14,713,101 as at March 31, 2023 and December 31, 2022,

respectively.

During the three-month period ended September 30, 2022, depreciation

and amortization expense totaled $ 5,982,055 of which $ 1,523,855 , $ 165,992 and $ 4,292,208 were recorded in direct labor and factory overheads

incurred during plant shutdown , administrative expenses and cost of net

During the same period in 2021, depreciation and amortization

expense totaled $ 4,090,343 of which $ 730,729 , $ 167,761 and $ 3,191,853 were recorded in direct labor and factory overheads incurred during

plant shutdown , administrative expenses and cost of net revenue .

During the nine-month period ended September

30, 2022 , depreciation and amortization expense totaled $ 16,255,069

of which $ 4,817,711 , $ 1,534,387 and $ 9,902,971 were recorded in direct labor and factory overheads incurred during plant

shutdown , administrative expenses and cost of net revenue .

During the same period of 2021, depreciation and amortization expense totaled $ 12,312,345 of which $ 3,305,955 , $ 494,862 and

$ 8,511,528 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 March 31,

2023, depreciation and amortization expense totaled $ 5,358,871 , of which $ 1,949,836 , $ 429,955 and $ 2,979,080 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,

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.

NOTE 6 – FINANCE LEASE RIGHT-OF-USE ASSETS

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

the following:

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

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

Plant and Equipment Under Finance Leases

September 30,

Buildings Buildings

8 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 and nine months period

ended September 30, 2022, depreciation and amortization expense totaled $ 1,356 and $ 4,216 , respectively, which was recorded in

direct labor and factory overheads incurred during plant shutdown.

During the three and nine months period

ended September 30, 2021, depreciation and amortization expense totaled $ 1,431

and $ 4,293 , respectively, which was recorded in direct labor and factory overheads incurred during plant shutdown.

During the three-month period ended March 31,

2023, depreciation and amortization expense totaled $ 1,353 , which was recorded in direct labor and factory overheads incurred during plant

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 shutdown.

GULF RESOURCES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

MARCH 31, 2023

(Expressed in U.S.

6 – OPERATING LEASE RIGHT – OF USE ASSETS

As of September 30, 2022, the total operating

lease ROU assets was $ 8,208,368 .

The total operating lease cost for the nine-month

period ended September 30, 2022 and 2021 was $ 746,731 and $ 721,994 .

NOTE 7 – OPERATING LEASE RIGHT-OF USE ASSETS

As of March 31, 2023, the total operating lease

ROU assets was $ 8,543,073 .

The total operating lease cost for the three-month

period ended March 31, 2023 and 2022 was $ 241,021 and $ 258,398 , respectively.

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 (See Note 3).

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

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 $ 9,103,495 as at September 30, 2022.

NOTE 7 – ACCOUNTS PAYABLE, OTHER PAYABLE

AND ACCRUED EXPENSES

Accounts payable, other payable and accrued expenses

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 $ 9,116,230 as at March 31, 2023.

NOTE 8 – ACCOUNTS AND OTHER PAYABLE AND

ACCRUED EXPENSES

Accounts and other payable and accrued expenses

consist of the following:

1 unchanged sentence

Expenses - Schedule of Accounts Payable and Accrued Liabilities

September 30,

Accounts payable

Salary payable

Other payable

Other payable-related party (see Note 8)

Accrued expense for construction

Accrued expense-others

8 – RELATED PARTY TRANSACTIONS

On September 25, 2012, the Company purchased

five floors of a commercial building in the PRC, through SYCI, from Shandong Shouguang Vegetable Seed Industry Group Co., Ltd.

“Seller”) at a cost of approximately $ 5.7

million in cash, of which Mr.

Ming Yang, the Chairman of the Company, had a 99 %

equity interest in the Seller.

During the first quarter of 2018, the Company entered into an agreement with the Seller, a related

party, to provide property management services for an annual amount of approximately $ 87,871

years from January 1, 2018 to December 31, 2022 .

The expense associated with this agreement for the three and nine months

ended September 30, 2022 was approximately $ 21,968 and $ 69,775 .

The expense associated with this agreement for the three and nine

months ended September 30, 2021 was approximately $ 24,048 and $ 71,926 .

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

(Expressed in U.S.

NOTE 9 – RELATED PARTY TRANSACTIONS

On September 25, 2012, the Company purchased five

floors of a commercial building in the PRC, through SYCI, from Shandong Shouguang Vegetable Seed Industry Group Co., Ltd.

(the “Seller”)

at a cost of approximately $ 5.7 million in cash, of which Mr.

Ming Yang, the Chairman of the Company, had a 99 % equity interest in the

During the first quarter of 2018, the Company entered into an agreement with the Seller, a related party, to provide property

management services for an annual amount of approximately $ 90,785 for five years from January 1, 2023 to December 31, 2027 .

associated with this agreement for the three months ended March 31, 2023 and 2022 was approximately $ 22,696 and $ 24,568 .

NOTE 9 – RELATED PARTY TRANSACTIONS –

Related parties

4 unchanged sentences

Chief Operating Officer

September 30,

Amount due to related parties:

2 unchanged sentences

earned for their services with the Company, which may be considered for future compensation should the Company improve its results of

9 – TAXES PAYABLE

September 30,

NOTE 10 – TAXES PAYABLE

Land use tax payable

1 unchanged sentence

Land use tax payable

NOTE 10 – LEASE LIABILITIES – FINANCE

AND OPERATING LEASE

NOTE 11 – LEASE LIABILITIES-FINANCE AND

OPERATING LEASE

The components of finance lease liabilities were

1 unchanged sentence

Lease - Schedule of Finance Leased Liabilities

September 30,

Interest rate

2 unchanged sentences

Finance lease liability, net of current portion

Interest expenses from capital lease obligations

amounted to $ 23,934 and $ 32,015 for the three-month period ended September 30, 2022 and 2021, respectively, which were charged to the

condensed consolidated statement of income (loss).

Interest expenses from capital lease obligations amounted to $ 93,630 and $ 103,212 for

the nine-month period ended September 30, 2022 and 2021, respectively, which were charged to the condensed consolidated statement of income

Interest expenses from a finance lease liability

amounted to $ 28,560 and $ 33,622 for the three-month periods ended March 31, 2023 and 2022, respectively, were charged to the condensed

consolidated statement of loss.

The components of operating lease liabilities

1 unchanged sentence

Lease - Schedule of Operating Leased Liabilities

September 30,

Interest rate

3 unchanged sentences

The weighted average remaining operating lease

term at September 3 0 , 2022 was 20 years and the weighted average discounts

rate was 4.89 %.

Lease payments for the three-month period ended September 30, 2022 and 2021, respectively, were $ 64,896 and $ 68,467 .

payments for the nine-month period ended September 30, 2022 and 2021, respectively, were $ 888,692 and $ 848,660 .

term at March 31, 2023 was 19 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, 2023 and 2022 was $ 239,898 and $ 257,879 .

Maturities of lease liabilities were as follows:

11 unchanged sentences

Present value of net minimum lease payments

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(Expressed in U.S.

NOTE 12 – EQUITY

Restricted Shares

23 unchanged sentences

reserve balance falling below 25% of the registered capital.

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

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

The Statutory Common Reserve Fund as of March 31, 2023 for SCHC, SYCI, SHSI,

and DCHC is 17%, 14%, 0% and 0% of its registered capital, respectively.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

(Expressed in U.S.

NOTE 13 – TREASURY STOCK

As of March 31, 2023 and December 31, 2022, the

number of treasury stock of the Company was 285,830 and 285,830 , respectively.

NOTE 14 – STOCK-BASED COMPENSATION

6 unchanged sentences

of the 2007 Plan and applicable award agreement.

As of September 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.

As of March 31, 2023, the number of shares of the Company’s common stock available

for grant of stock options and issuance under the 2019 Plan was 856,801 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 September 30, 2022

and 2021, total compensation costs for options issued recorded in the consolidated statement of loss were $ 0 .

During the three and nine months ended September 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 September 30, 2022.

For the three months ended March 31, 2023 and

2022, total compensation costs for options issued recorded in the consolidated statement of loss were $ 0 .

During the three months ended March 31, 2023, there were no options

issued to employees or non-employees.

The following table summarizes all Company stock

option transactions between January 1, 2023 and March 31, 2023.

Stock-Based Compensation - Schedule of Stock

8 unchanged sentences

Expired during the period

Balance, September 30, 2022

Balance, March 31, 2023

Stock Options and Warrants Outstanding and Exercisable

Weighted Average

Outstanding at September 30, 2022

Outstanding at March 31, 2023

Exercise Prices

1 unchanged sentence

Outstanding and exercisable

All options exercisable and outstanding at March

31, 2023 are fully vested.

As of March 31, 2023 there was no unrecognized compensation cost related to outstanding stock options,

The aggregate intrinsic value of options outstanding and exercisable

as of September 30, 2022 was $ 0 .

During the three and nine months ended September

30, 2022 and 2021, there were no options exercised.

as of March 31, 2023 and 2022 was $ 0 .

GULF RESOURCES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

MARCH 31, 2023

(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”)

4 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 and nine-month periods ended September 30, 2022 and 2021, and management believes that its earnings are permanently

invested in the PRC.

income for the three-month periods ended March 31, 2023 and 2022, and management believes that its earnings are permanently invested in

Virgin Islands (“BVI”)

1 unchanged sentence

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 and nine-month periods ended September 30,

2022 and 2021.

Upper Class Group Limited did not generate assessable profit for the three-month periods ended March 31, 2023 and 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 and nine-month periods

ended September 30, 2022 and 2021.

The applicable statutory tax rates for the three-month and nine-month periods ended September

30, 2022 and 2021 are 16.5 %.

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

31, 2023 and 2022.

The applicable statutory tax rates for the three-month periods ended March 31, 2023 and 2022 are 16.5 %.

There is no dividend withholding tax in Hong Kong.

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.

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, SYCI, DCHC, and

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

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 September 30, 2022 and December 31, 2021,

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

are $ 141,095,736 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 September 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 September 30, 2022

and December 31, 2021, the unrecognized WHT are $ 6,095,470 and $ 5,932,051 , respectively.

As of March 31, 2023 and December 31, 2022, the

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

$ 148,449,311 and $ 147,686,099 , 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 March 31, 2023 and December 31, 2022, 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, 2023 and December 31, 2022, the

unrecognized WHT are $ 6,431,341 and $ 6,406,394 , respectively.

The Company’s income tax returns are subject

11 unchanged sentences

in every four years.

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:

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:

Income Taxes - Schedule of Components of Income Tax Expense Benefit

Three-Month Period Ended

September 30,

Nine-Month Period Ended

September 30,

Three-Month Period Ended March 31,

Current taxes – PRC

Deferred taxes

( 3,010,967 )

( 1,750,283 )

( 4,356,283 )

( 1,363,054 )

Tax Expense Benefit

$ ( 3,010,967 )

$ ( 1,750,283 )

$ ( 4,356,283 )

Deferred tax – PRC entities

Deferred taxes – US entity

Change in valuation allowance

Income Tax (Expense) Benefit

$ ( 200,556 )

Significant components of the Company’s

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

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

Income Taxes - Schedule of Deferred

Tax Assets and Liabilities

September 30,

Deferred tax liabilities

8 unchanged sentences

Net deferred tax asset

The increase in valuation allowance for the three-month

period ended September 30, 2022 is $ 0 .

The decrease in valuation allowance for the three-month

period ended March 31, 2023 is $ 206,671 .

The increase in valuation allowance for the three-month

period ended September 30, 2021 is $ 13,366 .

The increase in valuation allowance for the nine-month

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

The increase in valuation allowance for the nine-month

period ended September 30, 2021 is $ 71,292 .

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

There were no unrecognized tax benefits and accrual

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

and nine months ended September 30, 2022 and 2021.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(Expressed in U.S.

for uncertain tax positions as of March 31, 2023 and December 31, 2022 and no amounts accrued for penalties and interest for the three

months ended March 31, 2023 and 2022.

NOTE 16 – 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.

An operating segment’s performance is primarily

6 unchanged sentences

All the customers are located in PRC.

September 30, 2022

Three-Month Period Ended March 31, 2023

(external customers)

(intersegment)

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

Income tax benefit(expense)

Income (loss) from operations after income tax benefit

Loss from operations before income benefit

Income tax benefit

Loss from operations after income taxes(benefit)

Depreciation and amortization

Capital expenditures

September 30, 2021

Three-Month Period Ended March 31, 2022

(external customers)

(intersegment)

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

Income tax benefit(expense)

Income (loss) from operations after income tax benefit

Loss from operations before income benefit

Income tax benefit

Loss from operations after income taxes(benefit)

Depreciation and amortization

8 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(Expressed in U.S.

NOTE 14 – BUSINESS SEGMENTS – Continued

September 30, 2022

(external customers)

(intersegment)

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

Income tax benefit(expense)

Income (loss) from operations after income tax benefit

Depreciation and amortization

Capital expenditures

September 30, 2021

(external customers)

(intersegment)

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

Income tax benefit(expense)

Income (loss) from operations after income tax 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.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

MARCH 31, 2023

(Expressed in U.S.

NOTE 16 – BUSINESS SEGMENTS – Continued

Three-Month Period Ended

September 30,

Nine-Month Period Ended

September 30,

Three-Month Period Ended March 31,

Reconciliations

Total segment operating Income (loss)

Total segment operating loss

$ ( 771,950 )

Corporate costs

Unrealized gain (loss) on translation of intercompany balance

Loss from operations

Loss before income taxes

$ ( 758,303 )

Unrealized gain on translation of intercompany balance

Income (loss) from operations

Other income, net of expense

Income (loss) before taxes

The following table shows the major customer(s)

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

The following table shows the major customers

(10% or more) for the three-month period ended March 31, 2023.

Business Segments - Schedule of

2 unchanged sentences

Percentage of

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 nine-month period ended September 30, 2022.

Chemical Products

Percentage of

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 three-month period ended September 30, 2021.

Percentage of

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 nine-month period ended September 30, 2021.

Shandong Shouguangshen Runfa Marine Chemical Company Limited

The following table shows the major customers

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

Chemical Products

1 unchanged sentence

Shandong Morui Chemical Company Limited

Shouguang Weidong Chemical Company Limited

Shandong Brother Technology Limited

15 – CUSTOMER CONCENTRATION

During the nine-month period ended September

30, 2022, the Company sold 52.9 %

of its products to its top five customers.

As of September 30, 2022, amounts due from these customers were $ 6,095,578 .

During the nine-month period ended September 30,

NOTE 17 – CUSTOMER CONCENTRATION

During the three-month period ended March 31,

2023, the Company sold 64 % of its products to its top five customers.

As of September 30, 2021, amounts due from these customers were

$ 11,280,670 .

16 – MAJOR SUPPLIERS

During the nine-month period ended September

As of March 31, 2023, amounts due from these customers were $ 3,492,933 .

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 .

NOTE 18 – MAJOR SUPPLIERS

During the three-month period ended March 31,

2023, the Company purchased 100 % of its raw materials from its top five suppliers.

As of September 30, 2022, amounts due

to those suppliers were $ 219,646 .

During the nine-month period ended September 30,

As of March 31, 2023, amounts due to those

suppliers were $ 411,554 .

During the three-month period ended March 31,

2022, the Company purchased 100 % of its raw materials from its top five suppliers.

As of September 30, 2021, amounts due to

those suppliers were $ 653,102 .

As of March 31, 2022, amounts due to those

suppliers were $ 623,523 .

NOTE 19 – FAIR VALUE OF FINANCIAL INSTRUMENTS

2 unchanged sentences

nature of these instruments.

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

and December 31, 2021.

There were no material unrecognized financial assets and liabilities as of March 31, 2023 and

December 31, 2022.

NOTE 20 – CAPITAL COMMITMENT AND OTHER SERVICE

1 unchanged sentence

The following table sets forth the Company’s

contractual obligations as of September 30, 2022:

contractual obligations as of March 31, 2023:

Capital Commitment and Other Service

6 unchanged sentences

the next 25 to 36 months

19 – LOSS CONTINGENCIES

the next 37 to 48 months

the next 49 to 60 months

NOTE 21 – LOSS CONTINGENCIES

Settled Litigation

11 unchanged sentences

2, 9, 7, 4, 8 and 10, respectively, and alleged, among other things, that SCHC had illegally

occupied and used the land in the total area of approximately 52,674 square meter, on which Factory nos.

occupied and used the land in the total area of approximately 52,674 square meters, on which Factory nos.

2, 9, 7, 4, 8 and 10 were built,

40 unchanged sentences

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.

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

7 was allowed to resume in April 2019.

16 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 September 30, 2022.

the Company believes that it is not necessary to accrue for any estimated losses or impairment as of March 31, 2023.

NOTE 22 – SUBSEQUENT EVENT

Subsequent Event

On October 7, 2022.

The Company issued a total

of 200,000 shares of common stock to its executive officers, directors , staff and consultant under the Company’s equity incentive

Not Applicable.

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