What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-10-11 compared with 2024-10-11 · 225 added, 398 removed, 257 unchanged (71% of the section changed)

76 unchanged sentences

it received another approval from the Shouguang Yangkou People’s Government dated on March 5, 2020 to resume production at its bromine

factories No.

factories No.1, No.

4, No.7 and No.

9 in order to meet the needs of bromide products for epidemic prevention and control.

two approvals, the Company was allowed to resume production at all four bromine factories.

With these two

approvals, the Company was allowed to resume production at all four bromine factories.

The Company received

8 unchanged sentences

The Company is still

waiting for governmental approval for factories No.

waiting for governmental approval for factories No.2 and No.10.

To its knowledge, the government is currently completing its planning

1 unchanged sentence

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 in order to satisfy the local government's requirements.

On November 24, 2017, Gulf Resources received a letter from the People’s

Government of Yangkou County, Shouguang City notifying the Company that due to the new standards and regulations relating to safety production

and environmental pollution, from certain local governmental departments, such as the municipal environmental protection department, the

security supervision department and the fire department, its chemical enterprises would have to be relocated to a new industrial park

called Bohai Marine Fine Chemical Industry Park.

Although our chemical companies were 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.

The construction was expected to take

approximately one year and an additional six months to complete the equipment installation and testing, however due to the COVID epidemic

and electrical restrictions, the opening of the chemical factory has been delayed.

[The Company has received the refrigeration and

air compressor units.

On July 26, 2023, the Company announced that the delivery of the remaining equipment for its Yuxin chemical factory

has been temporarily delayed and to review its chemical products strategy.

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 a letter from the People’s Government of Yangkou County, Shouguang City notifying the Company that due to

the new standards and regulations relating to safety production and environmental pollution, from certain local governmental departments,

such as the municipal environmental protection department, the security supervision department and the fire department, its chemical enterprises

would have to be relocated to a new industrial park called Bohai Marine Fine Chemical Industry Park.

Although our chemical

companies were 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.

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

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

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

and testing, however due to the COVID epidemic and electrical restrictions, the opening of the chemical factory has been delayed.

Company has received the refrigeration and air compressor units.

The rest equipment is expected to be delivered by the second quarter

The Company intends to start installation of equipment and may start testing andtrial production by the end of 2023 or beginning

In January 2017, the

14 unchanged sentences

Ltd（“SHSI”）, our subsidiary, was incorporated in Shandong Province, China, for crude salt production and

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

stock split of our common stock, such that for each five shares outstanding prior to the stock split there was one share outstanding after

the reverse stock split.

All shares of common stock referenced in this report have been adjusted to reflect the stock split

On January 28, 2020 we

completed a 1-for-5 reverse stock split of our common stock, such that for each five shares outstanding prior to the stock split there

was one share outstanding after the reverse stock split.

All shares of common stock referenced in this report have been adjusted

to reflect the stock split figures.

Recent Developments

Acquisition Agreements

On June 26, 2024, a wholly owned subsidiary of

the Company, Shouguang Hengde Salt Industry Co.

Ltd ( “SHSI”), entered into a Crude Salt Field Acquisition Agreement (the

“Acquisition Agreement”) with Shouguang Qingshuibo Farm Co., LTD.

(“Seller A”), pursuant to which Seller A agrees

to transfer to SHSI, and SHSI agrees to purchase, 2,380,000 square meters of crude salt field (including the land lease fee) for RMB54.40

per square meter, with the total transfer price of RMB129,472,000.

On June 26, 2024, a wholly owned subsidiary of the Company, Shouguang

Hengde Salt Industry Co.

Ltd ( “SHSI”), entered into a Crude Salt Field Acquisition Agreement (the “Acquisition Agreement”)

with Shouguang Qingshuibo Farm Co., LTD.

(“Seller A”), pursuant to which Seller A agrees to transfer to SHSI, and SHSI agrees

to purchase, 2,380,000 square meters of crude salt field (including the land lease fee) for RMB54.40 per square meter, with the total

transfer price of RMB129,472,000.

The term of transfer is from June 29, 2024 to June 28, 2044.

the transfer price shall be paid upon the execution of Acquisition Agreement, and the remaining 20% shall be paid in shares of common

stock of the Company within three months from the date of Acquisition Agreement after SHSI has inspected the and accepted the crude salt

field in writing.

On June 27, 2024, SHSI entered into four Crude

Salt Field Acquisition Agreements (the “Agreements”) with Shouguang city Yangkou town Dingjia Zhuangzi village stock economic

cooperative, Shouguang city Yangkou town Shanjia Zhuangzi village stock economic cooperative, Shouguang City Yangkou town Zhengjia Zhuangzi

village stock economic cooperative, and Shouguang city Yangkou town Renjia Zhuangzi village stock economic cooperative (together, “Sellers”),

pursuant to which Sellers agree to transfer to SHSI, and SHSI agrees to purchase from Sellers, 750,000, 804,000, 385,000, and 822,000

square meters of crude salt field (including the land lease fee) for RMB54.10, RMB54.90, RMB54.00, and RMB55.70 per square meter, respectively,

with the total transfer price of RMB40,575,000, RMB44,139,600, RMB20,790,000, and RMB45,785,400, respectively.

The term of transfers is

from June 29, 2024 to June 28, 2044.

80% of the transfer price shall be paid

upon the execution of Acquisition Agreement, and the remaining 20% shall be paid in shares of common stock of the Company within three

months from the date of Acquisition Agreement after SHSI has inspected the and accepted the crude salt field in writing.

On June 27, 2024, SHSI entered into four Crude Salt Field Acquisition

Agreements (the “Agreements”) with Shouguang city Yangkou town Dingjia Zhuangzi village stock economic cooperative, Shouguang

city Yangkou town Shanjia Zhuangzi village stock economic cooperative, Shouguang City Yangkou town Zhengjia Zhuangzi village stock economic

cooperative, and Shouguang city Yangkou town Renjia Zhuangzi village stock economic cooperative (together, “Sellers”), pursuant

to which Sellers agree to transfer to SHSI, and SHSI agrees to purchase from Sellers, 750,000, 804,000, 385,000, and 822,000 square meters

of crude salt field (including the land lease fee) for RMB54.10, RMB54.90, RMB54.00, and RMB55.70 per square meter, respectively, with

the total transfer price of RMB40,575,000, RMB44,139,600, RMB20,790,000, and RMB45,785,400, respectively.

The term of transfers is from

June 29, 2024 to June 28, 2044.

80% of the transfer price shall be paid upon the execution of Agreements, and the remaining 20% shall

2 unchanged sentences

Nasdaq Compliance

The Company received a notice (the “Initial

Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) on April 18, 2024 notifying

the Company that due to the Company’s failure to timely file its Annual Report on Form 10-K for the fiscal year ended December 31,

2023 (the “Form 10-K”), with the SEC, the Company is not in compliance with Nasdaq’s continued listing requirements

under Nasdaq Listing Rule 5250(c)(1) (the “Rule”), which requires the timely filing of all required periodic reports with

the SEC, and the Company subsequently received a notice (the “May Notice”) from Nasdaq on May 21, 2024 due to the Company’s

non-compliance with the Rule as a result of the Company’s failure to timely file its Quarterly Report on Form 10-Q for the fiscal

quarter ended March 31, 2024 (the “Form 10-Q”, together with the Form 10-K, the “Delinquent Reports”).

May Notice states that the Company has until June 17, 2024 to submit to Nasdaq a plan to regain compliance with the Rule.

On June 26, 2024, the Company received a letter

from Nasdaq indicating that, based on its further review and the plan of compliance submitted by the Company on June 14, 2024, Nasdaq

has determined to grant an exception to enable the Company to regain compliance with the Rule.

received a notice (the “Initial Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”)

on April 18, 2024 notifying the Company that due to the Company’s failure to timely file its Annual Report on Form 10-K for the

fiscal year ended December 31, 2023 (the “Form 10-K”), with the SEC, the Company is not in compliance with Nasdaq’s

continued listing requirements under Nasdaq Listing Rule 5250(c)(1) (the “Rule”), which requires the timely filing of all

required periodic reports with the SEC, and the Company subsequently received a notice (the “May Notice”) from Nasdaq on May

21, 2024 due to the Company’s non-compliance with the Rule as a result of the Company’s failure to timely file its Quarterly

Report on Form 10-Q for the fiscal quarter ended March 31, 2024 (the “Form 10-Q”, together with the Form 10-K, the “Delinquent

The May Notice states that the Company has until June 17, 2024 to submit to Nasdaq a plan to regain compliance with

26, 2024, the Company received a letter from Nasdaq indicating that, based on its further review and the plan of compliance submitted

by the Company on June 14, 2024, Nasdaq has determined to grant an exception to enable the Company to regain compliance with the Rule.

The terms of the exception are as follows:

on or before October 14, 2024, the Company must file the Delinquent Reports, as required by the Rule.

In the event the Company does not

satisfy the terms, Nasdaq will provide written notification that its securities will be delisted.

At that time, the Company may appeal

Nasdaq’s determination to a hearings panel.

Subsequently, on August 20, 2024, the Company

received a notice (the “August Notice”) from Nasdaq indicating that, because the Company is delinquent in filing its quarterly

report on Form 10-Q for the period ended June 30, 2024, the Company is not in compliance with the Rule.

The Notice also indicates that

as a result of this additional delinquency, the Company must submit an update to its original plan to regain compliance with respect to

the filing requirements.

on or before October 14, 2024, the Company must file the Delinquent Reports, as required by

In the event the Company does not satisfy the terms, Nasdaq will provide written notification that its securities will be delisted.

At that time, the Company may appeal Nasdaq’s determination to a hearings panel.

Subsequently,

on August 20, 2024, the Company received a notice (the “August Notice”) from Nasdaq indicating that, because the Company is

delinquent in filing its quarterly report on Form 10-Q for the period ended June 30, 2024, the Company is not in compliance with the Rule.

The Notice also indicates that as a result of this additional delinquency, the Company must submit an update to its original plan to regain

compliance with respect to the filing requirements.

The Company has until September 4, 2024 to submit such update to Nasdaq.

The August Notice has no immediate effect on the

listing or trading of the Company’s common stock on the Nasdaq Global Select Market.

While the Company can provide no assurance

to the timing, the Company has submitted a letter to Nasdaq confirming that there has been no change to its original plan to regain compliance

with respect to the filing requirements, and will continue to work diligently to complete and file its delayed SEC reports.

Notice has no immediate effect on the listing or trading of the Company’s common stock on the Nasdaq Global Select Market.

the Company can provide no assurance to the timing, the Company has submitted a letter to Nasdaq confirming that there has been no change

to its original plan to regain compliance with respect to the filing requirements, and will continue to work diligently to complete and

file its delayed SEC reports.

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, 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.

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

RESULTS OF OPERATIONS

The following table presents certain information

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

periods ended June 30, 2024 and 2023.

Comparison of the Three-Month Period Ended

June 30, 2024 and 2023

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

March 31, 2024 and 2023.

Comparison of the Three-Month Periods Ended

March 31, 2024 and 2023

Three-Month Period

Ended June 30, 2024

Ended March 31, 2024

Three-Month Period

Ended June 30, 2023

Ended March 31, 2023

Percent Change

Increase/ (Decrease)

Cost of net revenue

$ (2,119,845 )

$ (6,769,074 )

Gross profit (loss)

Sales and marketing expenses

Direct labor and factory overheads incurred during plant shutdown

$ (3,734,689 )

General and administrative expenses

Other Operating income (expense)

Income (loss) from operations

Other expense

Other Operating Income

Loss from operations

$ (5,269,419 )

Income (loss) before taxes

Other income, net

Other expense

Loss before taxes

$ (5,262,192 )

Income tax benefit

Net Income (loss)

$ (3,992,132 )

below shows the changes in net revenue in the respective segment of the Company for the three-month period ended June 30, 2024 as compared

to the same period in 2023:

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, 2024 compared to

the same period in 2023:

Net Revenue by Segment

2 unchanged sentences

Percent Change

June 30, 2024

June 30, 2023

of Net Revenue

March 31, 2024

March 31, 2023

Chemical Products

2 unchanged sentences

Percentage Change

Bromine and crude salt segments

product sold in tonnes

June 30, 2024

June 30, 2023

Bromine and crude salt segments product sold in tonnes

March 31, 2024

March 31, 2023

Bromine (excluded volume sold to SYCI)

Bromine segment

For the three-month periods ended June 30, 2024 and 2023, the net revenue

for the bromine segment was $1,859,234 and $7,356,347, respectively.

The decrease of the net revenue of bromine was due to a decrease

in selling prices and tonnes sold of bromine in the second quarter of 2023.

The sale price of bromine in the second quarter of 2024

was 22% lower than in the second quarter of 2023, and the quantity sold was 67% lower than in the second quarter of 2023.

For the three-month periods ended March 31, 2024

and 2023, the net revenue for the bromine segment was $1,146,197 and $8,470,372.

This decrease was due to the 78% decrease in tonnes sold

and a 39% decrease in average selling price.

Crude salt segment

For the three-month periods ended June 30, 2024 and 2023, the net revenue

for the crude salt was $523,935 and $649,435, respectively.

The decrease of net revenue of crude salt was mainly due to 33% decrease in

average selling price of crude salt for the three-month period ended June 30, 2024.

For the three-month periods ended March 31, 2024

and 2023, the net revenue for the crude salt was $116,671 and $748,681.

This decrease was due to the 80% decrease in tonnes sold and a

22% decrease in average selling price.

Chemical products segment

For the three-month periods ended June 30, 2024

For the three-month periods ended March 31, 2024

and 2023, 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 three-month period ended June 30, 2024

and 2023, the net revenue for the natural gas was $0.

For the three-month period ended March 31, 2024

and 2023, the net revenue for the natural gas production was $0.

Equipment Lease

For the three-month period ended June 30, 2024

and 2023, the net revenue for the equipment lease was $0.

For the three-month period ended March 31, 2024

and 2023, the net revenue for the equipment lease was $44,194 and $82,954.

Cost of Net Revenue

3 unchanged sentences

Three-Month Period Ended

June 30, 2024

June 30, 2023

March 31, 2024

March 31, 2023

Chemical Products

3 unchanged sentences

Our cost of net revenue was $2,119,845 for the

three-month period ended June 30, 2024, an decrease of $2,209,384 (or 30%) as compared to the same period in 2023 due to the decrease

of net revenue by 70% for the three-month period ended June 30, 2024 as compared to the same period in 2023 .

three-month period ended March 31, 2024, an decrease of $4,649,229 (or 69%) as compared to the same period in 2023 due to the decrease

of net revenue by 86% for the three-month period ended March 31, 2024 as compared to the same period in 2023 .

Bromine production capacity and utilization

3 unchanged sentences

Annual Production Capacity (in tonnes)

Three-month period ended June 30, 2023

Three-month period ended June 30, 2024

Variance of the three-month period ended June 30, 2024 and 2023

(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.

Three-month period ended March 31, 2023

Three-month period ended March 31, 2024

Variance of the three-month periods ended March 31, 2024 and 2023

(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.

Bromine segment

For the three-month period ended June 30, 2024,

For the three-month period ended March 31, 2024

the cost of net revenue for the bromine segment was $2,072,752.

For the three-month period ended June 30, 2023,

For the three-month period ended March 31, 2023

the cost of net revenue for the bromine segment was $6,148,443.

Crude salt segment

For the three-month period ended June 30, 2024 the cost of net revenue

for the crude salt segment was $382,999.

For the three-month period ended June 30, 2023

For the three-month period ended March 31, 2024

the cost of net revenue for the crude salt segment was $46,894.

For the three-month period ended March 31, 2023

the cost of net revenue for the crude salt segment was $620,258.

Chemical products segment

Cost of net revenue for our chemical products

segment for the three-month period ended June 30, 2024 and 2023 was $0.

segment for the three-month period ended March 31, 2024 and 2023 was $0.

Natural gas segment

Cost of net revenue for our natural gas segment

for the three-month period ended June 30, 2024 and 2023 was $0.

Gross Profit.

Gross loss was $2,728,889,

or 115%, of net revenue for the three-month period ended June 30, 2024, representing a decrease of $3,413,229, as compared to a gross

profit of $684,340, or 9%, of net revenue for the same period in 2023.

for the three-month period ended March 31, 2024 and 2023 was $199 and $373.

Gross Profit (Loss) Gross loss was

$812,783, or 62%, of net revenue for three-month period ended March 31, 2024 compared to $2,532,933, or 27% of net revenue for three-month

period ended March 31, 2023.

Gross Profit (Loss) by Segment

2 unchanged sentences

Three-Month Period Ended

June 30, 2024

June 30, 2023

Profit Margin

March 31, 2024

March 31, 2023

Profit (Loss) Margin

Gross Profit Margin

2 unchanged sentences

Equipment Lease

Total Gross Profit

Total Gross Profit (Loss)

Bromine segment

For the three-month period ended June 30, 2024,

the gross loss margin for our bromine segment was 154%, compared to 4% in the three-month period ended June 30, 2023.

For the three-month period ended March 31, 2024,

the gross loss margin for our bromine segment was 81%, compared to 27% in the three-month period ended March 31, 2023.

The decrease in

gross profit margin was primarily attributable to the lower average selling price of bromine of $2,379 per ton in the three-month period

ended June 30, 2024 compared to $3,065 per ton in the three-month period ended June 30, 2023 and the number of sales was down 67% from

the second quarter of 2023.

For the three-month period ended June 30, 2023,

gross loss margin was primarily attributable to the higher average selling price of bromine of $2,541 per ton in the three-month period

ended March 31, 2024 compared to $4,193 per ton in the three-month period ended March 31, 2023.

Bromine tonnes sales also decreased from

2,020 tonnes for the three month period ended March 31, 2023 to 451 tonnes for the three month period ended March 31, 2024.

For the three-month period ended March 31, 2023,

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

Crude salt segment

For the three-month period ended June 30, 2024,

Crude salt segmen t

For the three-month period ended March 31, 2024,

the gross profit margin for our crude salt segment was 60%.

For the three-month period ended June 30, 2023,

the gross loss margin for our crude salt segment was 57%.

For the three-month period ended March 31, 2023,

the gross profit margin for our crude salt segment was 17%.

Direct labor and factory overheads incurred

6 unchanged sentences

As a result, direct labor and factory overhead costs (including depreciation of plant and machinery) in the amount of $3,734,689

and $1,055,529 incurred for the three-month periods ended June 30, 2024 and 2023, respectively, for the factories that have not resumed

production were presented as part of the operating expenses.

General and Administrative Expenses

General and administrative expenses were $689,972 for the three-month period ended June 30, 2024, representing an increase of $96,647

as compared to $593,325 for the same period in 2023.

Income (loss) from Operations Loss

from operations was $5,146,997 for the three-month period ended June 30, 2024, compared to loss from operations of $919,098 in the same

period in 2023.

Income (loss) from Operations by Segment

and $2,408,736 incurred for the three-month periods ended March 31, 2024 and 2023, 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 $717,456 for the three-month period ended March 31, 2024, an decrease of $192,595 (or 21%) as compared to $910,051 for the same period

Loss from Operations Loss from operations

was $5,269,419 the three-month period ended March 31, 2024, compared to loss from operation of $799,558 in the same period in 2023.

Loss from Operations by Segment

Three-Month Period Ended

June 30, 2024

March 31, 2024

Three-Month Period Ended

June 30, 2023

March 31, 2023

Chemical Products

Income (loss) from operations before corporate costs

Corporate costs

Unrealized gain on translation of Intercompany balance

Income (loss) from operations

Loss from operations before corporate costs

Corporate cost

Unrealized gain (loss) on translation of intercompany balance

Loss from operations

Bromine segment

Loss from operations from our bromine segment

was $4,662,586 for the three-month period ended June 30, 2024, compared to income from operations of $787,509 in the same period in 2023.

This decrease was due to a 67% decrease in tonnes sold and a 22% decrease in average selling price.

was $4,782,815 for the three-month period ended March 31, 2024, compared to loss from operations of $409,692 in the same period in 2023.

This decrease was due to the 78% decrease in tonnes sold and a 39% decrease in average selling price.

Crude salt segment

Income from operations from our crude salt segment

was $130,024 for the three-month period ended June 30, 2024, compared to income from operations of $361,083 in the same period in 2023.

Loss from operations from our crude salt segment

was $75,092 for the three-month period ended March 31, 2024, compared toincome from operations of $42,930 in the same period in 2023.

Chemical products segment

Loss from operations from our chemical products

segment was $339,254 for the three-month period ended June 30, 2024, compared to loss from operations of $416,019 in the same period in

segment was $314,824 for the three-month period ended March 31, 2024, compared to loss from operations of $417,873 in the same period

Natural gas segment

Loss from operations from our natural gas segment

was $73,773 for the three -month period ended June 30, 2024, compared to a loss from operations of $2,830 in the same period in 2023.

Other Income, Net Other income,

net of 9,977 represented bank interest income, net of capital lease interest expense for the three-month period ended June 30, 2024, an

was $27,709 for the three -month period ended March 31, 2024, compared to a income of $12,685 in the same period in 2023.

Other Income Net Other income, net

of $11,230 represented bank interest income, net of finance lease interest expense for the three -month period ended March 31, 2024, a

decrease of $30,025 (or approximately 73%) as compared to the same period in 2023.

Net Income (loss) Net loss was $33,097,918

for the three-month period ended June 30, 2024, compared to a net income of $681,816 in the same period in 2023.

Comparison of the Six-Month Period Ended

June 30, 2024 and 2023

Six-Month Period

Ended June 30, 2024

Six-Month Period

Ended June 30, 2023

Percent Change

Cost of net revenue

(14,090,516 )

Sales and marketing expenses

Direct labor and factory overheads incurred during plant shutdown

General and administrative expenses

Other Operating income (expense)

Income (loss) from operations

(10,416,416 )

Other expense

(29,173,011 )

Income (loss) before taxes

(39,568,220 )

Income (loss) tax benefit

Net Income (loss)

$ (37,090,050 )

$ (1,239,563 )

below shows the changes in net revenue in the respective segment of the Company for the six-month period ended June 30, 2024 as compared

to the same period in 2023:

Net Revenue by Segment

Six-Month Period Ended

Percent Increase

June 30, 2024

June 30, 2023

of Net Revenue

Chemical Products

Equipment Lease

Bromine and crude salt segments

Six-Month Period Ended

Percentage Change

product sold in tonnes

June 30, 2024

June 30, 2023

Bromine (excluding volume sold to SYCI)

Bromine segment

Net revenue from our bromine segment decreased

to $3,005,431 for the six-month period ended June 30, 2024 compared to $15,826,719 for the same period in 2023 due to the lower selling

price of bromine and tonnes of bromine .

Crude salt segment

Net revenue from our crude salt segment decreased

to $640,606 for the six-month period ended June 30, 2024 compared $1,398,116 for the same period in 2023 due to the lower selling tonnes

of crude salt.

Chemical products segment

For the six-month period ended June 30, 2024 and

2023, 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, 2024 and

2023, the net revenue was $0.

Equipment Lease

For the six-month period ended June 30, 2024 and

2023, the net revenue for the equipment lease was $44,194 and $82,954.

Cost of Net Revenue

Cost of Net Revenue by Segment

Six-Month Period Ended

June 30, 2024

June 30, 2023

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, 2023

Six-month period ended June 30, 2024

Variance of the six-month period ended June 30, 2024 and 2023

Utilization ratio is calculated based on the annualized actual production volume in tonnes for the periods divided by the annual production capacity in tonnes.

Bromine segment

For the six-month period ended June 30, 2024,

the cost of net revenue for the bromine segment was $6,801,811.

For the six-month period ended June 30, 2023,

the cost of net revenue for the bromine segment was $13,192,124.

Crude salt segment

For the six-month period ended June 30, 2024,

the cost of net revenue for the crude salt segment was $429,893.

For the six-month period ended June 30, 2023,

the cost of net revenue for the crude salt segment was $898,019.

Natural gas segment

Cost of net revenue for our natural gas segment

for the six-month period ended June 30, 2024 and 2023 was $199 and $373, respectively.

Gross Profit.

Gross loss was $3,541,672,

or 96%, of net revenue for six-month period ended June 30, 2024 compared to $3,217,273, or 19%, of net revenue for the same period in

Gross Profit (Loss) by Segment

% Point Change

Six-Month Period Ended

June 30, 2024

June 30, 2023

Profit Margin

Gross Profit (loss) Margin

Gross Profit Margin

Chemical Products

Equipment Lease

Total Gross Profit

Bromine segment

For the six-month period ended June 30, 2024,

the gross loss for our bromine segment was 126%, compared to 17% in the six-month period ended June 30, 2023.

The decrease in gross profit

margin was primarily attributable to the higher average selling price of bromine of $2,438 per ton in the six-month period ended June

30, 2024 compared to $3,580 per ton in the six-month period ended June 30, 2023.

For the six-month period ended June 30, 2023,

the gross profit margin for our bromine segment was 17%.

Crude salt segment

For the six-month period ended June 30, 2024,

the gross profit margin for our crude salt segment was 33%.

For the six-month period ended June 30, 2023 the

gross profit margin for our crude salt segment was 35%.

Chemical products segment

For the six-month period ended June 30, 2024,

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, 2024.

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 $5,449,192

and $3,464,265 incurred for the three-month periods ended June 30, 2024 and 2023, respectively, for the factories that have not resumed

production were presented as part of the operating expense.

General and Administrative Expenses.

General and administrative expenses were $1,407,428 for the six-month period ended June 30, 2024, a decrease of $95,948 (or 6%) as compared

to $1,503,376 for the same period in 2023.

Income (Loss) from Operations.

from operations was $10,416,416 for the six-month period ended June 30, 2024, compared to income from operations of $1,718,656 in the

same period in 2023.

Income(loss) from Operations by Segment

Six-Month Period Ended

June 30, 2024

Six-Month Period Ended

June 30, 2023

$ (9,445,401 )

$ (1,197,201 )

Chemical Products

Income(loss) from operations before corporate costs

(10,146,029 )

Corporate costs

Unrealized gain on translation of intercompany balance

Income(loss) from operations before taxes

$ (10,416,416 )

$ (1,718,656 )

Bromine segment

Loss from operations from our bromine segment

was $9,445,401 for the six-month period ended June 30, 2024, compared to an loss from operations of $1,197,201 in the same period in 2023.

This decrease was due to a 72% decrease in tonnes sold and a 32% decrease in average selling price.

Crude salt segment

Income from operations from our crude salt segment

was $54,932 for the six-month period ended June 30, 2024, compared to a loss from operations of $404,013 in the same period in 2023.

Chemical products segment

Loss from operations from our chemical products

segment was $654,078 for the six-month period ended June 30, 2024, compared to a loss from operations of $833,892 in the same period in

Natural gas segment

Loss from operations from our natural gas segment

by equipment lease was $101,482 for the six-month period ended June 30, 2024, compared to a income from operations of $9,855 in the same

period in 2023.

Other Income, Net.

Other income,

net of $21,207 represented bank interest income, net of capital lease interest expense for the six -month period ended June 30, 2024,

an decrease of $64,631 (or approximately 75%) as compared to the same period in 2023.

Net Income (Loss).

$37,090,050 for the six-month period ended June 30, 2024, compared to a net loss of $1,239,563 in the same period in 2023.

Net Loss Net loss was $3,992,132

for the three-month period ended March 31, 2024, compared to a net loss of $557,747 in the same period in 2023.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2024, cash and cash equivalents

As of March 31, 2024, cash and cash equivalents

were $70,761,796 as compared to $72,223,894 as of December 31, 2023.

1 unchanged sentence

Statement of Cash Flows

Six-Month Period Ended June 30,

Three-Month Period Ended March 31,

Net cash (used in) provided by operating activities

Net cash used in investing activities

$ (1,330,476 )

Net cash used in financing activities

Net cash used in investing activities

Effects of exchange rate changes on cash and cash equivalents

Net increase(decrease) in cash and cash equivalents

For the six-month period ended June 30, 2024,

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, 2024, cash flow used in operating activities of approximately $0.8 million was mainly due to a net loss of $37.09 million, offset

by depreciation and amortization expenses of $9.47 million and loss on disposal of equipment of $29.17 million.

During the six-month period ended June 30, 2023,

cash flow provided by operating activities of approximately $11 million was mainly due to a net loss of $1.24 million, a decrease in accounts

receivable of $3.15 million, a decrease in accounts payable of $1.56 million, a decrease in deferred taxes of $0.4 million, and a non-cash

adjustment related to depreciation and amortization of property, plant and equipment of $10.6 million, offset by increases in operating

leases, and prepayments.

$ (1,462,098 )

For the three-month period ended March 31, 2024,

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, 2024, cash flow used in operating activities of approximately $1.33 million was mainly due to a net loss of $3.99 million,

an increase in accounts receivable of $0.4 million, a non-cash adjustment related to deferred taxes of $1.27 million, offset by depreciation

and amortization expenses of $4.73 million.

During the three -month period ended March 31,

2023, cash flow provided by operating activities of approximately $4.8 million was mainly due to a net loss of $0.56 million, a decrease

in accounts receivable of $0.2 million, a decrease in accounts payable of $0.8 million, an increase in deferred taxes of $0.2 million,

and a non-cash adjustment related to depreciation and amortization of property, plant and equipment of $5.36 million, offset by increases

in operating leases, and prepayments.

Accounts receivable

1 unchanged sentence

a major impact on our overall liquidity.

The following table presents the aging analysis of our accounts receivable as of June 30, 2024

The following table presents the aging analysis of our accounts receivable as of March 31, 2024

and December 31, 2023.

June 30, 2024

March 31, 2024

December 31, 2023

8 unchanged sentences

The overall accounts receivable balance as of

June 30, 2024 decreased by $3,129,401, as compared to those of December 31, 2023.

March 31, 2024 increased by $394,358, as compared to those of December 31, 2023.

We have policies in place to ensure that sales are made

1 unchanged sentence

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

allowance for doubtful accounts for the three-month and six-month periods ended June 30, 2024 is required.

allowance for doubtful accounts for the three-month period ended March 31, 2024 is required.

Our inventory consists of the following:

June 30, 2024

March 31, 2024

December 31, 2023

1 unchanged sentence

Finished goods

The net inventory level as of June 30, 2024 decreased

The net inventory level as of March 31, 2024 increased

by $56,898(or 10%), as compared to the net inventory level as of December 31, 2023.

Raw materials increased by $1,319 as of June 30,

Raw materials decreased by $2,011 as of March

31, 2024 as compared to December 31, 2023.

Our finished goods decreased by $164,788 as of

June 30, 2024 as compared to December 31, 2023.

Our finished goods increased by $58,909 as of

March 31, 2024 as compared to December 31, 2023.

Net Cash Used in Investing Activities

During the six months ended June 30, 2024, we

used approximately $60.5 million to acquire property, plant and equipment, which primarily included the cost of bromine wells and the

installation of high and low voltage lines for these bromine wells, as well as the purchase of salt plants.

For the six-month period ended June 30, 2023,

For the three-month period ended March 31, 2024,

we did not acquire property, plant and equipment.

For the three-month period ended March 31, 2023,

we used approximately $0.04 million to acquire property, plant and equipment.

Net Cash Used in Financing Activities

For the six-month period ended June 30, 2024 and

2023, we used $0.3 million to fulfil finance lease obligations.

We have no financing activities for the three-month

periods ended March 31, 2024 and 2023.

We believe that our available funds and cash flows

2 unchanged sentences

We had available cash of approximately $70.76

million at June 30, 2024, 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.

million at March 31, 2024, 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, SHSI and DCHC as these segments continue to expand within the Chinese market.

We may not be able to identify, successfully integrate

2 unchanged sentences

of risks, including possible adverse effects on our operating results, diversion of management’s attention, inability to retain

key personnel, risks associated with unanticipated events, and the financial statement effect of potential impairment of acquired intangible

assets, any of which could have a materially adverse effect on our condition and results of operations.

In addition, if competition

for acquisition candidates or operations were to increase, the cost of acquiring businesses could increase materially.

We may effect an

acquisition with a target business which may be financially unstable, under-managed, or in its early stages of development or growth.

Our inability to implement and manage our expansion strategy successfully may have a material adverse effect on our business and future

key personnel, risks associated with unanticipated events, risks associated with the COVID-19 pandemic and the financial statement effect

of potential impairment of acquired intangible assets, any of which could have a materially adverse effect on our condition and results of

In addition, if competition for acquisition candidates or operations were to increase, the cost of acquiring businesses could

increase materially.

We may effect an acquisition with a target business which may be financially unstable, under-managed, or in its early

stages of development or growth.

Our inability to implement and manage our expansion strategy successfully may have a material adverse

effect on our business and future prospects.

Contractual Obligations and Commitments

We have no significant 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, 2024 is provided in the notes to our consolidated financial

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

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, 2024 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”.

Material Off-Balance Sheet Arrangements

12 unchanged sentences

used by us in the preparation of our financial statements:

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 2023 Form 10-K.

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, 2024.

Quantitative and Qualitative Disclosures About Market Risk

Pursuant to Item 305(e) of Regulation S-K (§

229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,”

as defined by Rule 229.10(f)(1).

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