What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-11-19 compared with 2024-10-11 · 552 added, 398 removed, 785 unchanged (55% of the section changed)

4 unchanged sentences

(Expressed in U.S.

March 31, 2024

September 30, 2024

December 31, 2023

38 unchanged sentences

11,012,754 shares issued;

and 10,726,924 shares outstanding as of March 31, 2024 and December 31, 2023

and 10,726,924 shares outstanding as of September 30, 2024 and December 31, 2023, respectively

Treasury stock;

285,830 shares as of March 31, 2024 and December 31, 2023 at cost

285,830 shares as of September 30, 2024 and December 31, 2023 at cost

( 1,372,673 )

3 unchanged sentences

Retained earnings appropriated

Accumulated other comprehensive income

Accumulated other comprehensive loss

( 16,193,514 )

7 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE

INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE

(Expressed in U.S.

Three-Month Period Ended

OPERATING COSTS AND EXPENSE

Three-Month Period Ended September 30,

Nine -Month Period Ended September 30,

OPERATING INCOME (EXPENSE)

Cost of net revenue

1 unchanged sentence

( 6,373,902 )

( 11,303,519 )

( 20,464,418 )

Sales and marketing expenses

2 unchanged sentences

( 1,007,689 )

( 7,185,537 )

( 4,471,954 )

General and administrative expenses

Other operating income

( 1,002,529 )

( 2,409,957 )

( 2,266,260 )

Other operating income (loss)

TOTAL OPERATING COSTS AND EXPENSE

1 unchanged sentence

( 8,158,903 )

LOSS FROM OPERATIONS

( 20,930,621 )

( 27,185,348 )

PROFIT (LOSS) FROM OPERATIONS

( 4,581,609 )

( 2,293,288 )

( 14,998,025 )

( 4,011,944 )

OTHER INCOME (EXPENSE)

1 unchanged sentence

Interest income

Other expense

LOSS BEFORE INCOME TAXES

Other expenses (income)

( 29,173,011 )

INCOME TAX (EXPENSE) BENEFIT

INCOME(LOSS) BEFORE TAXES

( 4,596,580 )

( 2,259,321 )

COMPREHENSIVE LOSS:

( 44,164,800 )

( 3,892,139 )

INCOME TAX BENEFIT (EXPENSE)

NET PROFIT (LOSS)

$ ( 3,492,883 )

$ ( 1,775,797 )

$ ( 40,582,933 )

$ ( 3,015,360 )

COMPREHENSIVE INCOME (LOSS)

NET PROFIT (LOSS)

$ ( 3,492,883 )

$ ( 1,775,797 )

$ ( 40,582,933 )

$ ( 3,015,360 )

OTHER COMPREHENSIVE (LOSS) INCOME

- Foreign currency translation adjustments

( 7,879,513 )

TOTAL COMPREHENSIVE (LOSS) INCOME

$ ( 390,007 )

$ ( 38,723,178 )

$ ( 10,894,873 )

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE:

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

THREE-MONTH PERIOD ENDED MARCH 31, 2024 AND 2023

NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2024

(Expressed in U.S.

1 unchanged sentence

unappropriated

BALANCE AT JUNE 30, 2024 ( Una udited)

( 1,372,673 )

$ ( 19,296,390 )

$ 166,915,125

Translation adjustment

Net loss for three-month period ended September 30,

( 3,492,883 )

BALANCE AT SEPTEMBER 30, 2024 (Unaudited)

( 1,372,673 )

$ ( 16,193,514 )

$ 166,525,118

comprehensive

unappropriated

BALANCE AT JUNE 30, 2023 ( Una udited)

( 1,372,673 )

$ 156,849,972

$ ( 23,154,780 )

$ 260,251,151

Restricted shares

Translation adjustment

Net income for three-month period ended September 30,

( 1,775,797 )

BALANCE AT SEPTEMBER 30, 2023 (Unaudited)

( 1,372,673 )

$ 155,074,175

$ ( 20,906,802 )

$ 260,723,332

comprehensive

unappropriated

BALANCE AT DECEMBER 31, 2023 (Audited)

3 unchanged sentences

Translation adjustment

Net loss for three-month period

ended March 31, 2024

Net income for nine-month period ended September 30,

( 40,582,933 )

BALANCE AT MARCH 31, 2024(Unaudited)

BALANCE AT SEPTEMBER 30, 2024 (Unaudited)

( 1,372,673 )

8 unchanged sentences

$ 271,618,205

Restricted shares

Translation adjustment

Net loss for three-month period

ended March 31, 2023

BALANCE AT MARCH 31, 2023(Unaudited)

( 7,879,513 )

Net income for nine-month period ended September 30,

( 3,015,360 )

BALANCE AT SEPTEMBER 30, 2023 (Unaudited)

( 1,372,673 )

$ 155,074,175

$ ( 20,906,802 )

$ 260,723,332

Treasury Stock

7 unchanged sentences

(Expressed in U.S.

Three-Month Period Ended March 31,

Nine-Month Period Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

Net income(loss)

$ ( 40,582,933 )

$ ( 3,015,360 )

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

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

Amortization on capital lease

3 unchanged sentences

( 3,615,091 )

( 1,002,511 )

Amortization of right-of-use asset

Loss on disposal of equipment

Changes in assets and liabilities:

1 unchanged sentence

Prepayments and deposits

( 3,947,311 )

Advance from customers

1 unchanged sentence

Accounts and Other payable and accrued expenses

( 2,685,766 )

( 1,503,845 )

Amount due to related Parties

Taxes payable

Lease liabilities

Net cash (used in) provided by

operating activities

( 1,330,476 )

Operating lease

Net cash (used in) provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment

Net cash used in investing

EFFECTS OF EXCHANGE RATE CHANGES

ON CASH AND CASH EQUIVALENTS

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

( 60,526,213 )

( 15,197,648 )

Net cash from investing activities

( 60,526,213 )

( 15,197,648 )

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

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

( 60,986,401 )

( 4,451,237 )

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD

1 unchanged sentence

$ 103,774,977

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Expressed in U.S.

Years Ended March 31,

Periods Ended September 30,

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the three-month period ended March 31, 2024 for:

Cash paid during the nine-month period ended September 30, 2024 for:

Paid for taxes

5 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

SEPTEMBER 30, 2024

(Expressed in U.S.

1 unchanged sentence

of Presentation and Consolidation

The accompanying audited consolidated financial

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

Hengde Salt Industry Co.

All material intercompany transactions have been eliminated on consolidation.

of the Business

Nature of Business

The Company manufactures and trades bromine through

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

its wholly-owned subsidiary, Shouguang City Haoyuan Chemical Company Limited (“SCHC”);

manufactures and trades crude salt

through its wholly-owned subsidiary, SHSI;

4 unchanged sentences

resources (including bromine and crude salt) in the PRC.

DCHC’s business commenced trial operation in January 2019 but suspended

production temporarily in May 2019 as required by the government to obtain project approval (see Note 1 (b)(iii)).

On March 11, 2020, the World Health

Organization (WHO) officially declared COVID-19 a pandemic.

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

disruption to the Company’s operations and financial position is uncertain.

While our operations are currently not materially

affected, it is unknown whether or how they may be affected if such a pandemic persists for an extended period.

While not yet

quantifiable, the Company believes this situation did not have a material adverse impact on its operating results in the year of

2021 and will continue to assess the financial impact.

The virus outbreak slightly delayed the commencement of the operations for

Factory No.1, No.4, No.7, No.9.

We received approval to open factory No.

COVID has still delayed the approval for

factories N0.2 and No.10.

DCHC’s business commenced trial operation in January 2019 but has temporarily

suspended production insince May 2019 as required by the government to obtain project approval (see Note 1 (b)(iii)).

On March 11, 2020, the World Health Organization

(WHO) officially declared COVID-19 a pandemic.

While not fully quantifiable, the Company believes this situation did not have a material

adverse impact on its operating results in the year of 2021.

In 2022, COVID may have had a slightly more effect.

The government conducted

frequent unannounced inspections, which caused some disruption to production.

In addition, the Company believes the government’s

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

The virus outbreak and resulting

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

It has delayed the delivery

of machinery and other equipment for the Company’s Yuxin Chemical factory causing a postponement in its completion and opening.

The Company believes the virus outbreak has delayed the finalization of the Sichuan Province environmental plan, causing a further delay

for the Company’s project in Sichuan Province.

(i) Bromine and Crude Salt Segments

3 unchanged sentences

In April 2019, Factory No.1, and Factory No.7 resumed operation.

On November 25, 2019, the government of

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

including Factory No.

On November 25, 2019, the government of Shouguang

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

1 and Factory No.

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

Subsequently,

due to the coronavirus outbreak in China, the local government ordered those bromine facilities to postpone the commencement of

Subsequently, the Company received an approval dated February 27, 2020 issued by thelocal governmental authority

allowing the Company to resume production after the winter temporary closure.

Further, the Company received another approval from

the Shouguang Yangkou People’s Government dated March 5, 2020 allowing the Company to resume production at its bromine

factories No.

Subsequently, due to the coronavirus

outbreak in China, the local government ordered those bromine facilities to postpone the commencement of production.

Subsequently, the

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

after the winter temporary closure.

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

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

4, No.7 and No.

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

“March 2020 Approval”).

9 in order to meet the

needs of bromide products for epidemic prevention and control (the “March 2020 Approval”).

The Company’s Factories No.

7 commenced trial production in mid March 2020 and

commercial production on April 3, 2020 and its Factories No.

7 commenced trial production in mid-March 2020 and commercial production on April 3, 2020 and its Factories No.

commenced commercial production on May 6, 2020.

received verbal notification from the government regarding Factory No.

8, allowing it to recommence production in August 2022.

8 began contributing revenue in the fourth quarter 2022.

The Company received an oral notification from the government for its Factory No.

permits the Factory No.

8 to resume production in August 2022.

The Company is still waiting for governmental

8 unchanged sentences

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

period and reopened the operating bromine and crude salt factories in February, 2023 as planned.

period and reopened the operating bromine and crude salt factories in February, 2023.

In April 2022, Shouguang Hengde Salt Industry

1 unchanged sentence

This subsidiary was created

in response to a new government policy that required bromine and crude salt companies to have separate registrations.

in response to a new government policy that requires bromine and crude salt companies to have separate registrations.

The creation of

24 unchanged sentences

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

management that the electricity restrictions are being eased.

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

management that the electricity restrictions were eased.

Accordingly, the Company contacted its suppliers and expect to have the remainder

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

The COVID restrictions and resulting national and international supply

chain issues as well as permitting issues have caused delays in receiving some previously ordered machinery and 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, 2024 and December 31, 2023.

The COVID restrictions and resulting national

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

and equipment.

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 is unable to estimate when the construction can be completed and

the production can begin.

On March 23, 2023, the Company issued

a press release detailing the delays in the opening of its 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 install the

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

to apply for environmental and safety approval.

After the Company has obtained environmental and safety approval, it will take us 4 months

to conduct trial production, and then the Company may start commercial production.

On July 26, 2023, the Company announced

that the delivery of the remaining equipment for its Yuxin chemical factory has been temporarily delayed and the Company will re-evaluate

its chemical products strategy.

The Company believes the 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, 2024 and December 31, 2023.

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

impact the overall cost of the project.

(iii) Natural Gas Segment

In January 2017, the Company completed the

first brine water and natural gas well field construction in Daying located in Sichuan Province, China, 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 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, 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.

13 unchanged sentences

(d) Cash and Cash Equivalents

Cash and cash equivalents consist of all cash

balances and highly liquid investments with original maturities of three months or less.

Because of short maturity of these

investments, the carrying amounts approximate their fair values.

Cash and cash equivalents consist of all cash balances and highly liquid

investments with original maturities of three months or less.Because of short maturity of these investments, the carrying amounts approximate

their fair values.

(e) Allowance

for Doubtful Accounts

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.

Credit 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 result.

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.

Credit 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 result.

(f) Concentration

6 unchanged sentences

The Company placed $ 11,237,493

and $ 72,223,894 with these institutions as of March 31, 2024 and December 31, 2023, respectively.

and $ 72,223,894 with these institutions as of September 30, 2024 and December 31, 2023, respectively.

The Company has not experienced

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

SEPTEMBER 30, 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 using the straight-line method at rates sufficient to depreciate such

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

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

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

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

All other ordinary repair and maintenance

costs are expensed as incurred.

Mineral rights are recorded at cost less accumulated

12 unchanged sentences

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

Motor vehicles

Motor Vehicles

Motor vehicles Motor Vehicles

Furniture, fixtures and equipment

4 unchanged sentences

Common facilities that are built specifically to service production

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

and gas properties on a pro-rata basis.

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

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

Costs associated with significant development projects

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

depreciation.

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

gas properties on a pro-rata basis.

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

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

Costs associated with significant development projects are

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

(h) Retirement

3 unchanged sentences

The required contributions

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

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

The Company’s

contributions totaled $ 123,123 and $ 154,184 for the three-month periods ended March 31, 2024 and 2023, respectively.

contributions totaled $ 99,035 and $ 121,941 for the three-month period ended September 30, 2024 and 2023, respectively, and totaled $ 322,448

and $ 405,664 for the nine-month period ended September 30, 2024 and 2023, respectively.

Net revenue is net of discount and value added

11 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

SEPTEMBER 30, 2024

(Expressed in U.S.

19 unchanged sentences

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

For the three-month period ended March 31, 2024

and 2023, 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

weighted average number of shares outstanding during the periods presented.

For the three and nine months period ended September

30, 2024 and 2023, the Company determined that there were no events or circumstances indicating possible impairment of its long-lived

and Diluted Earnings per Share of Common Stock

Basic earnings per common share are based

on the weighted average number of shares outstanding during the periods presented.

Diluted earnings per share are computed using weighted

5 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 periods ended March 31,

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

30, 2024 and 2023, respectively.

Because the Company reported a net loss for the

three-month periods ended March 31, 2024 and 2023, 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.

Because the Company reported a net loss

for the three-month periods ended September 30, 2024 and 2023, 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

MARCH 31, 2024

SEPTEMBER 30, 2024

(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 income.

The statement of income

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

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.

Gains or losses resulting from transactions in currencies

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

other than the functional currencies are recognized in net loss 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, 2024

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION AND

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(p) 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 profit (loss).

tax in the consolidated statement of income (loss).

Accounting Pronouncements

Recent accounting pronouncements adopted

There were no recent accounting pronouncements adopted during the three

months ended March 31, 2024.

There were no recent accounting pronouncements adopted during the nine

months ended September 30, 2024.

Recently Issued Accounting Pronouncements Not

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments

– Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.

The amendments in this Update affect loans,

debt securities, trade.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

(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.

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

2016-13, Financial

Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.

The amendments in this Update affect

loans, debt securities, trade 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.

The Company is currently evaluating the effect

of this on the condensed consolidated financial statements and related disclosure.

(t) Fair Value Measurement

15 unchanged sentences

unobservable and significant to the fair value.

The carrying amounts of the Company’s

financial instruments approximate their fair values because of their short-term nature.

The Company’s financial instruments

include cash, accounts receivable, amounts due to related parties, accounts payable and other current payables.

There were no

material unrecognized financial assets and liabilities as of March 31, 2024 and 2023.

The carrying amounts of the Company’s financial

instruments approximate their fair values because of their short-term nature.

The Company’s financial instruments include cash,

accounts receivable, amounts due to related parties, accounts payable and other current payables.

There were no material unrecognized

financial assets and liabilities as of September 30, 2024 and 2023.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

(Expressed in U.S.

NOTE 2 – ACCOUNTS RECEIVABLE, NET

Accounts receivable net consist of:

Accounts Receivable, Net - Schedule of Accounts, Notes, Loans and Financing Receivable

September 30,

Accounts receivable

1 unchanged sentence

Accounts receivable, net

The overall accounts receivable balance

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

We have policies in place to ensure that sales are

made to customers with an appropriate credit history.

The overall accounts receivable balance as of

September 30, 2024 decreased by $ 3,678,816 , as compared to those of December 31, 2023.

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 customer.

2 unchanged sentences

Inventories - Schedule of Inventories, Current

September 30,

Raw materials

1 unchanged sentence

Inventory, net

As of March 31, 2024 and December 31, 2023, the

reserve for inventory impairment was due to exchange rate changes.

As of September 30, 2024 and December 31, 2023, the reserve for inventory

impairment was due to exchange rate change.

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 March 31 2024

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

2024 and December 31, 2023.

As of March 31, 2024, the prepaid land lease increased to $ 9,325,634 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

As of September 30, 2024, the prepaid land lease increased to $ 9,442,751 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.

GULF RESOURCES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

SEPTEMBER 30, 2024

(Expressed in U.S.

1 unchanged sentence

Property, plant and equipment, net consist of the following:

Property, Plant and Equipment, Net -

Schedule of Property, Plant and Equipment

Property, Plant and Equipment, Net - Schedule of Property, Plant and Equipment

September 30,

Mineral rights

10 unchanged sentences

The Company has certain buildings and salt pans

erected on parcels of land located in Shouguang, PRC, and such parcels of land are collectively owned by local townships or the

government authority.

erected on parcels of land located in Shouguang, PRC, and such parcels of land are collectively owned by local townships or the government

The Company has not been able to obtain property ownership certificates over these buildings and salt pans.

The aggregate carrying values of these properties situated on parcels of the land are $ 8,067,740

and $ 8,346,742

as at March 31, 2024 and December 31, 2023, respectively.

During the three-month period ended March 31,

2024, depreciation and amortization expense totaled $ 4,729,242 , of which $ 3,106,788 , $ 201,504 and $ 1,420,950 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,

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.

The aggregate carrying

values of these properties situated on parcels of the land are $ 7,870,846 and $ 8,346,742 as at September 30, 2024 and December 31, 2023,

respectively.

During the three-month period ended September 30, 2024, depreciation

and amortization expense totaled $ 4,522,525 ,of which $ 1,211,694 , $ 203,244 and $ 3,107,587 were recorded in direct labor and factory overheads

incurred during plant shutdown , administrative expenses and cost of net

During the nine-month period ended September 30, 2024 , depreciation

and amortization expense totaled $ 13,980,751 of which $ 5,601,791 , $ 605,945 and $ 7,773,015 were recorded in direct labor and factory overheads

incurred during plant shutdown , administrative expenses and cost of net

During the three-month period ended September 30, 2023, depreciation

and amortization expense totaled $ 4,787,568 .of which $ 760,400 , $ 166,042 and $ 3,861,126 were recorded in direct labor and factory overheads

incurred during plant shutdown , administrative expenses and cost of net

During the nine-month period ended September 30, 2023 , depreciation

and amortization expense totaled $ 15,381,658 , of which $ 3,502,188 , $ 765,921 and $ 11,113,549 were recorded in direct labor and factory

overheads incurred during plant shutdown , administrative expenses and

cost of net revenue .

NOTE 6 – FINANCE LEASE RIGHT-OF-USE ASSETS

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

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

the following:

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

Plant and Equipment Under Finance Leases

September 30,

Buildings Buildings

Plant and machinery Plant and Machinery

Accumulated depreciation and amortization

4 unchanged sentences

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

During the three-month period ended March 31,

2024, depreciation and amortization expense totaled $ 1,270 , which was recorded in direct labor and factory overheads incurred during plant

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 and nine months period ended

September 30, 2024, depreciation and amortization expense totaled $ 1,268 and $ 3,808 , respectively, which was recorded in direct labor

and factory overheads incurred during plant shutdown.

During the three and nine months period ended

September 30, 2023, depreciation and amortization expense totaled $ 1,291 and $ 3,966 , respectively, which was recorded in direct labor

and factory overheads incurred during plant shutdown.

GULF RESOURCES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

SEPTEMBER 30, 2024

(Expressed in U.S.

NOTE 7 – OPERATING LEASE RIGHT-OF USE ASSETS

The Company has the rights to use certain parcels of land located

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

For parcels of land that

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

NOTE 7 – OPERATING LEASE RIGHT–OF

The Company has the rights to use certain parcels

of land located in Shouguang, 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 29.8 square kilometers

with an aggregate operating lease right-of-use assets amount of $ 7,821,687 as at March

As of March 31, 2024, the total operating lease

ROU assets was $ 6,560,963 .

The total operating lease cost for the three-month

period ended March 31, 2024 and 2023 was $ 217,345 and $ 241,021 .

NOTE 8 – PAYABLE AND ACCRUED EXPENSES

Payable and accrued expenses consist of the following:

Company cannot obtain land use rights certificates covers a total of approximately 34.95 square kilometers with an aggregate operating

lease right-of-use assets amount of $ 7,642,937 as at September 30, 2024.

As of September 30, 2024, the total operating

lease ROU assets was $ 6,385,605 .

The total operating lease cost for the nine-month

period ended September 30, 2024 and 2023 was $ 659,509 and $ 706,033 .

NOTE 8 – PAYABLE AND ACCRUED

Accounts payable, other payable and accrued expenses

consist of the following:

Payable and Accrued

Expenses - Schedule of Accounts Payable and Accrued Liabilities

September 30,

Accounts payable

4 unchanged sentences

Accrued expense-others

Accrued expense-others mainly include the quality guarantee of water

conservancy projects of $ 2,552,044 and others.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

(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 $ 87,927 for five years from January 1, 2023 to December 31, 2027 .

associated with this agreement for the three months ended March 31, 2024 and 2023 was approximately $ 21,982 and $ 22,696 .

Accrued expense-others mainly include of the shares to be paid for

the acquisition of salt plant $ 7,878,182 and others

NOTE 9 – RELATED PARTY

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 former chairman of the board of directors 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 $ 87,927 for

five years from January 1, 2023 to December 31, 2027 .

The expense associated with this agreement for the three and nine

months ended September 30, 2024 was approximately $ 22,258

and $ 66,125 .

The expense associated with this agreement for the three and nine months ended September 30, 2023 was approximately

$ 21,748 and $ 66,028 .

NOTE 9 – RELATED PARTY TRANSACTIONS –

1 unchanged sentence

Name of related parties

Chairman Of the Board

Chief Executive Officer

Former Chairman Of the Board

Chief Executive Officer and Chairman of the Board

Chief Financial Officer

Chief Operating Officer

Chief Operating Officer,Director

September 30,

Amount due to related parties:

3 unchanged sentences

NOTE 10 – TAXES PAYABLE

September 30,

Land use tax payable

Value added tax and other taxes payable

NOTE 11 – 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 and Operating Leased Liabilities

September 30,

Interest rate

2 unchanged sentences

Finance lease liability, net of current portion

Interest expenses from a finance lease liability

amounted to $ 24,830 and $ 28,560 for the three-month periods ended March 31, 2024 and 2023, respectively, were charged to the condensed

consolidated statement of loss.

Interest expenses from capital lease obligations

amounted to $ 21,191 and $ 23,791 for the three-month period ended September 30, 2024 and 2023, respectively, which were charged to the

condensed consolidated statement of income (loss).

Interest expenses from capital lease obligations amounted to $ 70,835 and $ 80,252 for

the nine-month period ended September 30, 2024 and 2023, respectively, which were charged to the condensed consolidated statement of income

The components of operating lease liabilities

September 30,

Interest rate

3 unchanged sentences

The weighted average remaining operating lease

term at March 31, 2024 was 18 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, 2024 and 2023 was $ 226,259 and $ 239,898 .

term at September 3 0 , 2024 was 18 years and the weighted average discounts

rate was 4.89 %.

Lease payments for the three-month period ended September 30, 2024 and 2023, respectively, were $ 66,387 and $ 64,866 .

payments for the nine-month period ended September 30, 2024 and 2023, respectively, were $ 823,608 and $ 824,572 .

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, 2024

(Expressed in U.S.

NOTE 12 –– EQUITY

17 unchanged sentences

Statutory Common Reserve Funds

SCHC, SYCI, SHSI and DCHC are required each

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

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

This reserve can be used to make up

any loss incurred or to increase share capital.

Except for the reduction of losses incurred, any other application should

not result in this reserve balance falling below 25% of the registered capital.

As at 31 March, 2024, GULF RESOURCES 'statutory

provident fund stood at $26.67 million.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

(Expressed in U.S.

SCHC, SYCI, SHSI and DCHC are required each year

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

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

This reserve can be used to make up any loss incurred

or to increase share capital.

Except for the reduction of losses incurred, any other application should not result in this

reserve balance falling below 25% of the registered capital.

As at September 30, 2024 GULF RESOURCES 'statutory provident fund stood at

$26.67 million.

NOTE 13 – TREASURY STOCK

As of March 31, 2024 and December 31, 2023, the

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

As of September 30, 2024 and December 31, 2023,

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 March 31, 2024, the number of shares of the Company’s common stock available

for grant of stock options and issuance under the 2019 Plan was 561,801 shares.

As of September 30, 2024, the number of shares of the Company’s common stock available

for grant of awards under the 2019 Plan was 561,801 shares.

The fair value of each option award is estimated

3 unchanged sentences

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

For the three months ended March 31, 2024 and 2023, total compensation

For the three months ended September 30, 2024 and 2023, total compensation

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

There were no related tax benefits as a full valuation

allowance was recorded in the three months ended March 31, 2024 and 2023.

The following table summarizes all Company stock

option transactions between January 1, 2024 and March 31, 2024.

allowance was recorded in the three months ended September 30, 2024 and 2023.

The following table summarizes all Company

stock option transactions between January 1, 2024 and September 30, 2024.

Stock-Based Compensation - Schedule of Stock

8 unchanged sentences

Expired during the period

Balance, March 31, 2024

Balance, September 30, 2024

Stock Options and Warrants Outstanding and Exercisable

Weighted Average

Outstanding at March 31, 2024

Outstanding at September 30, 2024

Exercise Prices

1 unchanged sentence

Outstanding and exercisable

All options exercisable and outstanding at March

All options exercisable and outstanding at September

30, 2024 are fully vested.

As of March 31, 2024 there was no unrecognized compensation cost related to outstanding stock options,

As of September 30, 2024 there was no unrecognized compensation cost related to outstanding stock options,

The aggregate intrinsic value of options outstanding and exercisable

as of March 31, 2024 and 2023 was $ 0 .

as of September 30, 2024 was $ 0 .

During the three and nine months ended September

30, 2024 and 2023, there were no options exercised.

GULF RESOURCES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

SEPTEMBER 30, 2024

(Expressed in U.S.

NOTE 15 – OTHER EXPENSES

In September 2024, the Company retired

some fixed assets including aqueducts and wells for a total amount approximately $ 29,169,008 .

This decision was made due to the following

(1) the aqueducts exhibits serious water seepage, posed potential damage, and could lead to environmental pollution;

wells were found to have reduced water flow, low brine content and high energy consumption.

NOTE 16 – INCOME TAXES

1 unchanged sentence

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 periods ended March 31, 2024 and 2023, and management believes that its earnings are permanently invested in

income for the three-month and nine-month periods ended September 30, 2024 and 2023, and management believes that its earnings are permanently

invested in the PRC.

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 periods ended March 31, 2024 and 2023.

Upper Class Group Limited did not generate assessable profit for the three-month and nine-month periods ended September 30,

2024 and 2023.

HKJI, a subsidiary of Upper Class Group Limited, was

1 unchanged sentence

from Hong Kong.

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

31, 2024 and 2023.

The applicable statutory tax rates for the three-month periods ended March 31, 2024 and 2023 are 16.5 %.

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, 2024 and 2023.

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

30, 2024 and 2023 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, 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.

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

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

The operating subsidiaries SCHC is a wholly foreign-owned enterprises

(“FIE”), SYCI, DCHC, and SHSI are incorporated in the PRC and are subject to PRC Local Income Tax Law.

The PRC tax losses

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

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

Tax losses of the operating subsidiaries of the Company

may be carried forward for five years.

On February 22, 2008, the Ministry of Finance

3 unchanged sentences

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

As of March 31, 2024 and December 31, 2023, the

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

$ 81,618,519 and $ 87,160,228 , 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, 2024 and December 31, 2023, 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, 2024 and December 31, 2023, the

unrecognized WHT are $ 3,120,996 and $ 3,396,379 , respectively.

As of September 30, 2024 and December 31, 2023,

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

are $ 46,286,602 and $ 87,160,228 , 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, 2024 and December 31, 2023, 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, 2024

and December 31, 2023, the unrecognized WHT are $ 1,342,345 and $ 3,396,379 , respectively.

The Company’s income tax returns are subject

11 unchanged sentences

in every four years.

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

The components of the provision for income tax

benefit (expense) from continuing operations are:

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

The components of the income tax benefit from

continuing operations are:

Income Taxes - Schedule of Components of Income Tax Expense Benefit

Three-Month Period Ended March 31,

Three-Month Period Ended September 30,

Nine-Month Period Ended September 30,

Current taxes – PRC

Deferred tax – PRC entities

( 1,270,060 )

Total Income tax (expenses) benefits

$ ( 1,270,060 )

$ ( 200,556 )

Significant components of the Company’s

deferred tax assets and liabilities at March 31, 2024 and December 31, 2023 are as follows:

deferred tax assets and liabilities at September 30, 2024 and December 31, 2023 are as follows:

Income Taxes - Schedule of Deferred

Tax Assets and Liabilities

September 30,

Deferred tax liabilities

8 unchanged sentences

Net deferred tax asset

Deferred tax assets consist of future reversals of existing taxable

temporary differences and adequate future taxable income, exclusive of reversing deductible temporary differences.

As of March 31, 2024

and 2023, valuation allowances were mainly provided against deferred tax assets caused by exploration costs and net operating loss where

it was determined it was more likely than not that the benefits of the deferred tax assets will not be realized due to their continuous

The increase in valuation allowance for the three-month

period ended March 31, 2024 is $ 14,473 .

The decrease in valuation allowance for the three-month

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

period ended September 30, 2024 is $ 14,209 .

The decrease in valuation allowance for the three-month

period ended September 30, 2023 is $ 12,974 .

The decrease in valuation allowance for the nine-month

period ended September 30, 2024 is $ 71,237 .

The decrease in valuation allowance for the nine-month

period ended September 30, 2023 is $ 233,212 .

There were no unrecognized tax benefits and accrual

for uncertain tax positions as of March 31, 2024 and December 31, 2023 and no amounts accrued for penalties and interest for the three

months ended March 31, 2024 and 2023.

for uncertain tax positions as of September 30, 2024 and December 31, 20232 and no amounts accrued for penalties and interest for the

three and nine months ended September 30, 2024 and 2023.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

(Expressed in U.S.

NOTE 17 – 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.

Three-Month Period

Ended March 31, 2024 Corporate

Operating Segment

September 30, 2024

Total Segment Total

Corporate Corporate

(external customers)

(intersegment)

Loss from operations before income

Income(loss) from operations before income tax benefit

( 4,029,999 )

1 unchanged sentence

( 4,581,609 )

Income tax (expense) benefit

Loss from operations after income

taxes(expense) benefit

Income tax benefit (expense)

Income (loss) from operations after

income tax benefit (expense)

( 3,028,932 )

3 unchanged sentences

Capital expenditures

Three-Month Period Ended March 31, 2023

September 30, 2023

(external customers)

(intersegment)

Loss from operations before income benefit

Income tax benefit

Loss from operations after income taxes(benefit)

Income(loss) from operations before income tax benefit

( 2,143,203 )

( 2,035,988 )

( 2,293,288 )

Income tax benefit (expense)

Income (loss) from operations after

income tax benefit (expense)

( 1,626,276 )

( 1,552,464 )

( 1,809,764 )

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 the respective segment.

* 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 the respective segment until April 2022.

Commencing May 2022,

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

GULF RESOURCES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

SEPTEMBER 30, 2024

(Expressed in U.S.

NOTE 17 – BUSINESS SEGMENTS – Continued

Three-Month Period Ended March 31,

September 30, 2024

(external customers)

(intersegment)

Income(loss) from operations before income tax benefit

( 13,475,400 )

( 14,656,795 )

( 14,998,025 )

Income tax benefit (expense)

Income (loss) from operations after

income tax benefit (expense)

( 10,114,010 )

( 11,074,928 )

( 11,416,158 )

Depreciation and amortization

Capital expenditures

September 30, 2023

(external customers)

(intersegment)

Income(loss) from operations before income tax benefit

( 3,340,404 )

( 1,231,302 )

( 3,653,213 )

( 4,011,944 )

Income tax benefit (expense)

Income (loss) from operations after

income tax benefit (expense)

( 2,540,234 )

( 2,776,434 )

( 3,135,165 )

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, 2024

(Expressed in U.S.

NOTE 17 – BUSINESS SEGMENTS – Continued

Three-Month Period Ended September 30,

Nine-Month Period Ended September 30,

Reconciliations

Total segment operating loss

Total segment operating Income (loss)

$ ( 4,510,766 )

$ ( 2,035,988 )

$ ( 14,656,795 )

$ ( 3,653,213 )

Corporate costs

Unrealized gain (loss) on translation of intercompany balance

Loss from operations

Unrealized gain on translation of intercompany balance

Income (loss) from operations

( 4,581,609 )

( 2,293,288 )

( 14,998,025 )

( 4,011,944 )

Other income, net of expense

Other Expenses

Loss before taxes

( 29,173,011 )

Income (loss) before taxes

$ ( 4,596,580 )

The following table shows the major customers

(10% or more) for the three-month period ended March 31, 2024.

$ ( 2,259,321 )

$ ( 44,164,800 )

$ ( 3,892,139 )

The following table shows the major customer(s)

(10% or more) for the three-month period ended September 30, 2024.

Business Segments - Schedule of

3 unchanged sentences

Shandong Morui Chemical Company Limited

Shandong Brother Technology Limited

Shouguang Weidong Chemical Company Limited

The following table shows the major customer(s)

(10% or more) for the nine-month period ended September 30, 2024.

Chemical Products

Percentage of

Shandong Morui Chemical Company Limited

Shandong Brother Technology Limited

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, 2023.

Shouguang Weidong Chemical Company Limited

The following table shows the major customer(s)

(10% or more) for the three-month period ended September 30, 2023.

Chemical Products

3 unchanged sentences

Shouguang Weidong Chemical Company Limited

The following table shows the major customer(s)

(10% or more) for the nine-month period ended September 30, 2023.

Chemical Products

Percentage of

Shandong Morui Chemical Company Limited

Shandong Brother Technology Limited

Shouguang Weidong Chemical Company Limited

Shandong Shouguangshen Runfa Marine Chemical Company Limited

1 unchanged sentence

Customer Concentration

During the three-month period ended March 31,

During the nine-month period ended September 30,

2024, the Company sold 62.9 % of its products to its top five customers.

As of March 31, 2024, amounts due from these customers were $ 2,803,534 .

During the three-month period ended March 31,

As of September 30, 2024, amounts due from these customers were

During the nine-month period ended September 30,

2023, the Company sold 68.4 % of its products to its top five customers.

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

As of September 30, 2023, amounts due from these customers were

$ 1,485,777 .

NOTE 19 – MAJOR SUPPLIERS

1 unchanged sentence

Cost of Goods

During the three-month period ended March 31,

2024, the Company purchased 100 % of its raw materials from its top three suppliers.

As of March 31, 2024, amounts due to those

suppliers were $ 207,431 .

During the three-month period ended March 31,

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

As of March 31, 2023, amounts due to those

suppliers were $ 411,554 .

During the nine-month period ended September 30,

2024 the Company purchased 100 % of its raw materials from its top four suppliers.

As of September 30, 2024, amounts due to

those suppliers were $ 127,698 .

During the nine-month period ended September 30,

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

As of September 30, 2023, amounts due to

those suppliers were $ 229,260 .

NOTE 20 – LOSS CONTINGENCIES

55 unchanged sentences

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

389 Zhi Yi, dated

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

Production of

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

of Factory No.

7 was allowed to resume in April 2019.

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 March 31, 2024.

the Company believes that it is not necessary to accrue for any estimated losses or impairment as of September 30, 2024.

NOTE 21 - SUBSEQUENT EVENT

Subsequent Event

In June 2024, the Company retired some

fixed assets including aqueducts and wells for a total amount approximately $ 29,169,008 .

This decision was made due to the following reasons:

(1) the aqueducts exhibits serious water seepage, posed potential damage, and could lead to environmental pollution;

(2) the wells were

found to have reduced water flow, low brine content and high energy consumption.

In June 2024, SHSI, a wholly owned subsidiary

of the Company, signed acquisition agreements with each of several sellers.

Under these agreements, each seller agrees to transfer to

SHSI, and SHSI agrees to purchase from each seller, a parcel of crude salt field located in Shouguang city Yangkou town.

aggregate price for these acquisitions is RMB 280,762,000 (approximately US$ 38,619,257 based on the exchange rate on July 3, 2024.

Shandong Shouguang Vegetable Industry Group Co., Ltd.

Shouguang Vegetable Seed Group Co., Ltd.

owe RMB15.0million (Approximate $2.12 million) and RMB10.0 million (Approximate $1.41 million)

to Shandong Deepin City InvestmentEmergency Lending Fund, respectively.

A total of nine companies and individuals provided guarantee to

these loans, includingShouguang Haoyuan Chemical Co., Ltd.

and Shouguang Yuxin Chemical Co., LTD.

However, considering the number of guarantors,the

total amount of available fund indicated by Shandong Shouguang Vegetable Industry Group Co., Ltd.

and legal advice, GulfResources believes

that this guaranteed loan has limited impact on the company.

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