What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-04-11 compared with 2024-09-27 · 991 added, 909 removed, 677 unchanged (74% of the section changed)

Financial Statements and Supplementary Data

The financial statements and supplementary data

required by this item are included in a separate section of this Report.

The financial statements and supplementary

data required by this item are included in a separate section of this Report.

See “Index to Consolidated Financial Statements”

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID #2729)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID #1171)

CONSOLIDATED BALANCE SHEETS

8 unchanged sentences

To the Board of Directors and Stockholders of

Gulf Resources, Inc.

Resources, Inc.

Opinion on the Financial Statements

45 unchanged sentences

critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they

Property, plant and equipment,

Property, plant and equipment, net

As described in Note 1 to the

8 unchanged sentences

Management’s assessment of the carrying amount.

The primary procedures we performed

to address this critical audit matter included the following:

The primary procedures we performed to address this critical

audit matter included the following:

- Reviewed the Company’s accounting policies, assumptions and estimates.

3 unchanged sentences

/s/ GGF CPA LTD

We have served as the Company’s

auditor since 2024.

We have served as the Company’s auditor since

Guangzhou, Guangdong, China

September 27, 2024

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and Stockholders of

Resources, Inc.

on the Financial Statements

have audited the accompanying consolidated balance sheet of Gulf Resources, Inc.

and subsidiaries (collectively the “Company”)

as of December 31, 2022 and 2021, and the related consolidated statements of comprehensive (loss) income, stockholders’ equity,

and cash flows for each of the years in the two year period ended December 31, 2022, the related notes, and financial statement schedule

(collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements

present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its

operations and its cash flows for each of the years in the two year period ended December 31, 2022, in conformity with accounting principles

generally accepted in the United States of America.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain

reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing

an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due

to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due

to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Audit Matters

critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that

were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material

to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication

of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we

are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts

or disclosures to which they relate.

plant and equipment, net

determined that the Company’s property, plant and equipment was a critical audit matter based on the principal considerations that

property, plant, and equipment was very significant proportion of the Company’s total assets.

The challenges with general economic

and political environment present challenges in determining that carrying value of such assets are subject to significant estimation and

the use judgment.

Plant and equipment may be purchased and placed into service at varying times, and their ability to contribute to the

generation of cash flows is impacted by multiple factors, including the time for installation, demand for the Company’s products,

and the availability of working capital and raw materials.

The audit engagement team addressed this critical accounting matter by reviewing

the Company’s accounting policies, and perform extended procedures including physical inspection, corroborated with enquiry, examination

of contracts, review of global economic conditions and the Company’s own forecast for demand, review of movement of inventories

and the liquidity of the Company, vouching of a sample of purchases, and performing independent analysis that included recalculation of

depreciation and impairment testing.

The engagement team’s testing provided adequate evidence to support our audit opinion and to

mitigate the risk of material misstatement to an acceptable level.

The accounts that are affected by this critical audit matter is property

plant and equipment, and the related depreciation that is allocated into cost of sales, and impairment expense, if any.

Public Accountants

have served as the Company’s auditor since 2021.

April 11, 2025

GULF RESOURCES, INC.

2 unchanged sentences

(Expressed in U.S.

December 31, 2023

December 31, 2022

Current Assets

$ 108,226,214

Accounts receivable, net

1 unchanged sentence

Prepayments and deposits

Amount due from related parties

Other receivables

7 unchanged sentences

Total non-current assets

$ 226,671,708

$ 292,431,342

Liabilities and Stockholders’ Equity

20 unchanged sentences

$ 0.0005 par value;

80,000,000 shares authorized;

80,000,000 shares

11,012,754 and 11,012,754 shares issued;

5 unchanged sentences

Additional paid-in capital

Share to be issued

Retained earnings unappropriated

7 unchanged sentences

$ 226,671,708

The accompanying notes are an integral part of

these consolidated financial statements.

The accompanying notes are an integral

part of these consolidated financial statements.

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE

INCOME (LOSS)

(Expressed in U.S.

11 unchanged sentences

( 4,240,832 )

Other operating expense

( 2,850,059 )

TOTAL OPERATING COSTS AND EXPENSE

1 unchanged sentence

( 41,934,515 )

INCOME FROM OPERATIONS

LOSS FROM OPERATIONS

( 21,283,649 )

( 11,890,725 )

OTHER INCOME (EXPENSE)

1 unchanged sentence

Interest income

Other expenses, net

Loss on disposal of property, plant and equipment

( 29,169,008 )

Impairment of property, plant and equipment

( 6,772,500 )

Expenditure on water pollution treatment

2 unchanged sentences

( 57,287,270 )

( 58,256,662 )

INCOME TAX EXPENSE

1 unchanged sentence

( 3,538,617 )

NET (LOSS)/INCOME

$ ( 58,935,452 )

$ ( 61,795,279 )

COMPREHENSIVE INCOME (LOSS):

NET (LOSS)/INCOME

$ ( 58,935,452 )

$ ( 61,795,279 )

OTHER COMPREHENSIVE (LOSS) INCOME

2 unchanged sentences

( 5,025,980 )

TOTAL COMPREHENSIVE (LOSS) INCOME

TOTAL COMPREHENSIVE LOSS

$ ( 61,736,326 )

$ ( 66,821,259 )

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE

BASIC AND DILUTED LOSS PER SHARE

BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF SHARES:

The accompanying notes are an integral part of

these consolidated financial statements.

The accompanying notes are an integral

part of these consolidated financial statements.

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

YEARS ENDED DECEMBER 31, 2024 AND 2023

(Expressed in U.S.

shares issued

shares outstanding

treasury stock

unappropriated

comprehensive

paid-in capital

earnings unappropriated

earnings appropriated

other comprehensive Income(loss)

BALANCE AT JANUARY 1, 2023

4 unchanged sentences

Restricted shares issued for services

Repurchase stocks

Currency translation adjustment

2 unchanged sentences

Net loss for year ended December 31, 2023

BALANCE AT DECEMBER 31, 2022

( 61,795,279 )

BALANCE AT DECEMBER 31, 2023

( 1,372,673 )

$ ( 18,053,269 )

Treasury stock

unappropriated

$ 205,248,296

comprehensive

unappropriated

BALANCE AT JANUARY 1, 2024

2 unchanged sentences

$ 205,248,296

$ 271,618,205

Restricted shares issued for services

Restricted shares to be issued for service

Currency translation adjustment

4 unchanged sentences

( 58,935,452 )

BALANCE AT DECEMBER 31, 2023

( 1,372,673 )

5 unchanged sentences

Accumulated Other Comprehensive Income (Loss)

The accompanying notes are an integral part of

these consolidated financial statements.

Share to be Issued

The accompanying notes are an integral

part of these consolidated financial statements.

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

CONSOLIDATED STATEMENTS OF CASH

(Expressed in U.S.

2 unchanged sentences

$ ( 58,935,452 )

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

$ ( 61,795,279 )

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

Amortization on capital lease

Depreciation and amortization

Unrealized translation difference

Deferred tax asset

2 unchanged sentences

Impairment of inventory

Impairment of property plant and equipment

Amortization of right-of-use asset

Loss on disposal of property, plant and equipment

Changes in assets and liabilities

5 unchanged sentences

Accounts and Other payable and accrued expenses

Amount due to related parties

( 2,191,652 )

Taxes payable

Lease liabilities

Net cash provided by operating activities

Net cash provided by (used in) operating activities

( 32,751,851 )

2 unchanged sentences

( 60,526,213 )

Interest-free loan lent to related parties

Net cash used in investing activities

2 unchanged sentences

Repayment of finance leases obligation

Proceeds from interest-free loan from a related party

Net cash used in financing activities

1 unchanged sentence

( 2,023,072 )

( 2,982,659 )

NET DECREASE IN CASH AND CASH EQUIVALENTS

( 62,148,732 )

( 36,002,320 )

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS - END OF YEAR

$ 108,226,214

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

CONSOLIDATED STATEMENTS OF CASH

FLOWS (CONTINUED)

(Expressed in U.S.

5 unchanged sentences

Paid for Flood Prevention Project

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

The accompanying notes are an integral part of

these consolidated financial statements.

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING

The accompanying notes are an integral

part of these consolidated financial statements.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 1 – NATURE OF BUSINESS AND SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 – NATURE OF BUSINESS AND

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation and Consolidation

The accompanying audited consolidated financial

statements have been prepared by Gulf Resources, Inc.

The accompanying audited consolidated

financial statements have been prepared by Gulf Resources, Inc.

(“Gulf Resources”).

a Nevada corporation and its subsidiaries (collectively,

the “Company”).

The consolidated financial statements include

the accounts of Gulf Resources, Inc.

and its wholly-owned subsidiary, Upper Class Group Limited, a company incorporated in the British

Virgin Islands, which owns 100% of Hong Kong Jiaxing Industrial Limited, a company incorporated in Hong Kong (“HKJI”).

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

a Nevada corporation and its subsidiaries

(collectively, the “Company”).

The consolidated financial statements

include the accounts of Gulf Resources, Inc.

and its wholly-owned subsidiary, Upper Class Group Limited, a company incorporated in the

British Virgin Islands, which owns 100% of Hong Kong Jiaxing Industrial Limited, a company incorporated in Hong Kong (“HKJI”).

HKJI 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

All material intercompany transactions have been eliminated on consolidation.

(b) 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 through its wholly owned subsidiary, SHSI;

and manufactures chemical products for use in the oil industry, pesticides,

paper manufacturing industry and for human and animal antibiotics through its wholly-owned subsidiary, Shouguang Yuxin Chemical

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

DCHC was established to

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

DCHC’s business

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

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

On March 11, 2020, the World Health Organization

(WHO) officially declared COVID-19 a pandemic.

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

Company’s operations and financial position is uncertain.

While 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

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.

(b) Going Concern Consideration

The consolidated financial statements are prepared on the

going concern basis, meaning that the enterprise is expected to realize the assets and settle the liabilities through normal business

However, the going concern of the enterprise relies on many factors, such as profitable operations, generating operating cash

flows, obtaining financing, etc.

The company assesses its

liquidity by monitoring cash and cash equivalents, as well as operating and capital expenditure commitments.

As of December 31, 2024,

As of Dec 31, 2024, the Company had current assets of $ 17.45 million and current liabilities of $ 17.73 million.

As a result, the deficit

was $ 0.28 million, and it has suffered losses in both the fiscal years of 2024 and 2023 as well.

If it is unable to raise additional funds,

it may need to take measures such as cutting administrative and operational cost and save funds.

If there are significant doubts regarding the company's ability to continue operations, the company is attempting to alleviate such concerns

through measures such as controlling operating expenses, shifting business focus to revenue-generating activities, obtaining authorization

from domestic banks and other financial institutions, and seeking equity or debt financing.

Additionally, the company will also obtain

financial support commitments from related parties.

However, these situations still pose significant doubts regarding the company's ability

to continue operations.

The financial statements do not consider the potential impact on the recoverability of assets, classification,

and amounts and classification of liabilities if the company is unable to continue operations.

manufactures and trades bromine through its wholly-owned subsidiary, Shouguang City Haoyuan Chemical Company Limited

(“SCHC”) manufactures and trades crude salt through its wholly owned subsidiary, SHSI;

and manufactures chemical

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

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

China (“PRC”).

DCHC was established to further explore and develop natural gas and brine resources (including bromine

and crude salt) in the PRC.

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

May 2019 as required by the government to obtain project approval (see Note 1 (c)(iii)).

(i) Bromine and Crude Salt Segments

In February 2019, the Company received a notification

from the local government of Yangkou County that its Factory No.

9 passed inspection and could resume operations.

In February 2019, the Company

received a notification from the local government of Yangkou County that its Factory No.

9 passed inspection and

could resume operations.

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,

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.

1 unchanged sentence

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 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.

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”).

The Company’s Factories No.

7 commenced trial production in mid March 2020 and

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

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.

9 commenced commercial production on May 6, 2020.

received verbal notification from the government regarding Factory No.

The Company received verbal notification from the government regarding Factory

8, allowing it to recommence production in August 2022.

8 began contributing revenue in the fourth quarter 2022.

The Company is awaiting governmental approval

for Factories No.

The Company is awaiting governmental

approval for Factories No.

To our knowledge, the government is finalizing plans for all mining areas, including flood prevention

As a result, we may be required to make certain modifications to our existing wells and aqueducts prior to commencement of

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

Pursuant to the notification from the government

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

As a result, we may be required to make certain modifications to our existing wells and aqueducts prior to commencement of operations

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

Pursuant to the notification from

the government of Shouguang City, all bromine facilities in Shouguang City were temporarily closed from December 10, 2022 until February

1, 2023 8:00 AM China Time.

To comply with such notification, the Company 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.

In April 2022, Shouguang Hengde Salt Industry

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.

In April 2022, Shouguang Hengde

Salt Industry Co.

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

This subsidiary was created

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

The creation of

this subsidiary and the separation of bromine and crude salt does not impact sales or overall profits.

However, the establishment of this

subsidiary has resulting in a reallocation of costs between bromine and crude salt.

This subsidiary

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

creation of this subsidiary and the separation of bromine and crude salt does not impact sales or overall profits.

However, the establishment

of this subsidiary has resulting in a reallocation of costs between bromine and crude salt.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES – Continued

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(ii) Chemical Segment

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 to the Bohai Marine Fine Chemical Industrial Park (“Bohai Park”).

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

the residents.

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

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

All chemical enterprises

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

In December 2017, the Company secured from the

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

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

In January 2020, the Company received the environmental

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

The Company began

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

the civil works by the end of June 2021.

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

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

at the chemical factory had been delayed.

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

management that the electricity restrictions are being eased.

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

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

The COVID restrictions and resulting national

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

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

factory based on accelerated delivery.

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

The Company believes this relocation process will

cost approximately $ 69 million in total.

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

related to the design of the new chemical factory, and progress payments and deposits 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, prepayments and deposits and property,

plant and equipment in the consolidated balance sheets as of December 31, 2023 and 2022.

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 to the Bohai Marine Fine Chemical Industrial Park (“Bohai

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

environment of the residents.

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

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

All chemical enterprises which do not comply with the requirements of the safety and environmental protection regulations will be ordered

to shut down.

In December 2017, the Company

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

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

In January 2020, the Company

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

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

2020 and basically completed the civil works by the end of June 2021.

On November 15, 2021, the Company announced that due to the supply

chain issues as well as the electric restrictions in China, the delivery of some equipment, the equipment installation and testing and

beginning trial production at the chemical factory had been delayed.

On February 22, 2022, the Company announced that discussions with

the government have convinced management that the electricity restrictions are being eased.

Accordingly, the Company has contacted its

suppliers and will have the remainder of the equipment produced and delivered, so the Company can complete installation and begin testing

and trial production.

The Company believes this

relocation process will cost approximately $ 69

million in total.

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

of the new chemical factory, and progress payments and deposits 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, prepayments and deposits and property, plant and equipment in the consolidated balance

sheets as of December 31, 2024 and 2023.

(iii) Natural Gas Segment

In January 2017, the Company completed the first

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

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

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

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

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

In compliance with

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

natural gas, respectively.

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

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

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.

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.

2 unchanged sentences

been finalized.

The Company’s consolidated financial statements

have been prepared in accordance with accounting principles generally accepted in the United States of America and this requires management

to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial

statements and the reported amounts of revenues and expenses during the reporting period.

The Company bases its estimates on

historical experience and on various other assumptions that are believed to be reasonable under the circumstances.

(d) Use of Estimates

The Company’s consolidated

financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and

this requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the

consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

The Company bases its

estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.

significant accounting estimates with regard to these consolidated financial statements that require the most significant and subjective

3 unchanged sentences

of share based payments.

Accordingly, actual results may differ significantly from these estimates under different assumptions

or conditions.

Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS DECEMBER 31, 2024

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(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.

(e) Accounts receivable and Allowance

for Doubtful Accounts

Accounts receivable is stated at cost, net of

allowance for doubtful accounts.

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(e) 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.

(f) Accounts receivable and Allowance for Doubtful Accounts

Accounts receivable is stated

at cost, net of allowance for doubtful accounts.

The normal credit term extended to customers ranges between 90 and 240 days.

The company reviews all

receivables that exceed the term.

The Company establishes an allowance for doubtful accounts based on management’s assessment of

the collectability of trade and other receivables.

reviews all receivables that exceed the term.

The Company establishes an allowance for doubtful accounts based on management’s assessment

of the collectability of trade and other receivables.

A considerable amount of judgment is required in assessing the amount of allowance

4 unchanged sentences

an allowance may be required.

As of December 31, 2023 and December 31, 2022, the provision for doubtful

debts was $ 25,060 and $ 25,047 .

The provision for doubtful accounts in the consolidated statements of consolidated (loss) income for the

years ended December 31, 2023 is $ 431 .

(f) Concentration of Credit Risk

The Company is exposed to credit risk in the normal

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

Substantially all of the Company’s cash

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

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

The Company placed $ 72,223,894 and

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

The Company has not experienced any

losses in such accounts in the PRC.

Concentrations of credit risk with respect to

accounts receivable exists as the Company sells a substantial portion of its products to a limited number of customers.

However, such

concentrations of credit risks are limited since the Company performs ongoing credit evaluations of its customers’ financial condition

and extends credit terms as and when appropriate.

(g) Inventories

Inventories are stated at the lower of cost, determined

on a first-in first-out cost basis, or net realizable value.

Costs of work-in-progress and finished goods comprise direct materials, direct

labor and an attributable portion of manufacturing overhead.

Net realizable value is based on estimated selling price less costs to complete

and selling expenses.

As of December 31, 2024 and December

31, 2023, the provision for doubtful debts was $ 29,711 and $ 25,060 .

The provision for doubtful accounts in the consolidated statements

of comprehensive (loss) income for the years ended December 31, 2024 is $ 5,069 .

(g) Concentration of Credit Risk

The Company is exposed to credit

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

Substantially all of the

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

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

Company placed $ 10,075,162 and $ 72,223,894 with these institutions as of December 31, 2024 and 2023, respectively.

The Company has not

experienced any losses in such accounts in the PRC.

Concentrations of credit risk

with respect to accounts receivable exists as the Company sells a substantial portion of its products to a limited number of customers.

However, such concentrations of credit risks are limited since the Company performs ongoing credit evaluations of its customers’

financial condition and extends credit terms as and when appropriate.

(h) Inventories

Inventories are stated at the

lower of cost, determined on a first-in first-out cost basis, or net realizable value.

Costs of work-in-progress and finished goods comprise

direct materials, direct labor and an attributable portion of manufacturing overhead.

Net realizable value is based on estimated selling

price less costs to complete and selling expenses.

(i) Advances to suppliers, net

Advances to suppliers are stated at the original amount less

an allowance for doubtful account.

Advances to supplier primarily consists of prepayments for

purchase of cryptocurrency mining machines and standardized computing equipment.

The Company reviews its advance to suppliers on a periodic

basis and determines the adequacy of provision when amounts outstanding are not likely to be collected in cash or utilized against receive

An allowance for doubtful is recorded in the period in which the Company cash collection or receipts of products is remote.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(h) Property, Plant and Equipment

Property, plant and equipment are stated at cost

less accumulated depreciation and any impairment losses.

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

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

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

All other ordinary repair and maintenance

costs are expensed as incurred.

Mineral rights are recorded at cost less accumulated

depreciation and any impairment losses.

Mineral rights are amortized ratably over the term of the lease, or the equivalent term under

the units of production method, whichever is shorter.

Construction in process primarily represents direct

costs of construction of property, plant and equipment.

Costs incurred are capitalized and transferred to property, plant and equipment

upon completion and depreciation will commence when the completed assets are placed in service.

The Company’s depreciation and amortization

policies on property, plant and equipment, other than mineral rights and construction in process, are as follows:

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(j) Property, Plant and Equipment

Property, plant and equipment

are stated at cost less accumulated depreciation and any impairment losses.

Expenditures for new facilities or equipment, and major expenditures

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

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

All other ordinary repair

and maintenance costs are expensed as incurred.

Mineral rights are recorded at

cost less accumulated depreciation and any impairment losses.

Mineral rights are amortized ratably over the term of the lease, or the

equivalent term under the units of production method, whichever is shorter.

Construction in process primarily

represents direct costs of construction of property, plant and equipment.

Costs incurred are capitalized and transferred to property,

plant and equipment upon completion and depreciation will commence when the completed assets are placed in service.

The Company’s depreciation

and amortization policies on property, plant and equipment, other than mineral rights and construction in process, are as follows:

Basis of Presentation and Summary of

2 unchanged sentences

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

Motor vehicles

Motor Vehicles

Motor vehicles Motor Vehicles

Furniture, fixtures and equipment

Property, plant and equipment under the finance

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

Producing oil and gas properties are depreciated

on a unit-of-production basis over the proved developed reserves.

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.

Property, plant and equipment

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

of the lease, which is 20 years.

Producing oil and gas properties

are depreciated on a unit-of-production basis over the proved developed reserves.

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

3 unchanged sentences

depreciation.

(i) Asset Retirement Obligation

The Company follows Financial Accounting Standards

Board Accounting Standards Codification (“FASB ASC”), which established a uniform methodology for accounting for estimated

reclamation and abandonment costs.

FASB ASC 410 requires the fair value of a liability for an asset retirement obligation to be recognized

in the period in which the legal obligation associated with the retirement of the long-lived asset is incurred.

When the liability is

initially recorded, the offset is capitalized by increasing the carrying amount of the related long-lived asset.

Over time, the liability

is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset.

To settle the liability, the obligation is paid, and to the extent there is a difference between the liability and the amount of cash

paid, a gain or loss upon settlement is recorded.

(k) Asset Retirement Obligation

The Company follows Financial

Accounting Standards Board Accounting Standards Codification (“FASB ASC”), which established a uniform methodology for accounting

for estimated reclamation and abandonment costs.

FASB ASC 410 requires the fair value of a liability for an asset retirement obligation

to be recognized in the period in which the legal obligation associated with the retirement of the long-lived asset is incurred.

the liability is initially recorded, the offset is capitalized by increasing the carrying amount of the related long-lived asset.

time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the

related asset.

To settle the liability, the obligation is paid, and to the extent there is a difference between the liability and the

amount of cash paid, a gain or loss upon settlement is recorded.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Currently, there are no reclamation or abandonment

obligations associated with the land being utilized for exploitation by the bromine and crude salt factories.

Also, for the two chemical

plants that are to be relocated, currently, there are no obligations to restore the land to its original condition.

(j) Recoverability of Long-lived Assets

In accordance with Financial Accounting Standards

Board (“FASB”) Accounting Standards Codification (“ASC”) 360-10-35 ”Impairment or Disposal of Long-lived

Assets” , long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate

that the carrying amount of an asset may not be fully recoverable or that the useful lives of those assets are no longer appropriate.

The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment.

The Company determines the existence of such impairment

by measuring the expected future cash flows (undiscounted and without interest charges) and comparing such amount to the carrying amount

of the assets.

An impairment loss, if one exists, is then measured as the amount by which the carrying amount of the asset exceeds the

discounted estimated future cash flows.

Assets to be disposed of are reported at the lower of the carrying amount or fair value of such

assets less costs to sell.

Asset impairment charges are recorded to reduce the carrying amount of the long-lived asset that will be sold

or disposed of to their estimated fair values.

Charges for the asset impairment reduce the carrying amount of the long-lived assets to

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

For the year ended December 31, 2023 and 2022,

the Company determined that there were no events or circumstances indicating possible impairment of its long-lived assets.

(k) Retirement Benefits

Pursuant to the relevant laws and regulations

in the PRC, the Company participates in a defined contribution retirement plan for its employees arranged by a governmental organization.

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Currently, there are no reclamation

or abandonment obligations associated with the land being utilized for exploitation by the bromine and crude salt factories.

the two chemical plants that are to be relocated, currently, there are no obligations to restore the land to its original condition.

(l) Recoverability of Long-lived Assets

In accordance with Financial

Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360-10-35 ”Impairment or

Disposal of Long-lived Assets” , long-lived assets to be held and used are analyzed for impairment whenever events or changes

in circumstances indicate that the carrying amount of an asset may not be fully recoverable or that the useful lives of those assets are

no longer appropriate.

The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible

The Company determines the existence

of such impairment by measuring the expected future cash flows (undiscounted and without interest charges) and comparing such amount to

the carrying amount of the assets.

An impairment loss, if one exists, is then measured as the amount by which the carrying amount of the

asset exceeds the discounted estimated future cash flows.

Assets to be disposed of are reported at the lower of the carrying amount or

fair value of such assets less costs to sell.

Asset impairment charges are recorded to reduce the carrying amount of the long-lived asset

that will be sold or disposed of to their estimated fair values.

Charges for the asset impairment reduce the carrying amount of the long-lived

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

For the year ended December 31, 2024 and 2023, the Company

determined that the impairment of long-lived assets was $ 6,772,500 and $ nil .

(m) Retirement Benefits

Pursuant to the relevant laws and

regulations in the PRC, the Company participates in a defined contribution retirement plan for its employees arranged by a governmental

organization.

The Company makes contributions to the retirement plan at the applicable rate based on the employees’ salaries.

The required contributions

under the retirement plans are charged to the consolidated statement of comprehensive income (loss) on an accrual basis when they are

The Company’s contributions totaled $ 691,033 and $ 624,827 for the years ended December 31, 2023 and 2022, respectively.

required contributions under the retirement plans are charged to the consolidated statement of comprehensive income (loss) on an accrual

basis when they are due.

The Company’s contributions totaled $ 535,475 and $ 691,033 for the years ended December 31, 2024 and 2023,

respectively.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(l) Mineral Rights

The Company follows FASB ASC 805 “Business

Combinations” that certain mineral rights are considered tangible assets and that mineral rights should be accounted for based on

their substance.

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(n) Mineral Rights

The Company follows FASB ASC 805

“Business Combinations” that certain mineral rights are considered tangible assets and that mineral rights should be accounted

for based on their substance.

Mineral rights are included in property, plant and equipment.

The Company determines if an arrangement is a

lease at inception.

Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities

The Company determines if an arrangement

is a lease at inception.

Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease

liabilities in the consolidated balance sheets.

Finance leases are included in finance lease ROU assets and finance lease liabilities

in the consolidated balance sheets.

Finance leases are included in finance lease ROU assets and finance lease liabilities in the consolidated

balance sheets.

ROU assets represent the Company’s right

to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising

from the lease.

Operating lease and finance lease ROU assets and liabilities are recognized at January 1, 2019 based on the present value

of lease payments over the lease term discounted using the rate implicit in the lease.

ROU assets represent the Company’s

right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments

arising from the lease.

Operating lease and finance lease ROU assets and liabilities are recognized at January 1, 2019 based on the present

value of lease payments over the lease term discounted using the rate implicit in the lease.

In cases where the implicit rate is not readily

2 unchanged sentences

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company has elected not to recognize operating

lease ROU assets and liabilities arising from short-term lease.

(n) Basic 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

average number of common shares plus dilutive common share equivalents outstanding during the period.

Potential common shares that would

have the effect of increasing diluted earnings per share are considered to be anti-dilutive, i.e.

the exercise prices of the outstanding

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

Anti-dilutive common stock equivalents which were excluded from

the calculation of number of dilutive common stock equivalents amounted to 0 and 0 shares for the years ended December

31, 2023 and 2022, respectively.

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

greater than the exercise price of these awards.

(o) Reporting Currency and Translation

The financial statements of the Company’s

foreign subsidiaries are measured using the local currency, Renminbi (“RMB”), as the functional currency;

whereas the functional

currency and reporting currency of the Company is the United States dollar (“USD” or “$”).

The Company has elected not to recognize

operating lease ROU assets and liabilities arising from short-term lease.

(p) Basic 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 average number of common shares plus dilutive common share equivalents outstanding during the period.

Potential common shares

that would have the effect of increasing diluted earnings per share are considered to be anti-dilutive, i.e.

the exercise prices of the

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

Anti-dilutive common stock equivalents which were excluded

from the calculation of number of dilutive common stock equivalents amounted to 0 and 0 shares for the years ended December 31, 2024 and

2023, respectively.

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

the exercise price of these awards.

(q) Reporting Currency and Translation

The financial statements of the

Company’s foreign subsidiaries are measured using the local currency, Renminbi (“RMB”), as the functional currency;

whereas the functional currency and reporting currency of the Company is the United States dollar (“USD” or “$”).

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES – Continued

As such, the Company uses the “current rate method” to translate its PRC operations from RMB into USD, as required under FASB

ASC 830 “Foreign Currency Matters”.

The assets and liabilities of its PRC operations are translated into USD using the rate

of exchange prevailing at the balance sheet date.

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

As such, the Company uses the

“current rate method” to translate its PRC operations from RMB into USD, as required under FASB ASC 830 “Foreign Currency

The assets and liabilities of its PRC operations are translated into USD using the rate of exchange prevailing at the

balance sheet date.

The capital accounts are translated at the historical rate.

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 (loss).

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 comprehensive income (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 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 the acquisition of business which is translated at historical rates.

(p) Revenue Recognition

Net revenue is net of discount and value added tax and comprises the sale of bromine, crude salt and chemical products.

Revenue is recognized

at a point time when the control of the promised goods is transferred to the customers in an amount that reflects the consideration that

the Company expects to receive from the customers in exchange for those goods.

The acknowledgement of receipt of goods by the customers

is when control of the product is deemed to be transferred.

Gains or losses resulting

from transactions in currencies other than the functional currencies are recognized in net loss for the reporting periods as part of general

and administrative expense.

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

of the consideration paid for the acquisition of business which is translated at historical rates.

(r) Revenue Recognition

Net revenue is net of discount

and value added tax and comprises the sale of bromine, crude salt and chemical products.

Revenue is recognized at a point time when the

control of the promised goods is transferred to the customers in an amount that reflects the consideration that the Company expects to

receive from the customers in exchange for those goods.

The acknowledgement of receipt of goods by the customers is when control of the

product is deemed to be transferred.

Invoicing occurs upon acknowledgement of receipt of the goods by the customers.

Customers have no rights to return the goods upon acknowledgement of receipt of goods.

Customers typically pay after the Company delivers

and transfers the products to them in accordance to terms set forth in their contract.

Revenue from contracts with customers is disaggregated

(q) Income Taxes

The Company accounts for income taxes in accordance

with the Income Taxes Topic of the FASB ASC, which requires the use of the liability method of accounting for deferred income taxes.

this method, deferred income taxes are recorded to reflect the tax consequences on future years of temporary differences between the tax

basis of assets and liabilities and their reported amounts at each period end.

Deferred tax assets and liabilities are measured using

tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized

Customers have no

rights to return the goods upon acknowledgement of receipt of goods.

Customers typically pay after the Company delivers and transfers

the products to them in accordance to terms set forth in their contract.

Revenue from contracts with customers is disaggregated in Note

(s) Income Taxes

The Company accounts for income

taxes in accordance with the Income Taxes Topic of the FASB ASC, which requires the use of the liability method of accounting for deferred

income taxes.

Under this method, deferred income taxes are recorded to reflect the tax consequences on future years of temporary differences

between the tax basis of assets and liabilities and their reported amounts at each period end.

Deferred tax assets and liabilities are

measured using tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected

to be realized or settled.

The deferred income tax effects of a change in tax rates are recognized in the period of enactment.

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.

The guidance also provides

criteria for the recognition, measurement, presentation and disclosures of uncertain tax positions.

A tax benefit from an uncertain tax

position may be recognized if it is “more likely than not” that the position is sustainable based solely on its technical

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

tax in the consolidated statement of comprehensive income (loss).

(r) Exploration Costs

Exploration costs, which included the cost of

researching for appropriate places to drill wells and the cost of well drilling in search of potential natural brine or other resources,

are charged to the income statement as incurred.

Once the commercial viability of a project has been confirmed, all subsequent costs are

more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.

also provides criteria for the recognition, measurement, presentation and disclosures of uncertain tax positions.

A tax benefit from an

uncertain tax position may be recognized if it is “more likely than not” that the position is sustainable based solely on

its technical merits.

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

for income tax in the consolidated statement of comprehensive income (loss).

(t) Exploration Costs

Exploration costs, which included

the cost of researching for appropriate places to drill wells and the cost of well drilling in search of potential natural brine or other

resources, are charged to the income statement as incurred.

Once the commercial viability of a project has been confirmed, all subsequent

costs are capitalized.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES – Continued

For oil and gas properties, the successful efforts

method of accounting is adopted.

The Company carries exploratory well costs as an asset when the well has found a sufficient quantity

of reserves to justify its completion as a producing well and where the Company is making sufficient progress assessing the reserves and

the economic and operating viability of the project.

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

For oil and gas properties, the

successful efforts method of accounting is adopted.

The Company carries exploratory well costs as an asset when the well has found a sufficient

quantity of reserves to justify its completion as a producing well and where the Company is making sufficient progress assessing the reserves

and the economic and operating viability of the project.

Exploratory well costs not meeting these criteria are charged to expenses.

2 unchanged sentences

periodically for impairment.

(s) Fair Value Measurement

The Company applies Accounting Standards Codification

(“ASC”) Topic 820, Fair Value Measurements and Disclosures which defines fair value, establishes a framework for measuring

fair value and expands financial statement disclosure requirements for fair value measurements.

ASC Topic 820 defines fair value as the price

that would be received from the sale of an asset or paid to transfer a liability (an exit price) on the measurement date in an orderly

transaction between market participants in the principal or most advantageous market for the asset or liability.

ASC Topic 820 specifies

a hierarchy of valuation techniques, which is based on whether the inputs into the valuation technique are observable or unobservable.

The hierarchy is as follows:

Level 1 inputs to the valuation

methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

(u) Fair Value Measurement

The Company applies Accounting

Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures which defines fair value, establishes a

framework for measuring fair value and expands financial statement disclosure requirements for fair value measurements.

ASC Topic 820 defines fair value

as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) on the measurement date

in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability.

ASC Topic 820 specifies a hierarchy

of valuation techniques, which is based on whether the inputs into the valuation technique are observable or unobservable.

The hierarchy

is as follows:

Level 1 inputs to the valuation methodology

include quoted prices for identical or similar assets and liabilities in active markets or in inactive markets, and inputs that are observable

for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 inputs to the valuation

methodology are unobservable and significant to the fair value.

methodology include quoted prices for identical or similar assets and liabilities in active markets or in inactive markets, and inputs

that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

Level 3 inputs to the valuation methodology

are 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 December 31, 2023 and 2022.

(t) Loss Contingencies

The Company accrues for loss contingencies relating

to legal matters, including litigation defense costs, claims and other contingent matters, including liquidated damage liabilities, when

such liabilities become probable and reasonably able to be estimated.

Such estimates may be based on advice from third parties or on management’s

judgment, as appropriate.

Revisions to accruals are reflected in income (loss) in the period in which different facts or information become

known or circumstances change that affect the Company’s previous assumptions with respect to the likelihood or amount of loss.

paid upon the ultimate resolution of such liabilities may be materially different from previous estimates.

(u) Stock-based Compensation

The Company accounts for stock-based compensation

under the provisions of FASB ASC 718, Compensation Stock Compensation, which requires the measurement and recognition

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 December 31, 2024 and 2023.

(v) Loss Contingencies

The Company accrues for loss contingencies

relating to legal matters, including litigation defense costs, claims and other contingent matters, including liquidated damage liabilities,

when such liabilities become probable and reasonably able to be estimated.

Such estimates may be based on advice from third parties or

on management’s judgment, as appropriate.

Revisions to accruals are reflected in income (loss) in the period in which different

facts or information become known or circumstances change that affect the Company’s previous assumptions with respect to the likelihood

or amount of loss.

Amounts paid upon the ultimate resolution of such liabilities may be materially different from previous estimates.

(w) Stock-based Compensation

The Company accounts for stock-based

compensation under the provisions of FASB ASC 718, Compensation Stock Compensation, which requires the measurement and recognition

of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date.

3 unchanged sentences

In June 2018, the FASB issued ASU No.

201807, Compensation - Stock Compensation (Topic 7 I8), Improvements

to Nonemployee Share-Based Payment Accounting.

The amendments in this Update expand the scope of Topic 718 to include share-based

payment transactions for acquiring goods and services from nonemployees.

Prior to this Update, Topic 718 applied only to share-based transactions

to employees.

Consistent with the accounting requirement for employee share-based payment awards, nonemployee share-based payment awards

within the scope of Topic 718 are measured at grant-date fair value of the equity instruments that an entity is obligated to issue when

the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the

instruments have been satisfied.

201807, Compensation - Stock Compensation (Topic 7 I8), Improvements to Nonemployee

Share-Based Payment Accounting.

The amendments in this Update expand the scope of Topic 718 to include share-based payment transactions

for acquiring goods and services from nonemployees.

Prior to this Update, Topic 718 applied only to share-based transactions to employees.

Consistent with the accounting requirement for employee share-based payment awards, nonemployee share-based payment awards within the

scope of Topic 718 are measured at grant-date fair value of the equity instruments that an entity is obligated to issue when the good

has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments

have been satisfied.

The Company has elected to account for the forfeiture of stock-based awards as they occur.

(v) New Accounting Pronouncements

(x) New Accounting Pronouncements

Recent accounting pronouncements adopted

There were no recent accounting pronouncements

adopted for the year ended December 31, 2023.

Recently Issued Accounting Pronouncements Not

In June 2016, the FASB issued ASU No.

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.

In June 2016, the FASB

issued ASU No.

2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial

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 will adopt

this standard beginning January 1, 2023.

The Company is currently evaluating the effect of the adoption of this standard on the consolidated

2019-10 extends

the effective dates for two years.

The Company had evaluated the effect of the adoption of this standard on the consolidated

financial statements and related disclosures.

And the Company had adopted this standard beginning January 1, 2024.

Recently Issued Accounting Pronouncements Not Yet

There were no recently issued accounting pronouncements

not yet adopted for the year ended December 31, 2024.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

5 unchanged sentences

The overall accounts receivable

balance as of December 31, 2023 decreased by $ 497,470 compared to those of December 31, 2022.

We have policies in place to ensure that

sales are made to customers with an appropriate credit history.

We perform ongoing credit evaluation on the financial condition of our

balance as of December 31, 2024 decreased by $ 4,301,173

compared to those of December 31, 2023.

The decrease in accounts receivable is due to the decrease in sales revenue.

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.

NOTE 3 – INVENTORIES

3 unchanged sentences

Finished goods

( 1,240,760 )

Inventory, net

The Company recorded impairment charges for slow

moving inventory in the amounts of $ 230,776 and $ 24,745 for the years ended December 31, 2023 and 2022.

The Company recorded impairment

charges for slow moving inventory in the amounts of $ 989,035 and $ 230,776 for the years ended December 31, 2024 and 2023.

NOTE 4 – PREPAYMENTS

AND DEPOSITS, NET

Prepayments and deposits consisted of the following:

Prepayments and

Deposits, Net - Schedule of Prepayments and Deposits, Net

December 31, 2024

December 31, 2023

Prepayments and deposits

Provision for impairment

( 1,648,454 )

Prepayments and deposits, net

For the year December 31, 2024 and 2023, the Company recorded

provision of $ 1,663,933 and nil for the prepayments and deposits.

NOTE 5 – PREPAID LAND LEASES

The Company has the rights to use certain parcels

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

The production

facilities and warehouses of the Company are located on these parcels of land.

The lease term ranges from ten to fifty years.

Some of the lease contracts were paid in one lump sum upfront and some are paid annually at the beginning of each anniversary date.

leases have no purchase option at the end of the lease term and were classified as operating leases prior to and as of January 1, 2019

The Company has the rights to

use certain parcels of land located in Shouguang, Shandong, PRC, through lease agreements signed with local townships or the government

The production facilities and warehouses of the Company are located on these parcels of land.

The lease term ranges from ten

to fifty years.

Some of the lease contracts were paid in one lump sum upfront and some are paid annually at the beginning of each anniversary

These leases have no purchase option at the end of the lease term and were classified as operating leases prior to and as of January

1, 2019 when the new lease standard was adopted.

Prior to January 2019, the prepaid land lease was amortized on a straight line basis.

As of January

1, 2019, all the leases in which term has commenced and were in use were classified as operating lease right-of-use assets (“ROU”).

In December 2017, the Company paid a one lump

sum upfront amount of $ 8,978,553 for a 50-year lease of a parcel of land at Bohai Marine Fine Chemical Industrial Park (“Bohai”)

for the new chemical factory to be built.

There is no purchase option at the end of the lease term.

This was classified as an operating

lease prior to and as of January 1, 2019.

As of January 1, 2019, all the leases in which term has commenced and were in use were classified as operating lease right-of-use assets

In December 2017, the

Company paid a one lump sum upfront amount of $ 8,846,282 for a 50-year lease of a parcel of land at Bohai Marine Fine Chemical

Industrial Park (“Bohai”) for the new chemical factory to be built.

There is no purchase option at the end of the lease

This was classified as an operating lease prior to and as of January 1, 2019.

The land use certificate was issued on October

The lease term expires on August 12, 2069.

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

31 2023 and 2022.

As of December 31, 2023, the prepaid land lease increased to $ 9,342,176 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

The amount paid was recorded as prepaid land leases, net of current portion in

the consolidated balance sheet as of December 31 2024 and 2023.

As of December 31, 2024, the prepaid land lease increased to

$ 9,204,556 due to an additional amount paid for stamp duty and related land use rights fees.

Amortization of this prepaid land lease

will commence when the chemical factory is built and placed in service.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 5 – PROPERTY, PLANT AND EQUIPMENT,

Property, plant and equipment, net consist of

the following:

Property, Plant and Equipment, Net -

Schedule of Property, Plant and Equipment

NOTE 6 – PROPERTY, PLANT AND EQUIPMENT, NET

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

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

Mineral rights

6 unchanged sentences

( 108,027,190 )

( 6,744,380 )

Net book value

1 unchanged sentence

$ 122,188,023

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.

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 $ 8,346,742 and $ 14,713,101 as at December 31, 2023

and December 31, 2022, respectively.

During the year ended December 31, 2023, depreciation

and amortization expense totaled $ 27,064,404 of which $ 15,626,277 , $ 4,113,962 and $ 7,324,165 were recorded in direct labor

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

During the year ended December 31, 2022, depreciation

and amortization expense totaled $ 26,770,097 of which $ 14,507,140 , $ 1,777,989 and $ 10,484,968 were recorded in direct labor

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

NOTE 6 – FINANCE LEASE RIGHT-OF-USE

Property, plant and equipment under finance leases,

net consist of the following:

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.

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 $ 50,219,026 and

$ 8,346,742 as at December 31, 2024 and December 31, 2023, respectively.

During the year ended December

31, 2024, depreciation and amortization expense totaled $ 17,989,747

of which $ 10,864,807 , $ 6,806,372

and $ 318,568

were recorded in direct labor and factory overheads incurred cost of net revenue ,

during plant shutdown, and administrative expenses respectively.

During the year ended

December 31, 2023, depreciation and amortization expense totaled $ 27,064,404 of

which $ 15,626,277 , $ 4,113,962 and

$ 7,324,165 were

recorded in direct labor and factory overheads incurred cost of net revenue , during

plant shutdown, and administrative expenses respectively.

NOTE 7 – FINANCE LEASE RIGHT-OF-USE ASSETS

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

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

1 unchanged sentence

Buildings Buildings

Plant and machinery Plant and Machinery

Accumulated depreciation and amortization

( 2,115,747 )

Net book value

The above buildings erected on parcels of land

located in Shouguang, PRC, are collectively owned by local townships.

The Company has not been able to obtain property ownership

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

During the year ended December 31, 2023, depreciation

and amortization expense totaled $ 61,981 , respectively, which was recorded in direct labor and factory overheads incurred during plant

During the year ended December 31, 2022, depreciation

and amortization expense totaled $ 5,523 , respectively, which was recorded in direct labor and factory overheads incurred during plant

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

The above buildings erected on

parcels of land located in Shouguang, PRC, are collectively owned by local townships.

The Company has not been able to obtain property

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

During the year ended December

31, 2024, depreciation and amortization expense totaled $ 5,068 , respectively, which was recorded in direct labor and factory overheads

incurred during plant shutdown.

During the year ended December

31, 2023, depreciation and amortization expense totaled $ 61,981 , respectively, which was recorded in direct labor and factory overheads

incurred during plant shutdown.

NOTE 8 – OPERATING LEASE RIGHT–OF-USE

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.

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 $ 7,923,071 as at December 31, 2023.

As of December 31, 2023, the total operating lease

ROU assets was $ 6,699,784 .

The total operating lease cost for the years ended

December 31, 2023 and 2022 was $ 887,603 and $ 978,356 .

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.

of land of which the 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 $ 7,318,031 as at December 31, 2024.

As of December 31, 2024, the total operating lease ROU assets

was $ 6,169,855 .

The total operating lease cost for the years ended December

31, 2024 and 2023 was $ 877,809 and $ 887,603 .

NOTE 9 – PAYABLE AND ACCRUED EXPENSES

8 unchanged sentences

Accrued expense-others

Accrued expense-others mainly

include the quality guarantee of water conservancy projects of $ 2,557,982 and others.

Accrued expense-others mainly include the purchase

of the unpaid portion of salt Pans of $ 7,878,182 , and others.

NOTE 10 – 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 Seller that time.

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

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

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 Seller that time.

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 year ended December 31,

2024 was $ 87,821 .

The expense associated with this agreement for the year ended December 31, 2023 was $ 88,049 .

The expense associated with this

agreement for the year ended December 31, 2022 was $ 92,168 .

NOTE 9 – RELATED PARTY TRANSACTIONS –

Related parties

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 10 – RELATED PARTY TRANSACTIONS – Continued

a) Related parties

Name of related parties

Chairman Of the Board

Chief Executive Officer

1 unchanged sentence

Chief Operating Officer

Chengdu Dianjinshi Culture media Co., LTD

Affiliated with company officers

Amount due to related parties:

The Company repurchased 80,000 shares

respectively, valued from each of CEO Xiaobin Liu, COO Naihui Miao, and CFO Min Li in a privately negotiated transaction based on the

closing price of the stock of $ 3.5931 per

share on November 30, 2022.

Due from related party :

Chengdu Dianjinshi Culture media Co., LTD

NOTE 11 – TAXES PAYABLE

1 unchanged sentence

Value added tax and other taxes payable

Taxes payable

NOTE 11 – LEASE LIABILITIES - FINANCE

AND OPERATING LEASE

The components of finance lease liabilities were

NOTE 12 – LEASE LIABILITIES - FINANCE AND OPERATING LEASE

The components of finance lease liabilities

were as follows:

Lease Liabilities - Finance and Operating

Lease - Schedule of Finance Leased Liabilities

Interest rate

Lease - Schedule of Finance and Operating Leased Liabilities

Imputed Interest rate

Total finance lease liability

1 unchanged sentence

Finance lease liability, net of current portion

Interest expenses from capital lease obligations

amounted to $ 96,914 and $ 120,332 for the years ended December 31, 2023 and 2022, respectively, which were charged to the consolidated

statement of comprehensive income (loss).

The components of operating lease liabilities

Lease Liabilities - Finance and Operating

Lease - Schedule of Operating Leased Liabilities

Interest expenses from capital lease obligations amounted

to $ 91,901 and $ 96,914 for the years ended December 31, 2024 and 2023, respectively, which were charged to the consolidated statement

of comprehensive income (loss).

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

The components of operating lease liabilities as follows:

Discount rate

Total Operating lease liabilities

1 unchanged sentence

Operating lease liabilities, net of current portion

The weighted average remaining operating lease

term at December 31, 2023 was 18.3 years and the weighted average discounts rate was 4.89 %, This discount rates used are

The weighted average remaining

operating lease term at December 31, 2024 was 17.3 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.

13 unchanged sentences

Amount representing interest

( 5,010,967 )

Present value of net minimum lease payments

1 unchanged sentence

Restricted Shares

A restricted stock award (“RSA”) is

an award of common shares that is subject to certain restrictions during a specified period.

Restricted stock awards are independent of

option grants and are generally subject to forfeiture if employment terminates prior to the release of the restrictions.

The grantee cannot

transfer the shares before the restricted shares vest.

Shares of nonvested restricted stock have the same voting rights as common stock,

are entitled to receive dividends and other distributions thereon and are considered to be currently issued and outstanding.

expenses the cost of the restricted stock awards, which is determined to be the fair market value of the shares at the date of grant,

straight-line over the period during which the restrictions lapse.

For these purposes, the fair market value of the restricted stock is

determined based on the closing price of the Company's common stock on the grant date.

During the year ended December 31, 2023, the Company

granted in the aggregate, 295,000 restricted shares of common stock to a consultant, the company's directors, officers and an

A restricted stock award (“RSA”) is an award of common shares that is subject

to certain restrictions during a specified period.

Restricted stock awards are independent

of option grants and are generally subject to forfeiture if employment terminates prior to the release of the restrictions.

cannot transfer the shares before the restricted shares vest.

Shares of nonvested restricted stock have the same voting rights as common

stock, are entitled to receive dividends and other distributions thereon and are considered to be currently issued and outstanding.

Company expenses the cost of the restricted stock awards, which is determined to be the fair market value of the shares at the date of

grant, straight-line over the period during which the restrictions lapse.

For these purposes, the fair market value of the restricted

stock is determined based on the closing price of the Company's common stock on the grant date.

During the year ended December

31, 2023, the Company granted in the aggregate, 295,000 restricted shares of common stock to a consultant, the company's directors, officers

and an employee.

The restricted shares award were granted under the 2019 Omnibus Equity Incentive Plan (See Note 15) and vested immediately.

The fair value of the award on the date of grant was $ 451,350 which was expensed in full during the year ended December 31, 2023.

The Company granted an

aggregate of 295,000

restricted shares of common stock in January 2025 to a consultant, the Company's directors, officers, and an employee as

compensation for services rendered for the year ended December 31, 2024.

The restricted shares award were granted under the 2019

Omnibus Equity Incentive Plan (See Note 15) and vested immediately.

The fair value of the award on the date of grant was $ 194,700

which was expensed in full during the year ended December 31, 2024.

Retained Earnings - Appropriated

In accordance with the relevant PRC regulations

and the PRC subsidiaries’ Articles of Association, the Company’s PRC subsidiaries are required to allocate its profit after

tax to the following reserve:

In accordance with the relevant

PRC regulations and the PRC subsidiaries’ Articles of Association, the Company’s PRC subsidiaries are required to allocate

its profit after tax to the following reserve:

Statutory Reserve

SCHC, SYCI, SHSI and DCHC are required each

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

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

Reserve 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 December 2023, GULF RESOURCES 'statutory

provident fund stood at $26.67 million.

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 of December 31, 2024, the Company’s statutory provident fund stood at $26.67 million.

NOTE 14 – TREASURY STOCK

2 unchanged sentences

NOTE 15 – STOCK-BASED COMPENSATION

Pursuant to the Company’s 2019 Omnibus Equity

Incentive Plan adopted and approved in 2019 (“2019 Plan”), awards under the 2019 Plan is limited in the aggregate to 2,068,398 shares

of our common stock, inclusive of the awards that were previously issued and outstanding under the Company’s 2007 Equity Incentive

Plan, as amended (the “2007 Plan”).

Upon adoption and approval of the 2019 Plan, the 2007 Plan was frozen, no new awards will

be granted under the 2007 Plan, and outstanding awards under the 2007 Plan will continue to be governed by the terms and condition of

the 2007 Plan and applicable award agreement.

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

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

The fair value of each option award is estimated

on the date of grant using the Black-Scholes option-pricing model.

The risk free rate is based on the yield-to-maturity in continuous

compounding of the US Government Bonds with the time-to-maturity similar to the expected tenor of the option granted, volatility is based

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

For the year ended December 31, 2023 and 2022,

total compensation costs for options issued recorded in the consolidated statement of comprehensive income (loss) were $ 0 and $ 0 .

Pursuant to the Company’s

2019 Omnibus Equity Incentive Plan adopted and approved in 2019 (“2019 Plan”), awards under the 2019 Plan is limited in the

aggregate to 2,068,398 shares of our common stock, inclusive of the awards that were previously issued and outstanding under the Company’s

2007 Equity Incentive Plan, as amended (the “2007 Plan”).

Upon adoption and approval of the 2019 Plan, the 2007 Plan was frozen,

no new awards will be granted under the 2007 Plan, and outstanding awards under the 2007 Plan will continue to be governed by the terms

and condition of the 2007 Plan and applicable award agreement.

As of December 31, 2024, the number of shares of the Company’s common

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

The fair value of each

option award is estimated on the date of grant using the Black-Scholes option-pricing model.

The risk free rate is based on the

yield-to-maturity in continuous compounding of the US Government Bonds with the time-to-maturity similar to the expected tenor of

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

based on the historical option exercise pattern.

For the year ended December 31,

2024 and 2023, total compensation costs for options issued recorded in the consolidated statement of comprehensive income (loss) were

$ 0 and $ 0 .

There were no related tax benefits as a full valuation allowance was recorded in the years ended December 31, 2024 and 2023.

NOTE 14 – STOCK-BASED COMPENSATION –

The following table summarizes all Company stock

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

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 15 – STOCK-BASED COMPENSATION – Continued

The following table summarizes all Company stock option

transactions between January 1, 2024 and December 31, 2024.

Stock-Based Compensation - Schedule of Stock

Option Activity

Number of Option

Outstanding and exercisable

Weighted- Average Exercise price of Option

Exercise Price per Common Share

of Option and Warrants Outstanding and

Average Exercise price of Option

of Exercise Price per Common Share

Balance, January 1, 2024

1 unchanged sentence

Stock and Warrants Options Exercisable and Outstanding

Weighted Average Remaining

Outstanding at December 31, 2024

Exercise Prices

Contractual Life

Range of Exercise Prices

Weighted Average Remaining Contractual Life (Years)

Exercisable and outstanding

2 unchanged sentences

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

The aggregate intrinsic value of options outstanding

and exercisable as of December 31, 2023 and 2022 was $ 0 and $ 0 .

15– EXPENDITURE ON WATER POLLUTION TREATMENT

The aggregate intrinsic value of options outstanding and

exercisable as of December 31, 2024 and 2023 was $ 0 and $ 0 .

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 16– EXPENDITURE ON WATER POLLUTION TREATMENT

Expenditure on water pollution treatment

The Company had done the flood prevention

project which involved the renovation of the channels of four major rivers within our mining area, encompassing the tributary of the

The Company had done the flood

prevention project which involved the renovation of the channels of four major rivers within our mining area, encompassing the tributary

of the Mihe River.

The aim is to prevent flooding that could harm the wells, aqueducts and crude salt pans at our plant.

incurred total expense of $ 46,510,856 .

As of December 31, 2023, $ 48,384,711

(inclusive of tax) has been paid, and the remaining 5% guarantee will be paid in June 2024.

incurred total expense of $ 46,510,856 in the fiscal year 2023.

NOTE 17 – INCOME TAXES

The Company utilizes the asset and liability method

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.

United States (“US”)

The Company utilizes the asset

and liability method 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.

(a) United States (“US”)

United States

Gulf Resources, Inc.

may be subject to the United

States of America Tax laws at a tax rate of 21 %.

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

US taxable income for the years ended December 31, 2023 and 2022, and management believes that its earnings are permanently invested in

British Virgin Islands (“BVI”)

Upper Class Group Limited, a subsidiary of Gulf

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

may be subject

to the United States of America Tax laws at a tax rate of 21 %.

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

had no US taxable income for the years ended December 31, 2024 and 2023, and management believes that its earnings are permanently invested

(b) British Virgin Islands (“BVI”)

Upper Class Group Limited, a subsidiary

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

gain in the BVI.

Upper Class Group Limited did not generate assessable profit for the years ended December 31, 2024 and 2023.

HKJI, a subsidiary of Upper Class Group

Limited, was incorporated in Hong Kong and is subject to Hong Kong taxation on its activities conducted in Hong Kong and income

HKJI, a subsidiary of Upper Class

Group Limited, was incorporated in Hong Kong and is subject to Hong Kong taxation on its activities conducted in Hong Kong and income

arising in or derived from Hong Kong.

No provision for income tax has been made as it has no taxable income for the years

ended December 31, 2023 and 2022.

The applicable statutory tax rates for the years ended December 31, 2023 and 2022

There is no dividend withholding tax in Hong Kong.

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

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

The operating subsidiaries SCHC is a wholly foreign-owned enterprises

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

The PRC tax losses

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

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

Tax losses of the operating subsidiaries of the Company

may be carried forward for five years.

On February 22, 2008, the Ministry of Finance

(“MOF”) and the State Administration of Taxation (“SAT”) jointly issued CaiShui [2008] Circular 1 (“Circular

No provision for income tax has been made as it has no taxable income for the years ended December

31, 2024 and 2023.

The applicable statutory tax rates for the years ended December 31, 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

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 (“MOF”) and the State Administration of Taxation (“SAT”) jointly issued CaiShui [2008] Circular 1 (“Circular

According to Article 4 of Circular 1, distributions of accumulated profits earned by a FIE prior to January 1, 2008 to foreign

1 unchanged sentence

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

As of December 31, 2023 and 2022, the accumulated

distributable earnings under the Generally Accepted Accounting Principles (GAAP”) of PRC that are subject to WHT are $ 87,160,228 and

As of December 31, 2024

and 2023, the accumulated distributable earnings under the Generally Accepted Accounting Principles (GAAP”) of PRC that are subject

to WHT are $ 40,524,183

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 December 31, 2023 and December 31, 2022, the Company has not recorded any WHT on the cumulative amount of distributable

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

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

the unrecognized WHT are $ 3,396,379 and $ 6,406,394 , respectively.

The Company’s income tax returns are subject

to the various tax authorities’ examination.

The federal, state and local authorities of the United States may examine the Company’s

income tax returns filed in the United States for three years from the date of filing.

The Company’s US income tax returns since

2017 are currently subject to examination.

Inland Revenue Department of Hong Kong (“IRD”)

may examine the Company’s income tax returns filed in Hong Kong for seven years from date of filing.

For the years 2012 through

2018, HKJI did not report any taxable income.

It did not file any income tax returns during these years except for 2014 and 2018.

companies which do not have taxable income, IRD typically issues notification to companies requiring them to file income tax returns once

in every four years.

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 December 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 December 31, 2024 and December 31, 2023, the unrecognized

WHT are $ 1,078,743 and $ 3,396,379 , respectively.

The Company’s income tax

returns are subject to the various tax authorities’ examination.

The federal, state and local authorities of the United States may

examine the Company’s income tax returns filed in the United States for three years from the date of filing.

The Company’s

US income tax returns since 2017 are currently subject to examination.

Inland Revenue Department of Hong

Kong (“IRD”) may examine the Company’s income tax returns filed in Hong Kong for seven years from date of filing.

the years 2012 through 2018, HKJI did not report any taxable income.

It did not file any income tax returns during these years except

for 2014 and 2018.

For companies which do not have taxable income, IRD typically issues notification to companies requiring them to file

income tax returns once 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:

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

The components of the provision for income tax benefit (expense)

from continuing operations are:

Income Taxes - Schedule of Components of Income Tax Expense Benefit

Years Ended December 31,

Current taxes – PRC

6 unchanged sentences

$ ( 3,538,617 )

Significant components of the Company’s

deferred tax assets and liabilities at December 31, 2023 and December 31, 2022 are as follows:

Significant components of the

Company’s deferred tax assets and liabilities at December 31, 2024 and December 31, 2023 are as follows:

Income Taxes - Schedule of Deferred

2 unchanged sentences

Exploration costs

Impairment of property plant and equipment

PRC tax losses

5 unchanged sentences

Net deferred tax asset

tax assets consist of future reversals of existing taxable temporary differences and adequate future taxable income, exclusive of reversing

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 December 31, 2023 and 2022, 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 losses.

The increase in valuation allowance for the year

ended December 31, 2023 is 3,516,915 .

The increase in valuation allowance for the year

ended December 31, 2022 is $ 34,176 .

As of December 31, 2024 and 2023, valuation allowances were mainly provided against deferred tax

assets caused by exploration costs, Impairment of property plant and equipment , Allowance

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 losses.

The increase in valuation allowance for the year ended

December 31, 2024 is $ 1,401,232 .

The increase in valuation allowance for the year ended

December 31, 2023 is $ 3,516,915 .

There were no unrecognized tax benefits and accrual

for uncertain tax positions as of December 31, 2024 and 2023.

There were no amounts accrued for penalties and

interest for the years ended December 31, 2023 and 2022.

There were no change in unrecognized tax benefits

during the years ended December 31, 2023 and 2022.

There were no amounts accrued for penalties and interest for the years ended

December 31, 2024 and 2023.

There were no change in unrecognized tax benefits during

the years ended December 31, 2024 and 2023.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 18 – BUSINESS SEGMENTS

Operating segment’s performance is primarily

evaluated based on segment operating income, which excludes share-based compensation expense, certain corporate costs and other income

not associated with the operations of the segment.

These corporate costs are separately stated below and also include costs that are related

to functional areas such as accounting, treasury, information technology, legal, human resources, and internal audit.

The Company believes

that segment operating income, as defined above, is an appropriate measure for evaluating the operating performance of its segments.

the customers are located in PRC.

Operating segment’s performance

is primarily evaluated based on segment operating income, which excludes share-based compensation expense, certain corporate costs and

other income not associated with the operations of the segment.

These corporate costs are separately stated below and also include costs

that are related to functional areas such as accounting, treasury, information technology, legal, human resources, and internal audit.

The Company believes that segment operating income, as defined above, is an appropriate measure for evaluating the operating performance

of its segments.

All the customers are located in PRC.

December 31, 2024

Operating Segment

Corporate Corporate

(external customers)

(intersegment)

Loss from operations before income tax expense

Loss from operations before

income tax expense

( 17,238,619 )

17 unchanged sentences

(intersegment)

Loss from operations before income tax expense

Loss from operations before

income tax expense

( 10,005,755 )

( 1,653,349 )

( 11,105,079 )

( 11,890,725 )

Income tax (expense) benefit

6 unchanged sentences

( 1,653,349 )

( 14,643,696 )

( 15,429,342 )

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.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

Years Ended December 31,

Reconciliations

Total segment operating Profit (loss)

Total segment operating loss

$ ( 20,539,156 )

Corporate costs

$ ( 11,105,079 )

Corporate costs

Unrealized gain (loss) on translation of intercompany balance

Profit (loss) from operations

Loss from operations

( 21,283,649 )

Other income, net of expense

Expenditure on water pollution

( 11,890,725 )

Other expense, net

Expenditure on water pollution treatment

( 46,510,856 )

Loss on disposal of property, plant and equipment

( 29,169,008 )

Impairment of Property, plant and equipment

( 6,772,500 )

Loss before taxes

$ ( 57,287,270 )

The following table shows the major customers

(10% or more) for the year ended December 31, 2023

$ ( 58,256,662 )

The following table shows the major customers (10% or more)

for the year ended December 31, 2024

Business Segments - Schedule of

Revenue by Major Customers

Chemical Products

Percentage of

Shandong Morui Chemical Company Limited

1 unchanged sentence

Shouguang Weidong Chemical Company Limited

Shandong Shouguang Shenrunfa Marine Chemical Company Limited

The following table shows the major customers

(10% or more) for the year ended December 31, 2022

Chemical Products

Percentage of

The following table shows the major customers (10% or more) for the

year ended December 31, 2023

Shandong Morui Chemical Company Limited

1 unchanged sentence

Shouguang Weidong Chemical Company Limited

Shandong Shouguang Shenrunfa Marine Chemical Company Limited

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 19 – CUSTOMER CONCENTRATION

Customer Concentration

The Company sells a substantial portion of its

products to a limited number of customers.

During the year ended December 31, 2023, the Company sold 61.8 % of its products to its

top five customers, respectively.

The Company sells a substantial

portion of its products to a limited number of customers.

During the year ended December 31, 2024, the Company sold 66.05 % of its products

to its top five customers, respectively.

As of December 31, 2024, amounts due from these customers were $ 594,234 .

The Company sells a substantial portion of its

products to a limited number of customers.

During the year ended December 31, 2022, the Company sold 53.6 % of its products to its

top five customers, respectively.

The Company sells a substantial

portion of its products to a limited number of customers.

During the year ended December 31, 2023, the Company sold 61.8 % of its products

to its top five customers, respectively.

As of December 31, 2023, amounts due from these customers were $ 2,082,217 .

1 unchanged sentence

Product Concentration

During the year ended December 31, 2023, the Company

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

Cost of Goods

During the year ended December

31, 2024, the Company purchased 100 % of its raw materials from its top four suppliers.

As of December 31, 2024, amounts due to those suppliers

were $ 30,003 .

During the year ended December 31, 2022, the Company

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

During the year ended December

31, 2023, the Company purchased 100 % of its raw materials from its top four suppliers.

As of December 31, 2023, amounts due to those suppliers

were $ 206,984 .

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 21 – LOSS CONTINGENCIES

Settled Litigation

On or about August 3, 2018, written decisions

of administration penalty captioned Shou Guo Tu Zi Fa Gao Zi [2018] No.

On or about August 3,

2018, written decisions of administration penalty captioned Shou Guo Tu Zi Fa Gao Zi [2018] No.

291, Shou Guo Tu Zi Fa Gao Zi [2018]

292, Shou Guo Tu Zi Fa Gao Zi [2018] No.

292, Shou Guo Tu Zi Fa

Gao Zi [2018] No.

293, Shou Guo Tu Zi Fa Gao Zi [2018] No.

294, Shou Guo Tu Zi Fa Gao Zi [2018] No.

295 and Shou Guo Tu Zi Fa Gao Zi [2018]

296 (together, the “Written Decisions”) were served on Shouguang City Haoyuan Chemical Company Limited (“SCHC”)

by Shouguang City Natural Resources and Planning Bureau (the “Bureau”), naming SCHC as respondent respectively thereof.

Decisions challenged the land use of Factory nos.

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

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

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

respectively.

The Written Decisions ordered SCHC, among other things, to return the land subject to the Written Decisions to its respective

legal owner, restore the land to its original state, and demolish or confiscate all the buildings and facilities thereon and pay monetary

penalty of approximately RMB 1.3 million ($184,000) in the aggregate.

Each of the Written Decisions shall be executed within 15 days upon

serving on SCHC.

Additional interest penalty shall be imposed at a daily rate of 3% in the event that SCHC does not make the monetary

penalty payment in a timely manner.

Subsequently, the Bureau filed enforcement actions to the People’s Court of Shouguang City,

Shandong Province (the “Court”), naming SCHC as enforcement respondent and alleged, among other things, that SCHC failed to

perform its obligations under each of the Written Decisions within the specified timeframe.

The enforcement proceedings sought court orders

to enforce the Written Decisions.

and Shou Guo Tu Zi Fa Gao Zi [2018] No.

296 (together, the “Written Decisions”) were served on Shouguang City Haoyuan

Chemical Company Limited (“SCHC”) by Shouguang City Natural Resources and Planning Bureau (the “Bureau”),

naming SCHC as respondent respectively thereof.

The Decisions challenged the land use of Factory nos.

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

respectively, and alleged, among other things, that SCHC had illegally occupied and used the land in the total area of approximately

52,674 square meter, on which Factory nos.

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

The Written Decisions ordered SCHC, among

other things, to return the land subject to the Written Decisions to its respective legal owner, restore the land to its original

state, and demolish or confiscate all the buildings and facilities thereon and pay monetary penalty of approximately RMB 1.3 million

($184,000) in the aggregate.

Each of the Written Decisions shall be executed within 15 days upon serving on SCHC.

interest penalty shall be imposed at a daily rate of 3% in the event that SCHC does not make the monetary penalty payment in a

timely manner.

Subsequently, the Bureau filed enforcement actions to the People’s Court of Shouguang City, Shandong Province

(the “Court”), naming SCHC as enforcement respondent and alleged, among other things, that SCHC failed to perform its

obligations under each of the Written Decisions within the specified timeframe.

The enforcement proceedings sought court orders to

enforce the Written Decisions.

On May 5, 2019, written decisions of administrative ruling captioned (2019) Lu 0783 Xing Shen No.

2 unchanged sentences

389, (2019) Lu 0783 Xing Shen No.

390, (2019) Lu 0783 Xing Shen No.

390, (2019) Lu 0783 Xing Shen

393, and (2019) Lu 0783 Xing Shen No.

394, respectively (together, the “Court Rulings”) were made by the Court in favor of the

The Court orders, among other relief, to enforce each of the Written Decisions, to return each subject land to its legal owners

and demolish or confiscate the buildings and facilities thereon and restore the land to its original state within 10 days from the service

of the Court Rulings on SCHC.

394, respectively (together, the “Court Rulings”) were made by the Court in

favor of the Bureau.

The Court orders, among other relief, to enforce each of the Written Decisions, to return each subject land to

its legal owners and demolish or confiscate the buildings and facilities thereon and restore the land to its original state within

10 days from the service of the Court Rulings on SCHC.

The Court Rulings became enforceable immediately upon service on SCHC on May

In the last twenty years, to the Company’s

knowledge, there were no government regulations requiring bromine manufacturers to obtain land use and planning approval document.

such, the Company believes most of the bromine manufacturers in Shouguang City do not have land use and planning approval documents and

lease their land parcels from the village associations.

They are facing the same issues in connection with land use and planning as the

To the Company’s knowledge, the local government has submitted its plan to solve the issues to higher authority and are

waiting for approval from the higher authority.

The Company is in the process of resolving the

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

The Company has been in discussions closely with the local government

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

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

government authorities and may be revoked.

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

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

In the last twenty years, to the

Company’s knowledge, there were no government regulations requiring bromine manufacturers to obtain land use and planning approval

As such, the Company believes most of the bromine manufacturers in Shouguang City do not have land use and planning approval

documents and lease their land parcels from the village associations.

They are facing the same issues in connection with land use and

planning as the Company.

To the Company’s knowledge, the local government has submitted its plan to solve the issues to higher authority

and are waiting for approval from the higher authority.

The Company is in the process

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

The Company has been in discussions closely

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

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

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

Pursuant to a Written Application dated October 28, 2019 addressed to

the Court by the Bureau, the Bureau withdrew its application for the enforcement proceedings regarding the administrative penalty imposed

on Factory No.

7, Factory No.

8 and Factory No.10.

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

Pursuant to a written decisions of administrative ruling captioned (2019) Lu 0783 Xing

389 Zhi Yi, dated November 25, 2020, the Court orders to terminate the enforcement of the case captioned (2019) Lu 0783 Xing

Production of Factory No.

7 was allowed to resume in April 2019.

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

2019 informing the Company that Factory No.

9 have passed inspection and were approved to resume operation

In addition, on August 28, 2019, the People’s

Government of Shandong Province, issued a regulation titled “Investment Project Management Requirements of Chemical Companies in

Shandong Province” permitting the construction of facilities on existing sites or infrastructure of bromine manufacturing and other

chemical industry-related types of projects (clause 11 of section 3).

The Company believes that the goal of the government is to standardize

and regulate the industry and not to demolish the facilities or penalize the manufacturers.

As of the date of this report, the Company

has not been notified by the local government that it will take any measure to enforce the administrative penalties.

Based on information

known to date, the Company believes that it is remote that the Written Decisions or Court Rulings will be enforced within the expected

timeframe and a material penalty or costs and expenses against the Company will result.

However, there can be no assurance that there

will not be any further enforcement action, the occurrence of which may result in further liabilities, penalties and operational disruption.

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 December 31, 2023.

The Company received a notification from the Shouguang

City Government in February 2019 informing the Company that Factory No.

9 have passed inspection and were approved

to resume operation

In addition, on August 28, 2019,

the People’s Government of Shandong Province, issued a regulation titled “Investment Project Management Requirements of Chemical

Companies in Shandong Province” permitting the construction of facilities on existing sites or infrastructure of bromine manufacturing

and other chemical industry-related types of projects (clause 11 of section 3).

The Company believes that the goal of the government is

to standardize and regulate the industry and not to demolish the facilities or penalize the manufacturers.

As of the date of this report,

the Company has not been notified by the local government that it will take any measure to enforce the administrative penalties.

on information known to date, the Company believes that it is remote that the Written Decisions or Court Rulings will be enforced within

the expected timeframe and a material penalty or costs and expenses against the Company will result.

However, there can be no assurance

that there will not be any further enforcement action, the occurrence of which may result in further liabilities, penalties and operational

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 December 31, 2024.

NOTE 22 - SUBSEQUENT EVENT

Subsequent Event

Company has analyzed its operations subsequent to December 31, 2023 and up through September 27, 2024 which is the date these consolidation

financial statements were available to be issued, except as disclosed below, there are no other material subsequent events to disclose

in these consolidated financial statements.

Pursuant to the notification from the government

of Shouguang City, all bromine facilities in Shouguang City were temporarily closed from December 25, 2023 to February 20, 2024.

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, 2024 as planned.

The Company retired some fixed assets

including aqueducts and wells in June ,2024 for total amount approximately $ 29,169,008 , due to (1) the aqueducts with serious water seepage,

potential damage, and easy to cause environmental pollution;

(2) Wells found with reduced water flow, low brine content and high energy

A wholly owned subsidiary of

the Company entered into acquisition agreements with various sellers, pursuant to which the Company agreed to acquire from the sellers

5 parcels of crude salt fields located in Shouguang city Yangkou town for the total of aggregate price of RMB 280,762,000 (approximately

US$ 38,619,257 based on the exchange rate on July 3, 2024) in June 2024.

Shandong Shouguang Vegetable

Industry Group Co., Ltd.

and Shandong Shouguang Vegetable Seed Group Co., Ltd.

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

million (Approximate $1.41 million) to Shandong Deepin City Investment Emergency Lending Fund, respectively.

A total of nine companies

and individuals provided guarantee to these loans, including Shouguang 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

and legal advice, Gulf Resources believes that this guaranteed loan has limited impact on the company.

Subsequent Events

On January 20, 2025,

the company issued total 295,000 shares to its employees, officers and consultant for the services rendered for the year ended

December 31, 2024.

Pursuant to the notification from

the government of Shouguang City, all bromine facilities in Shouguang City were temporarily closed from December 15, 2024 until February

In compliance with the notification, the Company ceased production at its bromine facilities during this period and resumed

preparation operations at the bromine and crude salt factories as scheduled in February 2025.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

On February 28, 2025 (the

“Closing Date”), a wholly owned subsidiary of the Company, SHSI, closed the transactions contemplated by the Acquisition

Agreements (the “Agreements”) dated June 26, 2024 by and between SHSI, and Shouguang Qingshuibo Farm Co., LTD.

1”), dated June 27, 2024 by and between SHSI and each of Shouguang city Yangkou Town Dingjia Zhuangzi Village Stock Economic Cooperative

(“Seller 2”), Shouguang city Yangkou town Renjia Zhuangzi village stock economic cooperative (“Seller 3”), Shouguang

city Yangkou town Shanjia Zhuangzi village stock economic cooperative (“Seller 4”), Shouguang city Yangkou town Zhengjia

Zhuangzi village stock economic cooperative (“Seller 5”), respectively, as amended on December 17, 2024.

Pursuant to the

Agreements, SHSI acquired the crude salt field owned by each seller located in Shandong province, China.

On the Closing Date, the Company

issued a total of 2,059,694

shares of the Company’s common stock, par value $ 0.0005

per share (the “Shares”), at a price of $ 1.50

per share, to five individuals, who are citizens residing in the People’s Republic of China, designated by each the Seller

1, the Seller 2, the Seller 3, the Seller 4 and the Seller 5.

The issuance of the Shares was exempt from registration pursuant to Regulation

S of the Securities Act of 1933, as amended.

Determined by the civil mediation document issued by

Shouguang People's Court on March 17, 2025, SCHC owed Shouguang Chengyu Trading Co., Ltd.

a sum of RMB 226,825.44 for goods.

SCHC is required

to pay RMB 50,000 to Shouguang Chengyu Trading Co., Ltd.

before the 15th day of each month starting from April 2025 until the debt is

fully repaid.

On March 21, 2025, the company issued total 265,000 shares

to its employees, officers and consultant for the service rendered in the year ended December 31, 2025.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

SCHEDULE I – PARENT ONLY FINANCIAL INFORMATION

The following presents condensed parent company

only financial information of Gulf Resources, Inc.

The following presents condensed parent company only financial

information of Gulf Resources, Inc.

Condensed Balance Sheets

Parent Company

As of December 31,

5 unchanged sentences

Amounts due from group companies

Deferred tax assets, net

Total non-current assets

14 unchanged sentences

COMMON STOCK;

$0.0005 par value;

shares authorized;

11,012,754 and 10,717,754 shares issued;

and 10,726,924 and 10,431,924 shares outstanding as of December 31, 2023 and December 31, 2022

shares issued;

and 10,726,924

shares outstanding as of December 31, 2024 and December 31, 2023

Treasury stock;

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

( 1,372,673 )

Additional paid-in capital

Share to be issued

Retained earnings unappropriated

14 unchanged sentences

TOTAL OPERATING EXPENSES

( 1,057,893 )

OTHER EXPENSES

2 unchanged sentences

TOTAL EXPENSES

( 1,057,893 )

Equity in net Loss of subsidiaries

( 59,841,154 )

( 61,014,900 )

LOSS BEFORE INCOME TAXES

1 unchanged sentence

( 61,795,279 )

$ ( 58,935,452 )

$ ( 61,795,279 )

Condensed Statements of Cash Flows

2 unchanged sentences

$ ( 58,935,452 )

Adjustments to reconcile net Loss to

net cash used in operating activities:

$ ( 61,795,279 )

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

Equity Loss in unconsolidated subsidiaries

4 unchanged sentences

Net cash used in operating activities

( 1,259,268 )

CASH FLOWS FROM FINANCING ACTIVITIES

4 unchanged sentences

CASH AND CASH EQUIVALENTS - END OF YEAR

Basis of presentation

(i) Basis of presentation

In the condensed parent-company-only

5 unchanged sentences

financial statements and notes thereto.

As of December 31, 2023, the Company

itself has no purchase commitment, capital commitment and operating lease commitment.

Restricted Net Assets

As of December 31, 2024, the

Company itself has no purchase commitment, capital commitment and operating lease commitment.

(ii) Restricted Net Assets

Schedule I of Rule 5-04 of Regulation

6 unchanged sentences

regulatory agency, foreign government, etc.).

The condensed parent company financial

statements have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X as the restricted net assets of the subsidiaries

of Gulf Resources, Inc.

The condensed parent company

financial statements have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X as the restricted net assets of the

subsidiaries of Gulf Resources, Inc.

exceed 25% of the consolidated net assets of Gulf Resources, Inc.

The ability of the Company’s Chinese operating

subsidiaries to pay dividends may be restricted due to the foreign exchange control policies and availability of cash balances of the

Chinese operating subsidiaries.

Because a significant portion of the Company’s operations and revenues are conducted and generated

in China, a significant portion of the revenues being earned and currency received are denominated in RMB.

RMB is subject to the exchange

control regulation in China, and, as a result, the Company may be unable to distribute any dividends outside of China due to PRC exchange

control regulations that restrict the Company’s ability to convert RMB into US Dollars.

Changes in and Disagreements with Accountants on Accounting

and Financial Disclosure.

The ability of the Company’s

Chinese operating subsidiaries to pay dividends may be restricted due to the foreign exchange control policies and availability of cash

balances of the Chinese operating subsidiaries.

Because a significant portion of the Company’s operations and revenues are conducted

and generated in China, a significant portion of the revenues being earned and currency received are denominated in RMB.

RMB is subject

to the exchange control regulation in China, and, as a result, the Company may be unable to distribute any dividends outside of China

due to PRC exchange control regulations that restrict the Company’s ability to convert RMB into US Dollars.

Changes in and Disagreements with Accountants

on Accounting and Financial Disclosure.

(a) Dismissal of Independent Registered Public Accounting

On April 16, 2024, WWC, P.C.

Certified Public Accountants (“WWC”)

was dismissed as our independent registered public accounting firm, effective immediately.

The decision to dismiss WWC as the Company’s

principal independent accountant was approved by the Audit Committee of the Board of Directors of the Company on April 16, 2024.

WWC’s reports on our consolidated financial statements for the

fiscal years ended December 31, 2023 and 2022 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or

modified as to uncertainty, audit scope or accounting principles.

During the two most recent fiscal years ended December 31, 2023 and

2022, and the subsequent interim period through April 16, 2024, there were no disagreements with WWC on any matter of accounting principles

or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction

Certified Public Accountants

(“WWC”) was dismissed as our independent registered public accounting firm, effective immediately.

The decision to dismiss

WWC as the Company’s principal independent accountant was approved by the Audit Committee of the Board of Directors of the Company

on April 16, 2024.

WWC’s reports on our consolidated financial statements

for the fiscal years ended December 31, 2023 and 2022 did not contain an adverse opinion or a disclaimer of opinion and were not qualified

or modified as to uncertainty, audit scope or accounting principles.

During the two most recent fiscal years ended December

31, 2023 and 2022, and the subsequent interim period through April 16, 2024, there were no disagreements with WWC on any matter of accounting

principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction

of WWC, would have caused WWC to make reference to the subject matter of the disagreements in connection with its reports on our consolidated

2 unchanged sentences

of Regulation S-K.

We provided WWC with a copy of the above disclosures and requested

that WWC furnish the Company with a letter addressed to the SEC stating whether or not it agrees with the statements made above.

of WWC’s letter dated April 16, 2024 was attached as Exhibit 16.1 to a Current Report on Form 8-K that was filed by us with the

SEC on April 16, 2024.

On April 16, 2024, we engaged GGF CPA LIMITED (“GGF”) as

our independent registered public accounting firm for the fiscal year ending December 31, 2023, effective immediately.

We provided WWC with a copy of the above disclosures

and requested that WWC furnish the Company with a letter addressed to the SEC stating whether or not it agrees with the statements made

A copy of WWC’s letter dated April 16, 2024 was attached as Exhibit 16.1 to a Current Report on Form 8-K that was filed by

us with the SEC on April 16, 2024.

(b) Appointment of New Independent Registered Public

Accounting Firm.

On April 16, 2024, we engaged GGF CPA LIMITED (“GGF”)

as our independent registered public accounting firm for the fiscal year ending December 31, 2023, effective immediately.

During the fiscal

6 unchanged sentences

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data