What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-08-13 compared with 2025-05-13 · 535 added, 396 removed, 824 unchanged (53% of the section changed)

4 unchanged sentences

(Expressed in U.S.

March 31, 2025

June 30, 2025

December 31, 2024

36 unchanged sentences

COMMON STOCK;

$ 0.0005 par value;

80,000,000 shares authorized;

13,632,448 and 11,012,754 shares issued;

and 13,346,618

and 10,726,924 shares outstanding as of March 31, 2025 and December 31, 2024

and 13,346,618 and 10,726,924 shares outstanding as of June 30, 2025 and December 31, 2024

Treasury stock;

285,830 shares as of March 31, 2025 and December 31, 2024 at cost

285,830 shares as of June 30, 2025 and December 31, 2024 at cost

( 1,372,673 )

14 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE

INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE

(Expressed in U.S.

Three-Month Period Ended

Three-Month Period Ended June 30,

Six-Month Period Ended June 30,

OPERATING COSTS AND EXPENSE

2 unchanged sentences

( 5,112,058 )

( 8,951,400 )

( 7,231,903 )

Sales and marketing expenses

2 unchanged sentences

( 3,953,582 )

( 5,449,192 )

General and administrative expenses

( 2,384,288 )

( 1,407,428 )

TOTAL OPERATING COSTS AND EXPENSE

1 unchanged sentence

( 7,530,166 )

( 15,309,125 )

( 14,106,647 )

LOSS FROM OPERATIONS

1 unchanged sentence

( 5,360,893 )

( 10,416,416 )

OTHER INCOME (EXPENSE)

1 unchanged sentence

Interest income

Other expense

LOSS BEFORE INCOME TAXES

Other expense, net

Loss on disposal of property, plant and equipment

( 29,169,008 )

INCOME TAX (EXPENSE) BENEFIT

Loss before taxes

( 34,306,028 )

( 5,403,277 )

( 39,568,220 )

INCOME TAX BENEFIT (EXPENSE)

$ ( 773,777 )

$ ( 33,097,918 )

$ ( 5,403,277 )

$ ( 37,090,050 )

COMPREHENSIVE LOSS

1 unchanged sentence

$ ( 33,097,918 )

OTHER COMPREHENSIVE (LOSS) INCOME

$ ( 5,403,277 )

$ ( 37,090,050 )

- Foreign currency translation adjustments

TOTAL COMPREHENSIVE (LOSS) INCOME

( 1,243,121 )

TOTAL COMPREHENSIVE LOSS

$ ( 370,002 )

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE:

$ ( 33,947,172 )

$ ( 4,777,486 )

$ ( 38,333,171 )

BASIC AND DILUTED LOSS PER SHARE:

BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF SHARES:

2 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

THREE-MONTH PERIOD ENDED MARCH 31, 2025 AND 2024

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’

SIX-MONTH PERIOD ENDED JUNE 30, 2025

(Expressed in U.S.

1 unchanged sentence

unappropriated

BALANCE AT MARCH 31, 2025 (Unaudited)

( 1,372,673 )

$ ( 20,632,127 )

$ 142,584,827

Currency translation adjustment

Net loss for three-month period ended JUNE 30, 2025

BALANCE AT JUNE 30, 2025(Unaudited)

( 1,372,673 )

$ ( 20,228,352 )

$ 142,214,825

comprehensive

unappropriated

BALANCE AT MARCH 31, 2024 (Unaudited)

( 1,372,673 )

$ ( 18,447,136 )

$ 200,862,297

Currency translation adjustment

Net loss for three-month period ended June 30, 2024

( 33,097,918 )

BALANCE AT JUNE 30, 2024(Unaudited)

( 1,372,673 )

$ ( 19,296,390 )

$ 166,915,125

comprehensive

unappropriated

BALANCE AT DECEMBER 31, 2024 (Audited)

4 unchanged sentences

Currency translation adjustment

Net loss for three-month period ended March 31, 2025

Net loss for three-month period ended JUNE 30, 2025

( 5,403,277 )

BALANCE AT MARCH 31, 2025(Unaudited)

BALANCE AT JUNE 30, 2025(Unaudited)

( 1,372,673 )

8 unchanged sentences

Currency translation adjustment

Net loss for three-month period ended March 31, 2024

( 1,243,121 )

BALANCE AT MARCH 31, 2024(Unaudited)

Net loss for six-month period ended June 30, 2024

( 37,090,050 )

BALANCE AT JUNE 30, 2024(Unaudited)

( 1,372,673 )

$ ( 19,296,390 )

$ 166,915,125

Treasury Stock

8 unchanged sentences

(Expressed in U.S.

Three-Month Period Ended March 31,

Six-Month Period Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

1 unchanged sentence

$ ( 37,090,050 )

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

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

Amortization on capital lease

4 unchanged sentences

Amortization of right-of-use asset

Loss on disposal of equipment

Changes in assets and liabilities:

2 unchanged sentences

Prepayments and deposits

( 2,331,871 )

Advance from customers

1 unchanged sentence

Accounts and Other payable and accrued expenses

( 2,583,610 )

Amount due to related Parties

Taxes payable

2 unchanged sentences

( 2,139,435 )

( 1,330,476 )

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment

Net cash from investing activities

EFFECTS OF EXCHANGE RATE CHANGES

ON CASH AND CASH EQUIVALENTS

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

( 60,526,213 )

Net cash provided by (used in) investing activities

( 60,526,213 )

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of finance lease obligation

Net cash used in financing activities

EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

NET DECREASE IN CASH AND CASH EQUIVALENTS

( 2,339,081 )

( 61,856,355 )

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD

4 unchanged sentences

(Expressed in U.S.

Years Ended March 31,

Years Ended June 30,

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

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

Cash paid during the six-month period ended June 30, 2025 for:

Paid for taxes

5 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

JUNE 30, 2025

(Expressed in U.S.

1 unchanged sentence

of Presentation and Consolidation

The accompanying unaudited consolidated financial

The accompanying audited consolidated financial

statements have been prepared by Gulf Resources, Inc.

1 unchanged sentence

the “Company”).

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 March 31, 2025, As of March 31, 2025, the Company had

current assets of $ 17.64 million and current liabilities of $ 15.26 million.

As a result, the surplus was $ 2.38 million, and it has suffered

losses in both the fiscal years of 2025 and 2024 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.

of the 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, Shouguang Hengde Salt Industry Co.

Ltd (“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”).

County Haoyuan Chemical Company Limited (“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 impact.

The virus outbreak slightly delayed the commencement of the operations for

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

We received approval to open factory No.

COVID has still delayed the approval for

factories N0.2 and No.10.

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.

Going Concern Consideration

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 operations.

However, the going concern of the enterprise relies on many factors, such

as profitable operations, generating operating cash flows, obtaining financing, etc.

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

June 30, 2025, the Company had current assets of $ 20.28 million and current liabilities of $ 14.79 million.

As a result, the

surplus was $ 5.49 million, and it has suffered losses for the six months ended by June 30 , 2025.

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.

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 commenced trial operation

in January 2019 but temporarily suspended its production in May 2019 as required by the government to obtain project approval (see Note

(i) Bromine and Crude Salt Segments

2 unchanged sentences

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, including

In April 2019, Factory No.

1, and Factory No.

7 resumed operation.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

(Expressed in U.S.

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 and Factory No.

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

Subsequently, due to the coronavirus

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

Subsequently, the

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

after the winter temporary closure.

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

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

4, No.7 and No.

9 in order to meet the

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

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.

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

commercial production on May6, 2020.

The Company received verbal notification from the government regarding Factory No.

8, allowing it

to recommence production in August 2022.

8 began contributing revenue in the fourth quarter 2022.The Company is still waiting

for governmental approval for Factories No.

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

for all mining areas including that for prevention of flood.

As a result, we may be required to make some modifications to our current

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

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.

Company received verbal notification from the government regarding Factory No.

8, allowing it to recommence production in August

8 began contributing revenue in the fourth quarter 2022.

The Company is still waiting for governmental

approval for Factories No.

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

areas including that for prevention of flood.

As a result, we may be required to make some modifications to our current wells and aqueducts

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

In April 2022, Shouguang Hengde Salt Industry

4 unchanged sentences

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.

However, the establishment of this

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

(ii) Chemical Segment

20 unchanged sentences

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

management that the electricity restrictions are being eased.

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

management that the electricity restrictions were eased.

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

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

The COVID restrictions and resulting national and international supply

chain issues as well as permitting issues have caused delays in receiving some previously ordered machinery and equipment.

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

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

The Company estimates this relocation process will cost approximately

$ 69 million in total.

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

of the new chemical factory, purchase of plant and equipment and construction costs and installation costs incurred for the new chemical

factory in the amount of $ 45,584,344 and $ 45,584,344 , which were recorded in the Property, plant and equipment in the consolidated balance

sheets as of March 31, 2025 and December 31, 2024.

The Company suspended the construction in the chemical factory until it

decide what products can be produced most profitably.

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

design of the new chemical factory, purchase of plant and equipment and construction costs and installation costs incurred for the new

chemical factory in the amount of $ 45,584,344 and $ 45,584,344 , which were recorded in the Property, plant and equipment in the consolidated

balance sheets as of June 30, 2025 and December 31, 2024.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

(Expressed in U.S.

The Company suspended the construction in the chemical factory until

it decide what products can be produced most profitably.

(iii) Natural Gas Segment

In January 2017, the Company completed the first

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

January 2019.

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

Province, whereby the Company is required to obtain project approval for its well located in Daying, including the whole natural gas

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

related land issue.

Until these approvals have been received, the Company has to temporarily halt trial production at its natural

gas well in Daying.

In compliance with the Chinese government new policies, the Company is also required to obtain an exploration

license and a mining license for bromine and natural gas, respectively.

Pursuant to the Opinions of the Ministry of Natural

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

Resources of PRC on January 9, 2020, which came into effect on May 1, 2020, privately owned enterprises are allowed to participate

in the natural gas production.

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

with related government departments until the governmental planning has been finalized.

In January 2017, the Company completed the

first brine water and natural gas well field construction in Daying located in SichuanProvince, China, and commenced trial

production in January 2019.

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

County, Sichuan Province, whereby the Company is required to obtain project approval for its well located in Daying, including the

whole natural gas and brine water project, and approvals for safety production inspection,environmental protection assessment, and

to solve the related land issue.

Until these approvals have been received, the Company has to temporarily halt trial production at

its natural gas well in Daying.

In compliance with the Chinese government new policies, the Company is also required to obtain an

exploration license and a mining license for bromine and natural gas, respectively.

Pursuant to the Opinions of the Ministry of

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

Natural Resources of PRC on January 9, 2020, which came into effect on May 1, 2020, privately owned enterprises are allowed to

participate in the natural gas production.

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

approvals with related government departments until the governmental planning has been finalized.

(d) Use of Estimates

The Company’s consolidated financial statements have been

11 unchanged sentences

estimates under different assumptions or conditions.

(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) Allowance

(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) Allowance

for Doubtful Accounts

We make estimates of the uncollectability of accounts receivable, especially

analyzing accounts receivable and historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and

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

Credit evaluations are undertaken

for all major sale transactions before shipment is authorized.

On a quarterly basis, we evaluate aged items in the accounts receivable

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

If management were to make different judgments

or utilize different estimates, material differences in the amount of our reported operating expenses could result.

(f) Concentration

We make estimates of the uncollectibility of accounts

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

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

Credit evaluations

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

On a quarterly basis, we evaluate aged items in the accounts

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

If management were to make different

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

(g) Concentration

of Credit Risk

5 unchanged sentences

The Company placed $ 7,736,081

and $ 10,075,162 with these institutions as of March 31, 2025 and December 31, 2024, respectively.

and $ 10,075,162 with these institutions as of June 30, 2025 and December 31, 2024, 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.

GULF RESOURCES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

JUNE 30, 2025

(Expressed in U.S.

1 unchanged sentence

OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(g) Property,

(h) Property,

Plant and Equipment

2 unchanged sentences

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

of existing facilities or equipment are capitalized and depreciated using the straight-line method at rates sufficient to depreciate such

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

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

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

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

All other ordinary repair and maintenance

costs are expensed as incurred.

Mineral rights are recorded at cost less accumulated

12 unchanged sentences

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

Motor vehicles

Motor vehicles Motor Vehicles

Furniture, fixtures and equipment

Property, plant and equipment under the capital

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.

2 unchanged sentences

Common facilities that are built specifically to service production

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

and gas properties on a pro-rata basis.

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

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

Costs associated with significant development projects

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

depreciation.

(h) Retirement

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

gas properties on a pro-rata basis.

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

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

Costs associated with significant development projects are

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

(i) Retirement

Pursuant to the relevant laws and regulations

2 unchanged sentences

The required contributions

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

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

The Company’s

contributions totaled $ 173,485 and $ 123,123 for the three-month periods ended March 31, 2025 and 2024, respectively.

contributions totaled $ 123,099 and $ 100,290 for the three-month period ended June 30, 2025 and 2024, respectively, and totaled $ 296,584

and $ 223,413 for the six-month period ended June 30, 2025 and 2024, respectively.

Net revenue is net of discount and value added

11 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

JUNE 30, 2025

(Expressed in U.S.

1 unchanged sentence

OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(j) Recoverability

(k) Recoverability

of Long-lived Assets

15 unchanged sentences

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

For the three-month period ended March 31, 2025

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

and Diluted Net Income per Share of Common Stock

Basic earnings per common share are based on the

weighted average number of shares outstanding during the periods presented.

For the three and six months period ended June

30, 2025 and 2024, the Company determined that there were no events or circumstances indicating possible impairment of its long-lived

and Diluted Earnings per Share of Common Stock

Basic earnings per common share are based

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

Diluted earnings per share are computed using weighted

5 unchanged sentences

Anti-dilutive common stock equivalents which were excluded from

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

the calculation of number of dilutive common stock equivalents amounted to 0 and 0 shares for the six-month periods ended June 30, 2025

and 2024, respectively.

Because the Company reported a net loss for the

three-month periods ended March 31, 2025 and 2024, common stock equivalents including stock options and warrants were anti-dilutive, therefore

the amounts reported for basic and diluted loss per share were the same.

Because the Company reported a net loss

for the six-month periods ended June 30, 2025 and 2024, common stock equivalents including stock options and warrants were anti-dilutive,

therefore the amounts reported for basic and diluted loss per share were the same.

GULF RESOURCES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

JUNE 30, 2025

(Expressed in U.S.

1 unchanged sentence

OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(l) Reporting

(m) Reporting

Currency and Translation

19 unchanged sentences

effect of these factors cannot be accurately predicted.

(n) Inventories

(o) Inventories

Inventories are stated at the lower of cost, determined

24 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

JUNE 30, 2025

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION AND

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(p) Stock-based Compensation

(q) Stock-based

Stock-based awards issued to employees are recorded

32 unchanged sentences

Accounting Pronouncements

In June 2016, the FASB issued

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

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 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.

Recent accounting pronouncements adopted

There were no recent accounting pronouncements adopted during the three

months ended March 31, 2025.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES – Continued

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

The ASU requires an entity to recognize expected credit losses rather than incurred losses for financial assets.

For public entities,

the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

For the Company which is a smaller reporting company, ASU No.

2019-10 extends the effective dates for two years.

The Company is currently

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

(t) Fair Value Measurement

There were no recent accounting pronouncements adopted during the six

months ended June 30, 2025.

Recently Issued Accounting Pronouncements Not Yet Adopted

There were no recently issued accounting pronouncements not yet adopted

during the six months ended June 30, 2025.

(u) Fair Value Measurement

The Company applies Accounting Standards Codification

19 unchanged sentences

There were no material unrecognized

financial assets and liabilities as of March 31, 2025 and 2024.

financial assets and liabilities as of June 30, 2025 and 2024.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

(Expressed in U.S.

NOTE 2 – ACCOUNTS RECEIVABLE, NET

2 unchanged sentences

Accounts receivable, net

The overall accounts receivable balance

as of March 31, 2025 increased by $ 1,549,699 compared to those of December 31, 2024.

We have policies in place to ensure that sales are

made to customers with an appropriate credit history.

The overall accounts receivable balance as of June 30, 2025 increased

by $ 2,586,327 compared to those of December 31, 2024.

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.

7 unchanged sentences

The Company recorded impairment charges for slow moving inventory in

the amounts of $ nil and $ 989,035 for the years ended March 31, 2025 and December 31, 2024.

NOTE 4 – PREPAYMENTS AND

DEPOSITS, NET

the amounts of $ nil and $ 989,035 for the years ended June 30, 2025 and December 31, 2024.

NOTE 4 – PREPAYMENTS AND DEPOSITS, NET

Prepayments and deposits consisted of the following:

7 unchanged sentences

Prepayments and deposits, net

As of March 31, 2025 , the Company recorded the total prepayments

and deposits, and the provision for impairment was $ 6,393,161 .

As of June 30, 2025, the total amount of advance payments and deposits

recorded by the company, net of impairment provisions was $ 8,743,324 .

NOTE 5 – PREPAID LAND LEASES

14 unchanged sentences

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.

This was classified as an

operating lease prior to and as of January 1, 2019.

The land use certificate was issued on October 25, 2019.

The lease term expires on August 12,

The amount paid was recorded as prepaid land leases, net of current portion in the consolidated balance sheet as of March 31 2025

and December 31, 2024.

As of March 31, 2025, the prepaid land lease increased to $ 9,217,790 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 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

June 30 2025 and December 31, 2024.

As of June 30, 2025, the prepaid land lease increased to $ 9,242,933 due to an additional amount paid

for stamp duty and related land use rights fees.

Amortization of this prepaid land lease will commence when the chemical factory is completed

and placed in service.

GULF RESOURCES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

JUNE 30, 2025

(Expressed in U.S.

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

11 unchanged sentences

$ 136,143,177

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 $ 49,444,325

and $ 50,219,026

as at March 31, 2025 and December 31, 2024, respectively.

During the three-month period ended March 31,

2025, depreciation and amortization expense totaled $ 3,999,026 , of which $ 2,469,771 , $ 783,472 and $ 745,783 were recorded in direct labor

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

During the three-month period ended March 31,

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

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

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.

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 $ 48,765,141 and $ 50,219,026 as at June 30, 2025 and December 31, 2024,

respectively.

During the three-month period ended June 30, 2025,

depreciation and amortization expense totaled $ 3,989,399 , of which $ 430,283 , $ 197,636 and $ 3,361,480 were recorded in direct

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

During the six-month period

ended June 30, 2025, depreciation and amortization expense totaled $ 7,988,425 , of which $ 2,900,054 , $ 981,108 and $ 4,107,263 were recorded

in direct labor and factory overheads incurred during plant shutdown, administrative expenses and cost of net revenue.

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

depreciation and amortization expense totaled $ 4,728,984 of which $ 1,283,308 , $ 201,197 and $ 3,244,479 were recorded in direct labor and

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

During the six-month period ended June

30, 2024, depreciation and amortization expense totaled $ 9,458,227 , of which $ 4,390,097 , $ 402,701 and $ 4,665,429 were recorded in direct

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

NOTE 7 – FINANCE LEASE RIGHT-OF-USE ASSETS

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

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

the following:

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

7 unchanged sentences

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

During the three-month period ended March 31,

2025, depreciation and amortization expense totaled $ 1,258 , which was recorded in direct labor and factory overheads incurred during plant

During the three-month period ended March 31,

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

During the three and six months period ended June

30, 2025, depreciation and amortization expense totaled $ 1,255 and $ 2,512 , respectively, which was recorded in direct labor and factory

overheads incurred during plant shutdown.

During the three and six months period ended June

30, 2024, depreciation and amortization expense totaled $ 1,269 and $ 2,540 , respectively, which was recorded in direct labor and factory

overheads incurred during plant shutdown.

GULF RESOURCES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

JUNE 30, 2025

(Expressed in U.S.

NOTE 8 – OPERATING LEASE RIGHT-OF USE ASSETS

The Company has the rights to use certain

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

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 34.95 square kilometers with an aggregate

operating lease right-of-use assets amount of $ 7,190,872 as of March 31, 2025.

As of March 31, 2025, the total operating lease

NOTE 8 – OPERATING LEASE RIGHT– OF

The Company has the rights to use certain parcels

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

For parcels of land

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

The parcels of land of which the

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

lease right-of-use assets amount of $ 7,071,659 as at June 30, 2025.

As of June 30, 2025, the total operating lease

ROU assets was $ 5,937,515 .

The total operating lease cost for the three-month

period ended March 31, 2025 and 2024 was $ 217,801 and $ 217,345 .

The total operating lease cost for the six-month

period ended June 30, 2025 and 2024 was $ 435,102 and $ 440,030 .

NOTE 9 – PAYABLE AND ACCRUED EXPENSES

10 unchanged sentences

of salt Pans of $ 4,788,641 , and others.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

(Expressed in U.S.

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.

“Seller”) at a cost of approximately $ 5.7

million in cash, of which Mr.

Ming Yang, who was the Chairman of the Company then, had a 99 %

equity interest in the Seller.

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

party, to provide property management services for an annual amount of approximately $ 86,911

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

The expense associated with this agreement for the three months ended March

31, 2025 and 2024 was approximately $ 21,728

and $ 21,982 .

On September 25, 2012, the Company purchased five

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

(the “Seller”)

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

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

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

management services for an annual amount of approximately $ 86,911 for five years from January 1, 2023 to December 31, 2027 .

associated with this agreement for the three and six months ended June 30, 2025 was approximately $ 21,787 and $ 43,515 .

The expense associated

with this agreement for the three and six months ended June 30, 2024 was approximately $ 21,885 and $ 43,867 .

NOTE 10 – RELATED PARTY TRANSACTIONS –

10 unchanged sentences

Chengdu Dianjinshi Culture media Co., LTD

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

(Expressed in U.S.

NOTE 11 – TAXES PAYABLE

10 unchanged sentences

Finance lease liability, net of current portion

Interest expenses from a finance lease liability

amounted to $ 21,722 and $ 24,830 for the three-month periods ended March 31, 2025 and 2024, respectively, were charged to the condensed

consolidated statement of loss.

Interest expenses from finance lease obligations

amounted to $ 21,674 and $ 24,814 for the three-month period ended June 30, 2025 and 2024, respectively, which were charged to the condensed

consolidated statement of income (loss).

Interest expenses from finance lease obligations amounted to $ 43,396 and $ 49,644 for the six-month

period ended June 30, 2025 and 2024, respectively, which were charged to the condensed consolidated statement of income (loss).

The components of operating lease liabilities

4 unchanged sentences

The weighted average remaining operating lease

term on March 31, 2025 was 17 years and the weighted average discount rates was 4.89 %.

This discount rates used are based on the base

rate quoted by the People's Bank of China and vary with the remaining term of the lease.

Lease payment in the three-months ended March

31, 2025 and 2024 was $ 225,321 and $ 226,259 .

term at June 30, 2025 was 17 years and the weighted average discounts rate was 4.89 %.

Lease payments for the three-month period ended

June 30, 2025 and 2024, respectively, were $ 520,167 and $ 530,962 .

Lease payments for the six-month period ended June 30, 2025 and 2024,

respectively, were $ 745,488 and $ 757,221 .

Maturities of lease liabilities were as follows:

12 unchanged sentences

Present value of net minimum lease payments

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

(Expressed in U.S.

NOTE 13 –– EQUITY

12 unchanged sentences

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

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 and

vested immediately.

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 and vested

The fair value of the award on the date of grant was $ 194,700 which was expensed in full during the year ended December

During the three months ended March 31,

2025, the Company granted in the aggregate, 265,000 restricted

shares of common stock on March 21, 2025 to a consultant, the company's directors, officers and an employee as compensation for services rendered for the current year.

The restricted shares

award were granted under the 2019 Omnibus Equity Incentive Plan and vested immediately.

The fair value of the award on the date of

grant was $ 196,100 which

was expensed in full during the three months period ended March 31, 2025.

During the six months ended June 30, 2025, the Company granted in the

aggregate, 265,000 restricted shares of common stock on March 21, 2025 to a consultant, the company's directors, officers and

an employee as compensation for services rendered for the current year.

The restricted shares award were granted under the 2019 Omnibus

Equity Incentive Plan and vested immediately.

The fair value of the award on the date of grant was $ 196,100 which was expensed in

full during the six months period ended June 30, 2025.

Retained Earnings – Appropriated

2 unchanged sentences

tax to the following reserve:

Statutory Reserve

Statutory Common Reserve Funds

SCHC, SYCI, SHSI and DCHC are required each

5 unchanged sentences

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

As of March 31, 2025, the Company’s statutory

provident fund stood at $ 26.67

As at June 30, 2025, GULF RESOURCES 'statutory

provident fund stood at $ 26.67 million.

NOTE 14 – TREASURY STOCK

As of June 30, 2025 and December 31, 2024, the

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

GULF RESOURCES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

JUNE 30, 2025

(Expressed in U.S.

NOTE 14 – TREASURY STOCK

As of March 31, 2025 and December 31, 2024, the

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

NOTE 15 – STOCK-BASED COMPENSATION

6 unchanged sentences

of the 2007 Plan and applicable award agreement.

As of March 31, 2025, the number of shares of the Company’s common stock available

for grant of stock options and issuance under the 2019 Plan was 1,801 shares.

As of June 30, 2025, the number of shares of the Company’s common stock available

for grant of awards under the 2019 Plan was 1,801 shares.

The fair value of each option award is estimated

3 unchanged sentences

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

For the three months ended March 31, 2025 and 2024, total compensation

For the three and six months ended June 30, 2025 and 2024, total compensation

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

There were no related tax benefits as a full valuation

allowance was recorded in the three months ended March 31, 2025 and 2024.

allowance was recorded in the three and six months ended June 30, 2025 and 2024.

The following table summarizes all Company stock

option transactions between January 1, 2025 and March 31, 2025.

option transactions between January 1, 2025 and June 30, 2025.

Stock-Based Compensation - Schedule of Stock

Option Activity

Number of Option

Outstanding and exercisable

Weighted- Average Exercise price of Option

Average Exercise price of Option

Exercise Price per Common Share

3 unchanged sentences

Expired during the period

Balance, March 31, 2025

Stock Options and Warrants Outstanding and Exercisable

Balance, June 30, 2025

Stock Options Outstanding and Exercisable

Weighted Average

Outstanding at March 31, 2025

Outstanding at June 30, 2025

Exercise Prices

1 unchanged sentence

Outstanding and exercisable

All options exercisable and outstanding at March

All options exercisable and outstanding at June

30, 2025 are fully vested.

As of March 31, 2025 there was no unrecognized compensation cost related to outstanding stock options,

As of June 30, 2025 there was no unrecognized compensation cost related to outstanding stock options,

The aggregate intrinsic value of options outstanding and exercisable

as of March 31, 2025 and 2024 was $ 0 .

as of June 30, 2025 was $ 0 .

During the three and six months ended June 30,

2025 and 2024, there were no options exercised.

GULF RESOURCES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

JUNE 30, 2025

(Expressed in U.S.

NOTE 16 – 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.

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.

United States (“US”)

United States

3 unchanged sentences

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

income for the three-month periods ended March 31, 2025 and 2024, and management believes that its earnings are permanently invested in

Virgin Islands (“BVI”)

income for the three-month and six-month periods ended June 30, 2025 and 2024, and management believes that its earnings are permanently

invested in the PRC.

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

Upper Class Group Limited did not generate assessable profit for the three-month periods ended March 31, 2025 and 2024.

Upper Class Group Limited did not generate assessable profit for the three-month and six-month periods ended June 30, 2025

HKJI, a subsidiary of Upper Class Group Limited, was

1 unchanged sentence

from Hong Kong.

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

31, 2025 and 2024.

The applicable statutory tax rates for the three-month periods ended March 31, 2025 and 2024 are 16.5 %.

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

ended June 30, 2025 and 2024.

The applicable statutory tax rates for the three-month and six-month periods ended June 30, 2025

and 2024 are 16.5 %.

There is no dividend withholding tax in Hong Kong.

Enterprise income tax (“EIT”) for

SCHC, SYCI, SHSI and DCHC in the PRC is charged at 25 % of the assessable profits.

The operating subsidiaries SCHC, SYCI, DCHC, and

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

PRC tax losses may be carried forward to be utilized against future taxable profit for ten years for High-tech enterprises and small and

medium-sized enterprises of science and technology and for five years for other companies.

Tax losses of the operating subsidiaries of

the Company may be carried forward for five years.

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

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

The operating subsidiaries SCHC, SYCI, and DCHC are wholly foreign-owned

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

The PRC tax losses may be

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

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

Tax losses of the operating subsidiaries of the Company may be carried

forward for five years.

On February 22, 2008, the Ministry of Finance

3 unchanged sentences

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

As of March 31, 2025 and December 31, 2024, the

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

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

(Expressed in U.S.

As of June 30, 2025 and December 31, 2024, the

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

$ 70,523,755 and $ 40,524,183 , respectively.

1 unchanged sentence

China, its foreign invested enterprises do not intend to declare dividends to their immediate foreign holding companies in the foreseeable

Accordingly, as of March 31, 2025 and December 31, 2024, the Company has not recorded any WHT on the cumulative amount of distributable

Accordingly, as of June 30, 2025 and December 31, 2024, the Company has not recorded any WHT on the cumulative amount of distributable

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

As of March 31, 2025 and December 31, 2024, the

unrecognized WHT are $ 816,956 and $ 1,078,743 , respectively.

As of June 30, 2025 and December 31, 2024, the

unrecognized WHT were $ 4,477,604 and $ 1,078,743 , respectively.

The Company’s income tax returns are subject

11 unchanged sentences

in every four years.

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

The components of the provision for income tax

benefit (expense) from continuing operations are:

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

The components of the income tax benefit from

continuing operations are:

Income Taxes - Schedule of Components of Income Tax Expense Benefit

Three-Month Period Ended March 31,

Three-Month Period Ended June 30,

Six-Month Period Ended June 30,

Current taxes – PRC

1 unchanged sentence

( 1,241,334 )

Total Income tax (expenses) benefits

( 2,511,394 )

Total Income tax benefits

$ ( 1,208,110 )

$ ( 2,478,170 )

Significant components of the Company’s

deferred tax assets and liabilities at March 31, 2025 and December 31, 2024 are as follows:

deferred tax assets and liabilities at June 30, 2025 and December 31, 2024 are as follows:

Income Taxes - Schedule of Deferred

13 unchanged sentences

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

As of March 31, 2025

As of June 30, 2025

and 2024, valuation allowances were mainly provided against deferred tax assets caused by exploration costs and net operating loss where

1 unchanged sentence

The increase in valuation allowance for the three-month

period ended March 31, 2025 is $ 1,083,817 .

The increase in valuation allowance for the three-month

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

period ended June 30, 2025 is $ 268,713 .

The decrease in valuation allowance for the three-month

period ended June 30, 2024 is $ 42,555 .

The increase in valuation allowance for the six-month

period ended June 30, 2025 is $ 1,352,530 .

The decrease in valuation allowance for the six-month

period ended June 30, 2024 is $ 57,028 .

There were no unrecognized tax benefits and accrual

for uncertain tax positions as of March 31, 2025 and December 31, 2024 and no amounts accrued for penalties and interest for the three

months ended March 31, 2025 and 2024.

for uncertain tax positions as of June 30, 2025 and December 31, 2024 and no amounts accrued for penalties and interest for the three

and six months ended June 30, 2025 and 2024.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

(Expressed in U.S.

NOTE 17 – BUSINESS SEGMENTS

11 unchanged sentences

All the customers are located in PRC.

Three-Month Period Ended March 31, 2025 Operating Segment

June 30, 2025 Operating Segment

Corporate Corporate

1 unchanged sentence

(intersegment)

Loss from operations before income expense

Income(loss) from operations before income tax benefit

Income tax benefit (expense)

Income (loss) from operations after

income tax benefit (expense)

Depreciation and amortization

Capital expenditures

June 30, 2024

(external customers)

(intersegment)

Income(loss) from operations before income tax benefit

( 4,662,586 )

1 unchanged sentence

( 5,146,997 )

Income tax (expense) benefit

Loss from operations after income taxes(expense) benefit

Income tax benefit (expense)

Income (loss) from operations after

income tax benefit (expense)

( 3,500,334 )

3 unchanged sentences

Capital expenditures

Three-Month Period Ended March 31, 2024

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

(Expressed in U.S.

NOTE 17 – BUSINESS SEGMENTS – Continued

June 30, 2025

(external customers)

(intersegment)

Loss from operations before income expense

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

( 3,501,217 )

1 unchanged sentence

( 5,360,893 )

Income tax (expense) benefit

Loss from operations after income taxes(expense) benefit

Income tax benefit (expense)

Loss from operations after income tax benefit (expense)

( 3,501,217 )

3 unchanged sentences

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.

June 30, 2024

(external customers)

(intersegment)

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

( 9,445,401 )

( 10,146,029 )

( 10,416,416 )

Income tax benefit (expense)

Loss from operations after income tax benefit (expense)

( 7,085,078 )

( 7,667,859 )

( 7,938,246 )

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 until April 2022.

Commencing May 2022,

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

GULF RESOURCES, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2025

JUNE 30, 2025

(Expressed in U.S.

NOTE 17 – BUSINESS SEGMENTS – Continued

Three-Month Period Ended March 31,

Three-Month Period Ended June 30,

Six-Month Period Ended June 30,

Reconciliations

2 unchanged sentences

$ ( 4,945,589 )

$ ( 4,994,443 )

$ ( 10,146,029 )

Corporate costs

Unrealized gain (loss) on translation of intercompany balance

Unrealized gain on translation of intercompany balance

Loss from operations

1 unchanged sentence

( 5,360,893 )

Other Expenses

( 10,416,416 )

Interest income, net of expense

Other Expenses,net

Loss on disposal of property, plant and equipment

( 29,169,008 )

Loss before taxes

1 unchanged sentence

$ ( 34,306,028 )

The following table shows the major customers

(10% or more) for the three-month period ended March 31, 2025.

$ ( 5,403,277 )

$ ( 39,568,220 )

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

three-month period ended June 30, 2025.

Business Segments - Schedule of

1 unchanged sentence

Chemical Products

Percentage of

Percentage of Total Revenue (%)

Shandong Morui Chemical Company Limited

2 unchanged sentences

Shandong Shouguangshen Runfa Marine Chemical Company Limited

The following table shows the major customers

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

The following table shows the major customer(s)

(10% or more) for the six-month period ended June 30, 2025.

Chemical Products

1 unchanged sentence

Shandong Morui Chemical Company Limited

Shouguang Weidong Chemical Company Limited

Shandong Brother Technology Limited

Shouguang Weidong Chemical Company Limited

Shandong Shouguangshen Runfa Marine Chemical Company Limited

The following table shows the major customer(s)

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

Chemical Products

Percentage of Total Revenue (%)

Shandong Brother Technology Limited

Shandong Morui Chemical Company Limited

Shouguang Weidong Chemical Company Limited

The following table shows the major customer(s)

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

Chemical Products

Percentage of

Shandong Morui Chemical Company Limited

Shandong Brother Technology Limited

Shouguang Weidong Chemical Company Limited

NOTE 18 – CUSTOMER CONCENTRATION

Customer Concentration

During the three-month period ended March 31,

2025, the Company sold 62.4 % of its products to its top five customers.

As of March 31, 2025, amounts due from these customers were $ 1,462,756 .

During the three-month period ended March 31,

2024, the Company sold 55 % of its products to its top five customers.

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

During the six-month period ended June 30, 2025,

the Company sold 65.2 % of its products to its top five customers, respectively.

As of June 30, 2025, amounts due from these customers

were $ 2,207,307 .

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

the Company sold 60 % of its products to its top five customers, respectively.

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

$ 1,063,926 .

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

(Expressed in U.S.

NOTE 19 – MAJOR SUPPLIERS

1 unchanged sentence

Cost of Goods

During the three-month period ended March 31,

During the six-month period ended June 30, 2025

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

As of March 31, 2025, amounts due to those

suppliers were $ 390,250 .

During the three-month period ended March 31,

As of June 30, 2025, amounts due to those suppliers

were $ 380,812 .

During the six-month period ended June 30, 2024

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

As of March 31, 2024, amounts due to those

suppliers were $ 207,431 .

As of June 30, 2024, amounts due to those suppliers

were $ 132,606 .

NOTE 20 – LOSS CONTINGENCIES

76 unchanged sentences

In view of the above facts and circumstances,

the Company believes that it is not necessary to accrue for any estimated losses or impairment as of March 31, 2025.

the Company believes that it is not necessary to accrue for any estimated losses or impairment as of June 30, 2025.

NOTE 21 - SUBSEQUENT EVENT

Subsequent Event

On July 3, 2025, the Company filed with the SEC a Form

S-3 (Registration Statement No.

333- 168591), to register the Company's common stock, preferred stock and warrants with an aggregate offering

price not to exceed $10,000,000, to be sold by us under a “shelf” registration process ("Shelf Registration").

terms of such sales will be provided in the relevant prospectus supplement.

Any prospectus supplements also will describe the specific

manner in which these securities will be offered and may supplement, update or amend information contained in the registration Form S-3.

As of the date of this report, the registration statement on Form

S-3 has not been declared effective and we have not entered into any agreement in relation to the Shelf Registration.

[Not applicable.]

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

What changed 10-Q

Item 1. Financial Statements