What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-08-13 compared with 2025-05-13 · 436 added, 238 removed, 317 unchanged (68% of the section changed)

76 unchanged sentences

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

factories No.1, No.

4, No.7 and No.

factories No.

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

With these two

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

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

The Company received

2 unchanged sentences

No.8 started to contribute revenue in the fourth quarter 2022.

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.

The Company is still

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

waiting for governmental approval for factories No.

To its knowledge, the government is currently completing its planning

1 unchanged sentence

As a result, the Company may be required to make some modifications

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

On November 24, 2017, Gulf Resources received a letter from the People’s Government of Yangkou County, Shouguang City notifying

the Company that due to the new standards and regulations relating to safety production and environmental pollution, from certain local

governmental departments, such as the municipal environmental protection department, the security supervision department and the fire

department, its chemical enterprises would have to be relocated to a new industrial park called Bohai Marine Fine Chemical Industry Park.

Although our chemical companies were in compliance with regulations, they were also close to a residential area.

As a result, the government

determined we should relocate to the Bohai park.

Chemical companies that are not being asked to move into the park are being permanently

Since our factories closed, the Company has secured from the government the land use rights for its chemical plant.

6, 2020, the Company received the environmental protection approval by the government of Shouguang City, Shandong Province for the proposed

Yuxin Chemical factory.

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

Park in June 2020.

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

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

The Company has received the refrigeration and air compressor units.

The company decided to delay the delivery of the rest undelivered

equipment and the opening of the factory until financial conditions in China improved and until it had visibility as to which products

would produce the best returns.

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

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

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

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

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

called Bohai Marine Fine Chemical Industry Park.

Although our chemical companies were in compliance with regulations, they

were also close to a residential area.

As a result, the government determined we should relocate to the Bohai park.

Chemical companies

that are not being asked to move into the park are being permanently closed.

Since our factories closed, the Company has secured

from the government the land use rights for its chemical plant.

On January 6, 2020, the Company received the environmental protection

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

The Company began the construction

on its new chemical facilities located at Bohai Marine Fine Chemical Industrial Park in June 2020.

The construction was expected to take

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

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

[The Company has received the refrigeration and

air compressor units.

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

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

In January 2017, the

4 unchanged sentences

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

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

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,

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

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.

Company plans to proceed with its applications for the natural gas and brine project approvals with related government departments after

the governmental planning has finalized the land and resource planning for Sichuan Province.

plans to proceed with its applications for the natural gas and brine project approvals with related government departments until after

the governmental planning has been finalized the land and resource planning for Sichuan Province.

In April 2022, Shouguang Hengde Salt Industry

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

On January 28, 2020 we

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

was one share outstanding after the reverse stock split.

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

to reflect the stock split figures.

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

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

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

the reverse stock split.

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

Recent Developments

Acquisition Agreements

In June 2024, a wholly owned

subsidiary of the Company, Shouguang Hengde Salt Industry Co.

Ltd ( “SHSI”) entered into crude salt field acquisition agreements

with Shouguang Qingshuibo Farm Co., LTD.

(“Seller A”), Shouguang city Yangkou town Dingjia Zhuangzi village stock economic

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

Shouguang City Yangkou town Zhengjia Zhuangzi village stock economic cooperative (“Seller D”), and Shouguang city Yangkou

town Renjia Zhuangzi village stock economic cooperative (“Seller E”), respectively, as amended in December 2024.

of these agreements are set forth below:

On June 26, 2024, SHSI entered

into an acquisition agreement with Seller A, pursuant to which Seller A agrees to transfer to SHSI, and SHSI agrees to purchase, 2,380,000

square meters of crude salt field (including the land lease fee) for RMB54.40 per square meter, with the total transfer price of RMB129,472,000.

June 2024, a wholly owned subsidiary of the Company, Shouguang Hengde Salt Industry Co.

Ltd ( “SHSI”) entered into crude salt

field acquisition agreements with Shouguang Qingshuibo Farm Co., LTD.

(“Seller A”), Shouguang city Yangkou town Dingjia Zhuangzi

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

(“Seller C”), Shouguang City Yangkou town Zhengjia Zhuangzi village stock economic cooperative (“Seller D”), and

Shouguang city Yangkou town Renjia Zhuangzi village stock economic cooperative (“Seller E”), respectively, as amended in December

A summary of these agreements are set forth below:

June 26, 2024, SHSI entered into an acquisition agreement with Seller A, pursuant to which Seller A agrees to transfer to SHSI, and SHSI

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

total transfer price of RMB129,472,000.

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

80% of the transfer price shall be paid upon the execution of the agreement,

and the remaining 20% shall be paid in shares of common stock of the Company within three months from the date of the agreement after

SHSI has inspected the and accepted the crude salt field in writing.

80% of the transfer price shall be

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

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

Subsequently,

10 unchanged sentences

(2) the balance shall be paid in cash before December 31, 2028.

On June 27, 2024, SHSI entered

into an acquisition agreement with each Seller B, Seller C, Seller D and Seller E, respectively, pursuant to which the sellers agreed

to transfer to SHSI, and SHSI agrees to purchase from the sellers, 750,000, 804,000, 385,000, and 822,000 square meters of crude salt

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

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

The term of transfers is from June 29, 2024 to

June 28, 2044.

80% of the transfer price shall be paid upon the execution of the agreements, and the remaining 20% shall be paid in shares

of common stock of the Company within three months from the date of the agreements after SHSI has inspected the and accepted the crude

salt fields in writing.

June 27, 2024, SHSI entered into an acquisition agreement with each Seller B, Seller C, Seller D and Seller E, respectively, pursuant

to which the sellers agreed to transfer to SHSI, and SHSI agrees to purchase from the sellers, 750,000, 804,000, 385,000, and 822,000

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

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

The term of transfers is

from June 29, 2024 to June 28, 2044.

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

shall be paid in shares of common stock of the Company within three months from the date of the agreements after SHSI has inspected the

and accepted the crude salt fields in writing.

December 17, 2024, SHSI entered into an amendment to the acquisition agreement with Seller B, pursuant to which the Article 2.

9 unchanged sentences

(2) the balance shall be paid in cash before December 31, 2028.

17, 2024, SHSI entered into an amendment to the acquisition agreement with Seller C, pursuant to which the Article 2.

2 of the agreement

has been amended as follows:

Eighty percent (80%) of the total amount, equaling RMB35,311,680 had been paid on the date of signing the

contract by both parties.

December 17, 2024, SHSI entered into an amendment to the acquisition agreement with Seller C, pursuant to which the Article 2.

agreement has been amended as follows:

Eighty percent (80%) of the total amount, equaling RMB35,311,680 had been paid on the date of signing

the contract by both parties.

The remaining RMB8,827,920 shall be paid in a combination of common stock of the Company and cash as follows:

12 unchanged sentences

(2) the balance shall be paid in cash before December 31, 2028.

17, 2024, SHSI entered into an amendment to the acquisition agreement with Seller E, pursuant to which the Article 2.

2 of the agreement

has been amended as follows:

Eighty percent (80%) of the total amount, equaling RMB36,628,320 had been paid on the date of signing the

contract by both parties.

December 17, 2024, SHSI entered into an amendment to the acquisition agreement with Seller E, pursuant to which the Article 2.

agreement has been amended as follows:

Eighty percent (80%) of the total amount, equaling RMB36,628,320 had been paid on the date of signing

the contract by both parties.

The remaining RMB9,157,080 shall be paid in a combination of common stock of the Company and cash as follows:

3 unchanged sentences

(2) the balance shall be paid in cash by SHSI to Seller E before December 31, 2028.

In accordance

to each amendment, the parties also acknowledged and agreed that, in compliance with the Nasdaq Listing Rule 5635, the issuance of shares

pursuant to the agreement may not exceed 19.9% of the total outstanding shares of common stock of the Company prior to the issuance of

the shares (the “19.9% Threshold”), unless such issuance is approved by the shareholders of the Company in accordance with

accordance to each amendment, the parties also acknowledged and agreed that, in compliance with the Nasdaq Listing Rule 5635, the issuance

of shares pursuant to the agreement may not exceed 19.9% of the total outstanding shares of common stock of the Company prior to the issuance

of the shares (the “19.9% Threshold”), unless such issuance is approved by the shareholders of the Company in accordance with

the Nasdaq rules and regulations.

1 unchanged sentence

issuance of shares under the agreement exceeds the 19.9% Threshold.

30, 2024, SHSI and each of the sellers mutually acknowledged and confirmed that the salt land provided by each seller meets the acquisition

criteria, is in the anticipated usable condition, and has been accepted and handed over to SHSI.

Recent Developments

December 30, 2024, SHSI and each of the sellers mutually acknowledged and confirmed that the salt land provided by each seller meets the

acquisition criteria, is in the anticipated usable condition, and has been accepted and handed over to SHSI.

February 28, 2025, the transactions as contemplated by the acquisition agreements were closed.

On the closing date, the Company issued

a total of 2,059,694 shares of the Company’s common stock 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 seller.

Nasdaq Compliance

40 unchanged sentences

Our current corporate structure chart is set forth in the following

As a result of our acquisitions of SCHC and SYCI,

our historical financial statements and the information presented below reflects the accounts of SCHC, SYCI, SHSI and DCHC.

The following

discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere in

As a result of our acquisitions of SCHC and SYCI, our historical financial

statements and the information presented below reflects the accounts of SCHC, SYCI, SHSI and DCHC.

The following discussion should be

read in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere in this report.

RESULTS OF OPERATIONS

The following table presents certain information

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

March 31, 2025 and 2024.

Comparison of the Three-Month Periods Ended

March 31, 2025 and 2024

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

periods ended June 30, 2025 and 2024.

Comparison of the Three-Month Period Ended

June 30, 2025 and 2024

Three-Month Period

Ended March 31, 2025

Ended June 30, 2025

Three-Month Period

Ended March 31, 2024

Ended June 30, 2024

Percent Change

Increase/ (Decrease)

Cost of net revenue

$ (1,594,270 )

$ (2,119,845 )

Gross profit (loss)

1 unchanged sentence

Direct labor and factory overheads incurred during plant shutdown

$ (3,225,808 )

General and administrative expenses

$ (1,389,523 )

Loss from operations

$ (4,610,207 )

Interest income, net

Other expense, net

Loss on disposal of property, plant and equipment

(29,169,008 )

Other income, net

Other expense

Loss before taxes

(34,306,028 )

$ (5,262,192 )

Income tax benefit

$ (33,097,918 )

$ (3,992,132 )

Net revenue The table below

shows the changes in net revenue in the respective segment of the Company for the three-month period ended March 31, 2025 compared to

the same period in 2024:

Net Loss of $773,777 for the three-month periods

ended June 30, 2025 was mainly attributable to increased General and administrative expenses.

Net Loss of $33,097,918 for the three-month periods

ended June 30, 2024 was mainly attributable to decreased sales and reduced margins.

The company also suffered a loss of $29,169,008 on

retirement of fixed assets .

below shows the changes in net revenue in the respective segment of the Company for the three-month period ended June 30, 2025 as compared

to the same period in 2024:

Net Revenue by Segment

2 unchanged sentences

Percent Change

March 31, 2025

March 31, 2024

June 30, 2025

June 30, 2024

of Net Revenue

Chemical Products

1 unchanged sentence

Percentage Change

Bromine and crude salt segments product sold in tonnes

March 31, 2025

March 31, 2024

Bromine (excluded volume sold to SYCI)

Bromine and crude salt segments

product sold in tonnes

June 30, 2025

June 30, 2024

Bromine segment

For the three-month periods ended March 31, 2025

and 2024, the net revenue for the bromine segment was $1,481,869 and $1,146,197.

This increase was due to the 11% decrease in tonnes sold

and a 45% increase in average selling price.

For the three-month periods ended June 30, 2025 and 2024, the net revenue

for the bromine segment was $7,676,374 and $1,859,234, respectively.

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

in selling prices and tonnes sold of bromine in the second quarter of 2025.

The sale price of bromine in the second quarter of 2025

was 64% higher than in the second quarter of 2024, and the quantity sold was 152% higher than in the second quarter of 2024.

Crude salt segment

For the three-month periods ended March 31, 2025

and 2024, the net revenue for the crude salt was $122,578 and $116,671.

This increase was due to the 16% increase in tonnes sold and a

10% decrease in average selling price.

For the three-month periods ended June 30, 2025 and 2024, the net revenue

for the crude salt was $667,411 and $523,935, respectively.

The increase of net revenue of crude salt was mainly due to 22% increase in

average selling price of crude salt for the three-month period ended June 30, 2025.

Chemical products segment

For the three-month periods ended March 31, 2025

For the three-month periods ended June 30, 2025

and 2024, the net revenue for the chemical products segment was $0 due to the closure of our chemical factories since September 1, 2017.

Natural gas segment

For the three-month period ended March 31, 2025

and 2024, the net revenue for the natural gas production was $0 and $44,194, respectively.

For the three-month period ended June 30, 2025

and 2024, the net revenue for the natural gas production was $0.

Cost of Net Revenue

3 unchanged sentences

Three-Month Period Ended

March 31, 2025

March 31, 2024

June 30, 2025

June 30, 2024

Chemical Products

Cost of net revenue reflects mainly the raw materials consumed

and the direct salaries and benefits of staff engaged in the production process, electricity, depreciation and amortization of manufacturing

plant and machinery and other manufacturing costs.

Our cost of net revenue was $1,594,270 for the three-month period ended March

31, 2025, representing a $525,575 (or 25%) decrease compared to the preceding year.

Cost of net revenue reflects mainly

the raw materials consumed and the direct salaries and benefits of staff engaged in the production process, electricity, depreciation

and amortization of manufacturing plant and machinery and other manufacturing costs.

Our cost of net revenue was $7,357,130 for the

three-month period ended June 30, 2025, an increase of $2,245,072 (or 44%) as compared to the same period in 2024 due to the increase

of net revenue by 250% for the three-month period ended June 30, 2025 as compared to the same period in 2024 .

Bromine production capacity and utilization

3 unchanged sentences

Annual Production Capacity (in tonnes)

Three-month period ended March 31, 2024

Three-month period ended March 31, 2025

Variance of the three-month periods ended March 31, 2025 and 2024

(i) Utilization ratio is calculated based on the

annualized actual production volume in tonnes for the periods divided by the annual production capacity in tonnes.

Three-month period ended June 30, 2024

Three-month period ended June 30, 2025

Variance of the three-month period ended June 30, 2025 and 2024

(i) Utilization ratio is calculated

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

Bromine segment

Cost of net revenue for our bromine segment for

the three-month period ended March 31, 2025 and 2024 was $1,533,128 and $2,072,752.

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

the cost of net revenue for the bromine segment was $7,016,815.

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

the cost of net revenue for the bromine segment was $4,729,059.

Crude salt segment

Cost of net revenue for our crude salt segment

for the three-month period ended March 31, 2025 and 2024 was $61,142 and $46,894.

For the three-month period ended June 30, 2025 the cost of net revenue

for the crude salt segment was $340,315.

For the three-month period ended June 30, 2024

the cost of net revenue for the crude salt segment was $382,999.

Chemical products segment

Cost of net revenue for our chemical products

segment for the three-month period ended March 31, 2025 and 2024 was $0.

segment for the three-month period ended June 30, 2025 and 2024 was $0.

Natural gas segment

Cost of net revenue for our natural gas segment

for the three-month period ended March 31, 2025 and 2024 was $0 and $199.

Gross Profit (Loss) Gross profit

was $10,177, or 0.6%, of net revenue for three-month period ended March 31, 2025 compared to loss $812,783, or 62% of net revenue for

three-month period ended March 31, 2024.

for the three-month period ended June 30, 2025 and 2024 was $0.

Gross Profit (Loss).

was $986,655, or 115%, of net revenue for the three-month period ended June 30, 2025, representing a increase of $3,715,544, as compared

to a gross loss of $2,728,889, or 115%, of net revenue for the same period in 2024.

Gross Profit (Loss) by Segment

2 unchanged sentences

Three-Month Period Ended

March 31, 2025

March 31, 2024

Profit (Loss) Margin

June 30, 2025

June 30, 2024

Profit Margin

Gross Profit Margin

$ (2,869,825 )

Chemical Products

Total Gross Profit (Loss)

Total Gross Profit

$ (2,728,889 )

Bromine segment

For the three-month period ended March 31, 2025,

the gross loss margin for our bromine segment was 3.5%, compared to 81% in the three-month period ended March 31, 2024.

The decrease in

gross loss margin was primarily attributable to the higher average selling price of bromine of $3,684 per ton in the three-month period

ended March 31, 2025 compared to $2,541 per ton in the three-month period ended March 31, 2024.

Bromine tonnes sales also decreased from

451 tonnes for the three month period ended March 31, 2024 to 402 tonnes for the three month period ended March 31, 2025.

Crude salt segmen t

For the three-month period ended March 31, 2025, the gross profit margin

for our crude salt segment was 50%, compared to 60% in the same period in 2024, representing a 10% decrease.

Natural gas segment

For the three-month period ended March 31, 2025,

the gross profit margin for our crude salt segment was 0%, compared to 100% in the same period in 2024.

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

the gross profit margin for our bromine segment was 9%, compared to gross loss margin of 154% in the three-month period ended June 30,

The increase in gross profit margin was primarily attributable to the higher average selling price of bromine of $3,892 per ton

in the three-month period ended June 30, 2025 compared to $2,379 per ton in the three-month period ended June 30, 2024 and the number

of sales was up 152% from the second quarter of 2024.

Crude salt segment

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

the gross profit margin for our crude salt segment was 49%.

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

the gross profit margin for our crude salt segment was 27%.

Direct labor and factory overheads incurred

5 unchanged sentences

Company to relocate its two chemical production plants located in the second living area of the Qinghe Oil Extraction Plant to Bohai

As a result, direct labor and factory overhead costs (including depreciation of plant and machinery) in the amount of $3,225,808

and $3,734,689 incurred for the three-month periods ended March 31, 2025 and 2024, respectively, of factories that have not resumed production

were presented as part of the operating expense.

As a result, direct labor and factory overhead costs (including depreciation of plant and machinery) in the amount of $727,774 and

$1,714,503 incurred for the three-month periods ended June 30, 2025 and 2024, respectively, for the factories that have not resumed production

were presented as part of the operating expenses.

General and Administrative Expenses

General and administrative expenses were $1,389,523 for the three-month period ended March 31, 2025, an increase of $672,067 (or 94%)

General and administrative expenses were $994,765 for the three-month period ended June 30, 2025, representing an increase of $304,793

as compared to $689,972 for the same period in 2024.

Loss from Operations Loss from operations

was $4,610,207 the three-month period ended March 31, 2025, compared to loss from operation of $5,269,419 in the same period in 2024.

Loss from Operations by Segment

was $750,686 for the three-month period ended June 30, 2025, compared to loss from operations of $5,146,997 in the same period in 2024.

Income (loss) from Operations by Segment

Three-Month Period Ended

March 31, 2025

June 30, 2025

Three-Month Period Ended

March 31, 2024

$ (3,370,836 )

June 30, 2024

$ (4,662,586 )

1 unchanged sentence

loss from operations before corporate costs

Corporate cost

Unrealized gain (loss) on translation of intercompany balance

Corporate costs

Loss from operations

$ (5,146,997 )

Bromine segment

Loss from operations from our bromine segment

was $130,381 for the three-month period ended June 30, 2025, compared to loss from operations of $4,662,586 in the same period in 2024.

This decrease was due to a 152% increase in tonnes sold and a 64% increase in average selling price.

Crude salt segment

Loss from operations from our crude salt segment

was $147,489 for the three-month period ended June 30, 2025, compared to income from operations of $130,024 in the same period in 2024.

Chemical products segment

Loss from operations from our chemical products

segment was $344,947 for the three-month period ended June 30, 2025, compared to loss from operations of $339,254 in the same period in

Natural gas segment

Loss from operations from our natural gas segment

was $43,225 for the three -month period ended June 30, 2025, compared to a loss from operations of $73,773 in the same period in 2024.

Interest Income (Loss), Net Other

loss, net of 19,879 represented bank interest income, net of finance lease interest expense for the three-month period ended June 30,

2025, a decrease of $29,856 as compared to the same period in 2024.

Loss on disposal of property, plant and equipment.

on disposal of property, plant and equipment was $29,169,008 in the fiscal year 2024.

In June 2024, considered the bromide well and transmission

channel have been in use for many years, the Company conducted a site inspection and found that some wells and channels were seriously

damaged by water seepage which in turn required write-off or new construction, and the write-off amount is $29,169,008.

Net Income (loss) Net loss was $773,777

for the three-month period ended June 30, 2025, compared to a net loss of $33,097,918 in the same period in 2024.

Comparison of the Six-Month Period Ended

June 30, 2025 and 2024

Six-Month Period

Ended June 30, 2025

Six-Month Period

Ended June 30, 2024

Percent Change

Cost of net revenue

Gross profit (loss)

Sales and marketing expenses

Direct labor and factory overheads incurred during plant shutdown

General and administrative expenses

Loss from operations

(10,416,416 )

Interest income ,net

Other expense,net

Loss on disposal of property, plant and equipment

(29,169,008 )

Loss before taxes

(39,568,220 )

Income tax benefit

$ (5,403,277 )

$ (37,090,050 )

Net Loss of $5,403,277 for the six-month periods

ended June 30, 2025 was mainly attributable to increased General and administrative expenses.

Net Loss of $37,090,050 for the six-month periods

ended June 30, 2024 was mainly attributable to decreased sales and reduced margins.

The company also suffered a loss of $29,169,008 on

retirement of fixed assets .

below shows the changes in net revenue in the respective segment of the Company for the six-month period ended June 30, 2025 as compared

to the same period in 2024:

Net Revenue by Segment

Six-Month Period Ended

Percent Increase

June 30, 2025

June 30, 2024

of Net Revenue

Chemical Products

Bromine and crude salt segments

Six-Month Period Ended

Percentage Change

product sold in tonnes

June 30, 2025

June 30, 2024

Bromine (excluding volume sold to SYCI)

Bromine segment

Loss from operations from our bromine segment was $3,370,836 for the

three-month period ended March 31, 2025, compared to loss from operations of $4,782,815 in the same period in 2024.

This decrease

was due to the a 45% increase in average selling price partially offset by a decrease of 11% in tonnes sold.

Net revenue from our bromine segment increased

to $9,158,243 for the six-month period ended June 30, 2025 compared to $3,005,431 for the same period in 2024 due to the higher selling

price of bromine and tonnes sold of bromine.

Crude salt segment

Loss from operations from our crude salt segment was $554,062 for the

three-month period ended March 31, 2025, compared to loss from operations of $75,092 in the same period in 2024.

The main reason for the

increase in raw salt in 2024 compared to 2023 is that sales also rose by 16%.

Net revenue from our crude salt segment increased

to $789,989 for the six-month period ended June 30, 2025 compared $640,606 for the same period in 2024 due to the higher selling tonnes

of crude salt.

Chemical products segment

For the six-month period ended June 30, 2025 and

2024, the net revenue for the chemical products segment was $0 due to the closure of our chemical factories since September 1, 2017.

Natural gas segment

For the six-month period ended June 30, 2025 and 2024, the net revenue

for the natural gas production was $0 and $44,194, respectively.

The 100% decrease in revenue was primarily due to the expiration of contracts.

Cost of Net Revenue

Cost of Net Revenue by Segment

Six-Month Period Ended

June 30, 2025

June 30, 2024

Chemical Products

Cost of net revenue reflects mainly the raw materials consumed-direct

salaries and benefits of staff engaged in the production process, electricity, depreciation and amortization of manufacturing plant and

machinery and other manufacturing costs.

Our cost of net revenue was $8,951,400 for six-month period ended June 30, 2025, representing

a $1,719,497 (or 24%) increase compared to the six-month period ended June 30, 2024.

The increase in costs was mainly due to a significant

increase in sales volume.

Bromine production capacity and utilization

of our factories

The table below represents the annual capacity

and utilization ratios for all of our bromine producing properties:

Annual Production Capacity (in tonnes)

Six-month period ended June 30, 2024

Six-month period ended June 30, 2025

Variance of the six-month period ended June 30, 2025 and 2024

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

Bromine segment

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

the cost of net revenue for the bromine segment was $8,549,943.

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

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

Crude salt segment

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

the cost of net revenue for the crude salt segment was $401,457.

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

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

Chemical products segment

Cost of net revenue for our chemical products

segment for the six-month period ended June 30, 2025 and 2024 was $0.

Natural gas segment

Cost of net revenue for our natural gas segment

for the six-month period ended June 30, 2025 and 2024 was $0 and $199, respectively.

Gross Profit (Loss).

was $996,832, or 10%, of net revenue for six-month period ended June 30, 2025 compared to a loss of $3,541,672, or 96%, of net revenue

for the same period in 2024.

Gross Profit (Loss) by Segment

% Point Change

Six-Month Period Ended

June 30, 2025

June 30, 2024

Profit Margin

Gross Profit (loss) Margin

Gross Profit (Loss) Margin

$ (3,796,380 )

Chemical Products

Total Gross Profit

$ (3,541,672 )

Bromine segment

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

the gross profit margin for our bromine segment was 6.7%, compared to gross loss margin of 126% in the six-month period ended June 30,

The increase in gross profit margin was primarily attributable to the higher average selling price of bromine of $3,857 per ton

in the six-month period ended June 30, 2025 compared to $2,438 per ton in the six-month period ended June 30, 2024.

Crude salt segment

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

the gross profit margin for our crude salt segment was 49.2%.

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

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

Chemical products segment

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

the gross profit margin for our chemical segment was 0% due to the closure of our plant and factories to perform rectification and improvement.

As a result, there were no chemical products for sale for the six-month period ended June 30, 2025.

Natural gas segment

Gross profit for our natural gas segment for the

six-month period ended June 30, 2025 and 2024 was $0 and $43,995 respectively.

Direct labor and factory overheads incurred

during plant shutdown On September 1, 2017, the Company received notification from the government of Yangkou County, Shouguang

City of PRC that stated that production at all its bromine and crude salt and chemical factories should be halted with immediate effect

in order for the Company to perform rectification and improvement in accordance with the county’s new safety and environmental protection

requirements.

On November 24, 2017, the Company received a letter from the Government of Yangkou County, Shouguang City notifying the

Company to relocate its two chemical production plants located in the second living area of the Qinghe Oil Extraction Plant to Bohai

As a result, direct labor and factory overhead costs (including depreciation of plant and machinery) in the amount of $3,953,582

and $5,449,192 incurred for the three-month periods ended June 30, 2025 and 2024, respectively, for the factories that have not resumed

production were presented as part of the operating expense.

General and Administrative Expenses.

General and administrative expenses were $2,384,288 for the six-month period ended June 30, 2025, a increase of $976,860 (or 69%) as compared

to $1,407,428 for the same period in 2024.

Loss from Operations.

operations was $5,360,893 for the six-month period ended June 30, 2025, compared to loss from operations of $10,416,416 in the same period

Income(loss) from Operations by Segment

Six-Month Period Ended

June 30, 2025

Six-Month Period Ended

June 30, 2024

$ (3,501,217 )

$ (9,445,401 )

Chemical Products

Loss from operations before corporate costs

(10,146,029 )

Corporate costs

Loss from operations before taxes

$ (5,360,893 )

$ (10,416,416 )

Bromine segment

Loss from operations from our bromine segment

was $3,501,217 for the six-month period ended June 30, 2025, compared to an loss from operations of $9,445,401 in the same period in 2024.

This decrease was due to a 93% increase in tonnes sold and a 58% increase in average selling price.

Crude salt segment

Loss from operations from our crude salt segment

was $701,551 for the six-month period ended June 30, 2025, compared to an income from operations of $54,932 in the same period in 2024.

The increase in operating losses was mainly due to the depreciation resulting from the new acquisition of crude salt assets in 2024.

Chemical products segment

Loss from operations from our chemical products

segment was $358,629 for the three-month period ended March 31, 2025, compared to loss from operations of $314,824 in the same period

segment was $703,576 for the six-month period ended June 30, 2025, compared to a loss from operations of $654,078 in the same period in

Natural gas segment

Loss from operations from our natural gas segment

was $44,844 for the three -month period ended March 31, 2025, compared to loss from operations of $27,709 in the same period in 2024.

Other Income(Expense) Net Other

expense, net of $19,293 represented bank interest income, net of finance lease interest expense for the three -month period ended March

31, 2025, an increase of $26,520 (or approximately 367%) as compared to the same period in 2024.

Net Loss Net loss was $4,629,500

for the three-month period ended March 31, 2025, compared to a net loss of $3,992,132 in the same period in 2024.

was $88,099 for the six-month period ended June 30, 2025, compared to a loss from operations of $101,482 in the same period in 2024.

Interest Income (Loss), Net.

loss, net of $39,172 represented bank interest income, net of finance lease interest expense for the six -month period ended June 30,

2025, a decrease of $60,374 as compared to the same period in 2024.

Net Income (Loss).

$5,403,277 for the six-month period ended June 30, 2025, compared to a net loss of $37,090,050 in the same period in 2024.

Loss on disposal of property, plant and equipment.

on disposal of property, plant and equipment was $29,169,008 in the fiscal year 2024.

In June 2024, considered the bromide well and transmission

channel have been in use for many years, the Company conducted a site inspection and found that some wells and channels were seriously

damaged by water seepage which in turn required write-off or new construction, and the write-off amount is $29,169,008.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2025, cash and cash equivalents

As of June 30, 2025, cash and cash equivalents

were $7,736,081 as compared to $10,075,162 as of December 31, 2024.

1 unchanged sentence

Statement of Cash Flows

Three-Month Period Ended March 31,

Net cash used in operating activities

Six-Month Period Ended June 30,

Net cash used in provided by operating activities

$ (2,139,435 )

Net cash provided by (used in) investing activities

(60,526,213 )

Net cash used in investing activities

Net cash used in financing activities

Effects of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

$ (1,552,117 )

$ (1,462,098 )

For the three-month period ended March 31, 2025,

we met our working capital and capital investment requirements mainly by using cash on hand.

Net Cash Provided by (Used in) Operating Activities

During the three -month period ended March 31, 2025, cash flow used

in operating activities of approximately $1.58 million was mainly due to a net loss of $4.62 million, an increase in accounts receivable

of $1.5 million, offset by a non-cash adjustment related to depreciation and amortization of property, plant and equipment of $4 million.

During the three-month period ended March 31, 2024, cash flow used

in operating activities of approximately $1.33 million was mainly due to a net loss of $3.99 million, an increase in accounts receivable

of $0.4 million, a non-cash adjustment related to deferred taxes of $1.27 million, offset by depreciation and amortization expenses of

$4.73 million.

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

we met our working capital and capital investment requirements by using cash on hand.

Net Cash used in Operating Activities

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

cash flow used in operating activities of approximately $2.14 million was mainly due to a net loss of $5.4 million, a decrease in accounts

receivable of $2.58 million, and offset by a non-cash adjustment related to depreciation and amortization of property, plant and equipment

of $8 million, adecreases in prepayment and deposits of $2.33 million.

During the six-month period ended June 30, 2024, cash flow used in

operating activities of approximately $0.8 million was mainly due to a net loss of $37.09 million, offset by depreciation and amortization

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

Accounts receivable

1 unchanged sentence

a major impact on our overall liquidity.

The following table presents the aging analysis of our accounts receivable as of March 31, 2025

The following table presents the aging analysis of our accounts receivable as of June 30, 2025

and December 31, 2024.

March 31, 2025

June 30, 2025

December 31, 2024

7 unchanged sentences

Aged 211-240 days

The overall accounts receivable balance as of March 31, 2025 increased

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

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

3 unchanged sentences

Our inventory consists of the following:

March 31, 2025

June 30, 2025

December 31, 2024

1 unchanged sentence

Finished goods

The net inventory level as of March 31, 2025 increased

The net inventory level as of June 30, 2025 increased

by $199,642 (or 63%), as compared to the net inventory level as of December 31, 2024.

The increase in inventory goods is an estimate that

market demand may rise .

Raw materials increased by $31,255 as of March

The increase in inventory is due to the growth in

current sales volume.

Raw materials increased by $26,935 as of June

30, 2025 as compared to December 31, 2024.

Our finished goods increased by $172,707 as of

March 31, 2025 as compared to December 31, 2024.

Net Cash Provided by (Used in) Investing

We have no investing activities for the three-month

periods ended March 31, 2025 and 2024.

Net Cash Provided by (Used in)

Financing Activities

We have no financing activities for the three-month

periods ended March 31, 2025 and 2024.

June 30, 2025 as compared to December 31, 2024.

Net Cash Used in Investing Activities

During the six-month period ending on June 30,

2025, we spent approximately $0.

During the six months ended June 30, 2024, we

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

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

Net Cash Used in Financing Activities.

For the six-month period ended June 30, 2025 and

2024, we used $0.3 million to fulfil finance lease obligations.

We believe that our available funds and cash flows

2 unchanged sentences

We had available cash of approximately $7.74 million

at March 31, 2025, most of which is in highly liquid current deposits which earn no or little interest.

We do not anticipate paying cash

dividends in the foreseeable future.

We intend to continue to focus our efforts on

the activities of SCHC, SYCI, SHSI and DCHC as these segments continue to expand within the Chinese market.

at June 30, 2025, all which is in highly liquid current deposits earning no or little interest.

We do not anticipate paying cash dividends

in the foreseeable future.

We intend to continue to focus our efforts on the activities of SCHC,

SYCI, SHSI and DCHC as these segments continue to expand within the Chinese market.

We may not be able to identify, successfully integrate

11 unchanged sentences

We have no significant contractual obligations

not fully recorded on our condensed consolidated balance sheets or fully disclosed in the notes to our condensed consolidated financial

Additional information regarding our contractual obligations and commitments at March 31, 2025 is provided in the notes to

our condensed consolidated financial statements.

not fully recorded on our consolidated balance sheets or fully disclosed in the notes to our consolidated financial statements.

information regarding our contractual obligations and commitments at June 30, 2025 is provided in the notes to our consolidated financial

See “Notes to Condensed Consolidated Financial Statements.

Material Off-Balance Sheet Arrangements

2 unchanged sentences

Critical Accounting Policies and Estimates

Our 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.

We base its estimates on historical experience and on various

other assumptions that are believed to be reasonable under the circumstances.

Accordingly, actual results may differ significantly from

these estimates under different assumptions or conditions.

We have identified the following critical accounting policies and estimates

used by us in the preparation of our financial statements:

accounts receivable and allowance for doubtful accounts, inventories and allowance

for obsolescence, assets retirement obligation, property, plant and equipment, recoverability of long-lived assets, mineral rights, leases,

revenue recognition, income taxes, and loss contingencies.

These policies and estimates are described in the Company’s Form 10-Q

for the three months ended March 31, 2025.

Our 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.

We base its estimates on historical experience and on various other assumptions

that are believed to be reasonable under the circumstances.

Accordingly, actual results may differ significantly from these estimates

under different assumptions or conditions.

We have identified the following critical accounting policies and estimates used by us in the

preparation of our financial statements:

accounts receivable and allowance for doubtful accounts, inventories and allowance for obsolescence,

assets retirement obligation, property, plant and equipment, recoverability of long-lived assets, mineral rights, leases, revenue recognition,

income taxes, and loss contingencies.

These policies and estimates are described in the Company’s Form 10-Q for the six months ended

June 30, 2025.

Quantitative and Qualitative Disclosures About Market Risk

3 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-Q

Item 2. Management’s Discussion and Analysis