GULF RESOURCES, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Cautionary Note Regarding Forward-Looking Statements The discussion below contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act. We have used words such as “believes,” “intends,” “anticipates,” “expects” and similar expressions to identify forward-looking statements. These statements are based on information currently available to us and are subject to a number of risks and uncertainties that may cause our actual results of operations, financial condition, cash flows, performance, business prospects and opportunities and the timing of certain events to differ materially from those expressed in, or implied by, these statements. Except as expressly required by the federal securities laws, we undertake no obligation to update such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances, or for any other reason. Overview We are a Nevada holding company which conducts operations through our wholly-owned China-based subsidiaries. Our business is conducted and reported in four segments, namely, bromine, crude salt, chemical products and natural gas. Through our wholly-owned subsidiary, SCHC, we produce and trade bromine and crude salt. We are one of the largest producers of bromine in China, as measured by production output. Elemental bromine is used to manufacture a wide variety of bromine compounds used in industry and agriculture. Bromine also is used to form intermediary chemical compounds such as Tetramethylbenzidine. Bromine is commonly used in brominated flame retardants, fumigants, water purification compounds, dyes, medicines and disinfectants. Crude salt is the principal material in alkali production as well as chlorine alkali production and is widely used in the chemical, food and beverage, and other industries. Through our wholly-owned subsidiary, SYCI, we manufacture and sell chemical products used in oil and gas field exploration, oil and gas distribution, oil field drilling, papermaking chemical agents, inorganic chemicals and materials that are used for human and animal antibiotics. Our wholly-owned subsidiary, DCHC, was established to explore and develop natural gas and brine resources (including bromine and crude salt) in Sichuan Province, China. As disclosed in the Company’s Current Report on Form 8-K filed on September 8, 2017, the Company received, on September 1, 2017, letters from the Yangkou County, Shouguang City government addressed to each of its subsidiaries, SCHC and SYCI, which stated that in an effort to improve the safety and environmental protection management level of chemical enterprises, the plants are requested to immediately stop production and perform rectification and improvements in accordance with the country’s new safety and environmental protection requirements. In the Company’s press release of August 11, 2017 and on its conference call of August 14, 2017, the Company addressed concerns that increased government enforcement of stringent environmental rules that were adopted in early 2017 to insure corporations bring their facilities up to necessary standards so that pollution and other negative environmental issues are limited and remediated, could have an impact on our business in both the short and long-term. The Company also expressed that although it believed its facilities were fully compliant at the time, the Company did not know how its facilities would fare under the new rules. Teams of inspectors from the government were sent to many provinces to inspect all mining and manufacturing facilities. The local government requested that facilities be closed, so that the facilities could undergo the inspection and analysis in the most efficient manner by inspectors’ team. As a result, our facilities were closed on September 1, 2017. The Company believes that this is another step by the government to improve the environment. It further believes the goal of the government is not to close all plants, but rather to codify the regulations related to project approval, land use, planning approval and environmental protection assessment approval so that illegal plants are not able to open in the future and so that plants close to population centers do not cause serious environmental damage. In addition, the Company believes that the Shandong provincial government wants to assure that each of its regional and county governments has applied the Notice in a consistent manner. The Shouguang City Bromine Association, on behalf of all the bromine plants in Shouguang, started discussions with the local government agencies. The local governmental agencies confirmed the facts that their initial requirements for the bromine industry did not include the project approval, the planning approval and the land use rights approval and that those three additional approvals were new requirements of the provincial government. The Company understood from the local government that it has been coordinating with several government agencies to solve these three outstanding approval issues in a timely manner and that all the affected bromine plants willnot be allowed to commence production prior to obtaining those approvals. 17 In February 2019, the Company received a notification from the local government of Yangkou County that its Factory No. 1, No. 4, No. 7 and No. 9 had passed inspection and could resume operations. In April 2019, Factory No. 1 and No. 7 resumed operations. On February 28, 2020, the Company announced that it received an approval from the government to resume bromine production after winter temporary closure. Subsequently, 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. 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. The Company received an oral notification from the government for its Factory No. 8, which permitted Factory No.8 to resume production in August 2022. Factory 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. 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. The Company is still waiting for governmental approval for factories No. 2 and No. 10. To its knowledge, the government is currently completing its planning process for all mining areas including that for prevention of flood. As a result, the Company may be required to make some modifications to our current wells and aqueducts prior to commencement of operations of these factories in order to satisfy the local government's requirements. On November 24, 2017, Gulf Resources received a letter from the People’s Government of Yangkou County, Shouguang City notifying the Company that due to the new standards and regulations relating to safety production and environmental pollution, from certain local governmental departments, such as the municipal environmental protection department, the security supervision department and the fire department, its chemical enterprises would have to be relocated to a new industrial park called Bohai Marine Fine Chemical Industry Park. Although our chemical companies were in compliance with regulations, they were also close to a residential area. As a result, the government determined we should relocate to the Bohai park. Chemical companies that are not being asked to move into the park are being permanently closed. Since our factories closed, the Company has secured from the government the land use rights for its chemical plant. On January 6, 2020, the Company received the environmental protection approval by the government of Shouguang City, Shandong Province for the proposed Yuxin Chemical factory. The Company began the construction on its new chemical facilities located at Bohai Marine Fine Chemical Industrial Park in June 2020. The construction was expected to take approximately one year and an additional six months to complete the equipment installation and testing, however due to the COVID epidemic and electrical restrictions, the opening of the chemical factory has been delayed. The Company has received the refrigeration and air compressor units. On July 26, 2023, the Company announced that the delivery of the remaining equipment for its Yuxin chemical factory has been temporarily delayed and the Company will re-evaluate its chemical products strategy. In January 2017, the Company completed the first brine water and natural gas well field construction in Daying located in Sichuan Province 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 after the governmental planning has been finalized the land and resource planning for Sichuan Province. 18 In April 2022, Shouguang Hengde Salt Industry Co. 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 figures. On October 27, 2025, we completed a 1-for-10 reverse stock split of our common stock, such that for each ten shares outstanding prior to the stock split there was one share outstanding after the reverse stock split. All shares of common stock referenced in this report have been adjusted to reflect the stock split figures. Recent Developments Acquisition Agreements 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. A summary 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. 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. Subsequently, on December 17, 2024, the parties entered into an amendment to the agreement, pursuant to which the Article 2. 2 of the agreement has been amended as follows: eighty percent (80%) of the total amount, equaling RMB103,577,600 had been paid on the date of signing the contract by both parties. The remaining RMB25,894,400 shall be paid in a combination of common stock of the Company and cash as follows: (1) RMB10,357,800 shall be paid in shares, calculated on a per share price of US$1.5, using the exchange rate RMB/US$:7.27. These shares shall be issued by the Company to Seller A or Seller A's designated parties within three months after SHSI has inspected and accepted the crude salt field in writing; (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. On December 17, 2024, SHSI entered into an amendment to the acquisition agreement with Seller B, pursuant to which the Article 2. 2 of the agreement has been amended as follows: (80%) of the total amount, equaling RMB32,460,000 had been paid on the date of signing the contract by both parties. The remaining RMB8,115,000 shall be paid in a combination of common stock of the Company and cash as follows: (1) RMB3,246,000 shall be paid in shares, calculated on a per share price of US$1.5, using the exchange rate RMB/US$:7.27. These shares shall be issued by the Company to Seller B or Seller B’s designated parties within three months after SHSI has inspected and accepted the crude salt field in writing; (2) the balance shall be paid in cash before December 31, 2028. On December 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. The remaining RMB8,827,920 shall be paid in a combination of common stock of the Company and cash as follows: (1) RMB3,531,168 shall be paid in shares, calculated on a per share price of US$1.5 per, using the exchange rate RMB/US$:7.27. These shares shall be issued by the Company to Seller C or Seller C's designated parties within three months after SHSI has inspected and accepted the crude salt field in writing; (2) the balance shall be paid in cash before December 31, 2028. On December 17, 2024, SHSI entered into an amendment to the acquisition agreement with Seller D, pursuant to which the Article 2. 2 of the agreement has been amended as follows: Eighty percent (80%) of the total amount, equaling RMB 16,632,000 had been paid on the date of signing the contract by both parties. The remaining RMB 4,158,000 shall be paid in a combination of common stock of the Company and cash as follows: (1) RMB1,663,200 shall be paid in shares, calculated on a per share price ofUS$1.5, using the exchange rate RMB/US$:7.27. These shares shall be issued by the Company to Seller D or Seller D's designated parties within three months after SHSI has inspected and accepted the crude salt field in writing; (2) the balance shall be paid in cash before December 31, 2028. On December 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. The remaining RMB9,157,080 shall be paid in a combination of common stock of the Company and cash as follows: (1) RMB3,662,832 shall be paid in shares, calculated on a per share price of US$1.5, using the exchange rate RMB/US$:7.27. These shares shall be issued by the Company to Seller E or Seller E's designated party within three months after SHSI has inspected and accepted the crude salt field in writing; (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 the Nasdaq rules and regulations. SHSI shall cause the Company to take all necessary steps to obtain such shareholder approval if the issuance of shares under the agreement exceeds the 19.9% Threshold. On 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. On 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. 19 Nasdaq Compliance The Company received a notice (the “Initial Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) on April 18, 2024 notifying the Company that due to the Company’s failure to timely file its Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Form 10-K”), with the SEC, the Company is not in compliance with Nasdaq’s continued listing requirements under Nasdaq Listing Rule 5250(c)(1) (the “Rule”), which requires the timely filing of all required periodic reports with the SEC, and the Company subsequently received a notice (the “May Notice”) from Nasdaq on May 21, 2024 due to the Company’s non-compliance with the Rule as a result of the Company’s failure to timely file its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024 (the “Form 10-Q”, together with the Form 10-K, the “Delinquent Reports”). The May Notice states that the Company has until June 17, 2024 to submit to Nasdaq a plan to regain compliance with the Rule. As previously announced, on November 5, 2024, the Staff notified the Company that the bid price for the Common Shares no longer satisfied Nasdaq Listing Rule 5450(a) (1), the minimum bid price requirement applicable to The Nasdaq Global Select Market issuers. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company was afforded an initial 180-calendar day grace period, through May 5, 2025, to regain compliance with the minimum bid price requirement. Issuers listed on The Nasdaq Global Select Market are not eligible for a second 180-day grace period under the Nasdaq Listing Rules. However, based upon the Company’s compliance with the various criteria required under Nasdaq Listing Rule 5810(c)(3)(A)(ii) to obtain a second 180-day grace period applicable to issuers listed on The Nasdaq Capital Market, the Company applied to transfer the listing of its Common Shares to The Nasdaq Capital Market. As noted above, the Staff approved the Company’s transfer application on May 6, 2025. 20 The Company has provided written notice to Nasdaq of its intention to cure the deficiency during the Second Compliance Period by effecting a reverse stock split, if necessary. On May 6, 2025, the Company was notified by the Nasdaq that the Company’s request to transfer the listing of its Common Stock, from The Nasdaq Global Select Market tier to The Nasdaq Capital Market tier has been granted, and that the Company was granted a second 180-calendar day period, or until November 3, 2025 (the “Second Compliance Period”), to regain compliance with the requisite bid price requirement, as set forth in Nasdaq Listing Rule 5550(a)(2). The transfer of the listing of the Common Shares from The Nasdaq Global Select Market to The Nasdaq Capital Market took effect with the open of business on May 8, 2025. The transfer is not expected to impact trading in the Common Shares, which will continue to trade on Nasdaq under the symbol “GURE.” On November 12, 2025, the Company issued a press release providing certain updates on its hearing scheduling process with the Nasdaq Hearings Panel. The Company has received a hearing notification letter from Nasdaq scheduling an oral hearing for December 9, 2025. As of November 10, 2025, the Company’s common stock had maintained the requisite closing bid price in compliance with Listing Rule 5550(a)(2). In light of the above and in accordance with the instructions provided by the hearing notification letter, the Company has submitted a request to cancel the hearing, subject to the Company’s Listing Analyst review and confirmation. 21 Our current corporate structure chart is set forth in the following diagram: 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. 22 RESULTS OF OPERATIONS The following table presents certain information derived from the condensed consolidated statements of operations, cash flows and stockholders equity for the three-month and nine-month periods ended September 30, 2025 and 2024. Comparison of the Three-Month Period Ended September 30, 2025 and 2024 Three-Month Period Ended September 30, 2025 Three-Month Period Ended September 30, 2024 Percent Change Increase/ (Decrease) Net revenue $ 9,044,581 $ 2,242,365 303 % Cost of net revenue (7,996,785 ) (4,071,616 ) 96 % Gross profit(loss) 1,047,796 (1,829,251 ) (157 %) Sales and marketing expenses (16,013 ) (13,484 ) 19 % Direct labor and factory overheads incurred during plant shutdown (580,178 ) (1,736,345 ) (67 %) General and administrative expenses (785,533 ) (1,002,529 ) (24 %) Loss from operations (333,928 ) (4,581,609 ) (93 %) Interest income, net (17,206 ) (14,971 ) 15 % Other expense, net (3,521,613 ) — — Loss on disposal of long-lived assets (2,008,853 ) — — Impairment of long-lived assets (29,782,912 ) — — Loss before taxes (35,664,512 ) (4,596,580 ) 676 % Income tax benefit — 1,103,697 (100 %) Net loss $ (35,664,512 ) $ (3,492,883 ) 921 % Net Loss of $35,664,512 for the three-month periods ended September 30, 2025. The increase in net loss was mainly due to a rise of 2,008,853 in loss on disposal of long-lived assets, a rise of 29,782,912 in impairment of long-lived assets, and an increase of 3,521,613 in provision accrued liabilities. Net revenue. The table below shows the changes in net revenue in the respective segment of the Company for the three-month period ended September 30, 2025 as compared to the same period in 2024: Net Revenue by Segment Three-Month Period Ended Three-Month Period Ended Percent Change Increase September 30, 2025 September 30, 2024 of Net Revenue Segment % of total % of total Bromine $ 8,052,331 89 % $ 1,571,313 70 % 412 % Crude Salt 992,250 11 % 654,039 29 % 52 % Chemical Products — — — — — Natural Gas — — 17,013 1 % — Total sales $ 9,044,581 100 % $ 2,242,365 100 % 303 % Bromine and crude salt segments Three-Month Period Ended Percentage Change product sold in tonnes September 30, 2025 September 30, 2024 Increase (Decrease) Bromine 2,214 656 238 % Crude Salt 38,379 24,249 58 % Bromine segment For the three-month periods ended September 30, 2025 and 2024, the net revenue for the bromine segment was $8,052,331 and $1,571,313, respectively. The increase of the net revenue of bromine was due to the 238% increase in tonnes sold and the 52% increase in average selling price of bromine in the third quarter of 2025. The average selling price of bromine in the third quarter of 2025 was $3,637 compared to the average selling price of bromine in the third quarter of 2024 of $2,396 (calculated by dividing revenue by tonnes). Crude salt segment For the three-month periods ended September 30, 2025 and 2024, the net revenue for the crude salt was $992,250 and $654,039, respectively. The increase of net revenue of crude salt was mainly due to the 58% increase in tonnes sold and the 4% decrease in average selling price of crude salt for the three-month period ended September 30, 2025. Chemical products segment For the three-month periods ended September 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 September 30, 2025 and 2024, the net revenue was $0 and $17,013. The decrease in income was due to the fact that the relevant documents of the client were incomplete, which prevented us from continuing the cooperation. 23 Cost of Net Revenue Cost of Net Revenue by Segment Percent Change Three-Month Period Ended Three-Month Period Ended of Cost of September 30, 2025 September 30, 2024 Net Revenue Segment % of total % of total Bromine $ 7,666,463 96 % $ 3,794,088 93 % 102 % Crude Salt 330,322 4 % 277,451 7 % 19 % Chemical Products — — — — — Natural Gas — — 77 — (100 %) Total $ 7,996,785 100 % $ 4,071,616 100 % 96 % 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 $7,996,785 for the three-month period ended September 30, 2025, an increase of $3,925,169 (or 96%) as compared to the same period in 2024 due to the increase of net revenue by 303% for the three-month period ended September 30, 2025 as compared to the same period in 2024. 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) Utilization Ratio (i) Three-month period ended September 30, 2024 31,506 8 % Three-month period ended September 30, 2025 31,506 28 % Variance of the three-month period ended September 30, 2025 and 2024 — 20 % (i) Utilization ratio is calculated based on the annualized actual production volume in tonnes for the periods divided by the annual production capacity in tonnes. Bromine segment For the three -month period ended September 30, 2025 and 2024 the cost of net revenue for the bromine segment was $7,666,463 and $3,794,088, respectively. The increase in costs is mainly due to the increase in sales volume. Crude salt segment For the three -month period ended September 30, 2025 and 2024 the cost of net revenue for the crude salt segment was $330,322 and $277,451, respectively. The increase in costs is mainly due to the increase in sales volume. Chemical products segment Cost of net revenue for our chemical products segment for the three-month period ended September 30, 2025 and 2024 was $0. Natural gas segment Cost of net revenue for our natural gas segment for the three-month period ended September 30, 2025 and 2024 was $0 and 77, respectively. The decrease in income was due to the fact that the relevant documents of the client were incomplete, which prevented us from continuing the cooperation. 24 Gross Profit (Loss) . Gross profit was $1,047,796 or12%, of net revenue for three-month period ended September 30, 2025, representing an increase of $2,877,047, as compared to a gross loss of $1,829,251 or 82%, of net revenue for the same period in 2024. Gross Profit (Loss) by Segment % Point Change Three-Month Period Ended Three-Month Period Ended of Gross September 30, 2025 September 30, 2024 Profit Margin Segment Gross Profit (loss) Margin Gross Profit (loss) Margin Bromine $ 385,868 5 % $ (2,222,775 ) (141 %) 146 % Crude Salt 661,928 67 % 376,588 58 % 9 % Chemical Products — — — — — Natural Gas — — 16,936 100 % — Total Gross Profit (Loss) $ 1,047,796 12 % $ (1,829,251 ) (82 %) 47 % Bromine segment For the three-month period ended September 30, 2025, the gross profit for our bromine segment was 5%, compared to gross loss margin of 141% in the three-month period ended September 30, 2024. The increase in gross profit margin was primarily attributable to the higher average selling price of bromine of $3,637 per ton in the three-month period ended September 30, 2025 compared to $2,396 per ton in the three-month period ended September 30, 2024 and the number of sales was up 238% from the second quarter of 2024. Crude salt segment For the three-month period ended September 30, 2025, the gross profit margin for our crude salt segment was 67%. The increase of net revenue of crude salt was mainly due to the 58% increase in tonnes sold and the 4% decrease in average selling price of crude salt for the three-month period ended September 30, 2025. For the three-month period ended September 30, 2024, the gross profit margin for our crude salt segment was 58%. Natural g as segment Gross profit for our natural gas segment for the three-month period ended September 30, 2025 and 2024 was $0 and $16,936 respectively. The decrease in income was due to the fact that the relevant documents of the client were incomplete, which prevented us from continuing the cooperation. 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 Park. As a result, direct labor and factory overhead costs (including depreciation of plant and machinery) in the amount of $580,178 and $1,736,345 incurred for the three-month periods ended September 30, 2025 and 2024, respectively, of factories that have not resumed production were presented as part of the operating expense. 25 General and Administrative Expenses General and administrative expenses were $785,533 for the three-month period ended September 30, 2025, representing an decrease of $216,966 as compared to $1,002,529 for the same period in 2024. Loss from Operations Loss from operations was $333,928 for the three-month period ended September 30, 2025, compared to loss from operations of $4,581,609 in the same period in 2024. Loss from Operations by Segment Three-Month Period Ended September 30, 2025 Three-Month Period Ended September 30, 2024 Segment: % of total % of total Bromine $ (274,496 ) 128.98 % $ (4,029,999 ) 89.34 % Crude Salt 453,824 (213.24 %) (102,657 ) 2.27 % Chemical Products (352,371 ) 165.57 % (339,038 ) 7.52 % Natural Gas (39,781 ) 18.69 % (39,072 ) 0.87 % Loss from operations before corporate costs (212,824 ) 100 % (4,510,766 ) 100 % Corporate costs (121,104 ) (70,843 ) Loss from operations $ (333,928 ) $ (4,581,609 ) Bromine segment Loss from operations from our bromine segment was $274,496 for the three-month period ended September 30, 2025, compared to loss from operations of $4,029,999 in the same period in 2024. The increase of the net revenue of bromine was due to the 238% increase in tonnes sold and the 52% increase in average selling price of bromine in the third quarter of 2025. Crude salt segment Income from operations from our crude salt segment was $453,824 for the three-month period ended September 30, 2025, compared to loss from operations of $102,657 in the same period in 2024. The increase of net revenue of crude salt was mainly due to the 58% increase in tonnes sold and the 4% decrease in average selling price of crude salt for the three-month period ended September 30, 2025. Chemical products segment Loss from operations from our chemical products segment was $352,371 for the three-month period ended September 30, 2025, compared to loss from operations of $339,038 in the same period in 2024. Natural gas segment Loss from operations from our natural gas segment was $39,781 for the three -month period ended September 30, 2025, compared to a loss of $39,072 in the same period in 2024. Interest income, net Interest income, net of $17,206 represented bank interest income, net of finance lease interest expense for the three-month period ended September 30, 2025, an increase of $2,235 as compared to the same period in 2024. Other Expenses, net As the company was the joint guarantor party for the debts of Shandong Shouguang Vegetable Industry Group Co., Ltd. and Shandong Shouguang Vegetable Seed Group Co., Ltd. ("Vegetable Group"). Currently, the Vegetable Group is unable to repay the debt. As the joint liability party, our company has to accrue a provision of $3,521,613. Loss on Disposal of Long-lived Assets As the company was the joint responsible party for the debts of the Vegetable Group, the court auctioned the idle land and the attached properties on it of SYCI, resulting in a total asset disposal loss of $2,008,853. Impairment of Long-lived Assets The court engaged a third-party valuer for evaluation of the land at xiangjiang road, yangkou town ,shouguang city and its attached properties. The valuation report returned a fair value of $4,580,892. The Company recognized an impairment loss of $29,782,912 accordingly. Net Loss Net loss was $35,664,512 for the three-month period ended September 30, 2025, compared to a net loss of $3,492,883 in the same period in 2024. 26 Comparison of the Nine-Month Period Ended September 30, 2025 and 2024 Nine-Month Period Ended September 30, 2025 Nine-Month Period Ended September 30, 2024 Percent Change Increase/ (Decrease) Net revenue $ 18,992,813 $ 5,932,596 220 % Cost of net revenue (16,948,185 ) (11,303,519 ) 50 % Gross profit (loss) 2,044,628 (5,370,923 ) (138 %) Sales and marketing expenses (35,868 ) (31,608 ) 13 % Direct labor and factory overheads incurred during plant shutdown (4,533,760 ) (7,185,537 ) (37 %) General and administrative expenses (3,169,821 ) (2,409,957 ) 32 % Loss from operations (5,694,821 ) (14,998,025 ) (62 %) Interest income ,net (56,378 ) 6,236 804 % Other expense,net (3,524,825 ) (4,003 ) 880 % Loss from asset disposal (2,008,853 ) (29,169,008 ) (93 %) Impairment of long-lived assets (29,782,912 ) — — Loss before taxes (41,067,789 ) (44,164,800 ) (7 %) Income tax benefit (expense) — 3,581,867 (100 %) Net loss $ (41,067,789 ) $ (40,582,933 ) 1 % 27 Net revenue. The table below shows the changes in net revenue in the respective segment of the Company for the nine-month period ended September 30, 2025 as compared to the same period in 2024: Net Revenue by Segment Nine-Month Period Ended Nine-Month Period Ended Percent Increase September 30, 2025 September 30, 2024 of Net Revenue Segment % of total % of total Bromine $ 17,210,574 91 % $ 4,576,744 77 % 276 % Crude Salt 1,782,239 9 % 1,294,645 22 % 38 % Chemical Products - - - - Natural Gas - - 61,207 1 % (100 %) Total sales $ 18,992,813 100 % $ 5,932,596 100 % 220 % Bromine and crude salt segments Nine-Month Period Ended Percentage Change product sold in tonnes September 30, 2025 September 30, 2024 Increase Bromine (excluding volume sold to SYCI) 4,589 1,889 143 % Crude Salt 69,047 53,172 30 % Bromine segment Net revenue from our bromine segment increased to $17,210,574 for the nine-month period ended September 30, 2025 compared to $4,576,744 for the same period in 2024 due to the higher selling price of bromine and tonnes sold of bromine. Crude salt segment Net revenue from our crude salt segment increased to $1,782,239 for the nine-month period ended September 30, 2025 compared $1,294,645 for the same period in 2024, respectively, due to the higher selling quantity. Chemical products segment For the nine-month period ended September 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 nine-month period ended September 30, 2025 and 2024, the net revenue for the natural gas was $0 and $61,207,respectively. The decrease in income was due to the fact that the relevant documents of the client were incomplete, which prevented us from continuing the cooperation. Cost of Net Revenue Cost of Net Revenue by Segment % Change Nine-Month Period Ended Nine-Month Period Ended of Cost of September 30, 2025 September 30, 2024 Net Revenue Segment % of total % of total Bromine $ 16,216,406 96 % $ 10,595,899 94 % 53 % Crude Salt 731,779 4 % 707,344 6 % 3 % Chemical Products — — — — — Natural Gas — — 276 0 % (100 %) Total $ 16,948,185 100 % $ 11,303,519 100 % 50 % 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 $16,948,185 for nine-month period ended September 30, 2025, representing a $5,644,666 (or 50%) increase compared to the nine- month period ended September 30, 2025. The increase in costs was mainly due to a significant increase in sales volume. 28 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) Utilization Ratio (i) Nine-month period ended September 30, 2024 31,506 8 % Nine-month period ended September 30, 2025 31,506 20 % Variance of the nine-month period ended September 30, 2025 and 2024 — 12 % (i) Utilization ratio is calculated based on the annualized actual production volume in tonnes for the periods divided by the annual production capacity in tonnes. Bromine segment For the nine-month period ended September 30, 2025 and 2024 the cost of net revenue for the bromine segment was $16,216,406 and $10,595,899, respectively. The increase in costs is mainly due to the increase in sales volume. Crude salt segment For the nine-month period ended September 30, 2025 and 2024 the cost of net revenue for the crude salt segment was $731,779 and $707,344, respectively. The increase in costs is mainly due to the increase in sales volume. Natural gas segment Cost of net revenue for our natural gas segment for the nine-month period ended September 30, 2025 and 2024 was $0 and $276, respectively. The decrease in income was due to the fact that the relevant documents of the client were incomplete, which prevented us from continuing the cooperation. Gross Profit. Income profit was $2,044,628, or 10.8%, of net revenue for nine-month period ended September 30, 2025 compared to gross loss $5,370,923, or 91%, of net revenue for the same period in 2024. Gross Profit (Loss) by Segment % Point Change Nine-Month Period Ended Nine-Month Period Ended of Gross September 30, 2025 September 30, 2024 Profit Margin Segment Gross Profit (loss) Margin Gross Profit (loss) Margin Bromine $ 994,168 5.8 % $ (6,019,155 ) (132 %) 137.8 % Crude Salt 1,050,460 58.9 % 587,301 45 % 13.9 % Chemical Products — — — — — Natural Gas — — 60,931 100 % — Total Gross Profit(Loss) $ 2,044,628 10.8 % $ (5,370,923 ) (91 %) (101.8 %) Bromine segment For the nine-month period ended September 30, 2025, the gross profit margin for our bromine segment was 6%, compared to gross loss margin of 132% in the nine-month period ended September 30, 2024. The increase in gross loss margin was primarily attributable to the higher average selling price of bromine of $3,751 per ton in the nine-month period ended September 30, 2025 compared to $2,423 per ton in the nine-month period ended September 30, 2024. 29 Crude salt segment For the nine-month period ended September 30, 2025, the gross profit margin for our crude salt segment was 59%. For the nine-month period ended September 30, 2024 the gross profit margin for our crude salt segment was 45%. Chemical products segment For the nine-month period ended September 30, 2025, the gross profit margin for our chemical segment was 0% due to the closure of our chemical products plant. As a result of the closure, there were no chemical products for sale for the nine-month period ended September 30, 2025. Natural gas segment Gross profit for our natural gas segment for the nine-month period ended September 30, 2025 and 2024 was $0 and $60,931 respectively. The decrease in income was due to the fact that the relevant documents of the client were incomplete, which prevented us from continuing the cooperation. 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 Park. As a result, direct labor and factory overhead costs (including depreciation of plant and machinery) in the amount of $4,533,760 and $7,185,537 incurred for the nine-month periods ended September 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 $3,169,821 for the nine-month period ended September 30, 2025, an increase of $759,864 (or 32%) as compared to $2,409,957 for the same period in 2024. The increase in administrative expenses is mainly due to the increase in depreciation. Loss from Operations. Loss from operations was $5,694,821 for the nine-month period ended September 30, 2025, compared to a loss of $14,998,025 in the same period in 2024. Loss from Operations by Segment Nine-Month Period Ended September 30, 2025 Nine-Month Period Ended September 30, 2024 Segment: % of total % of total Bromine $ (3,775,713 ) 72.51 % $ (13,475,400 ) 91.94 % Crude Salt (247,727 ) 4.76 % (47,725 ) 0.32 % Chemical Products (1,055,947 ) 20.28 % (993,116 ) 6.78 % Natural Gas (127,880 ) 2.45 % (140,554 ) 0.96 % Loss from operations before corporate costs (5,207,267 ) 100 % (14,656,795 ) 100 % Corporate costs (487,554 ) (341,230 ) Loss from operations before taxes $ (5,694,821 ) $ (14,998,025 ) 30 Bromine segment Loss from operations from our bromine segment was $3,775,713 for the nine-month period ended September 30, 2025, compared to a loss of $13,475,400 in the same period in 2024. The decrease in gross loss margin was primarily attributable to the higher average selling price of bromine of $3,751 per ton in the nine-month period ended September 30, 2025 compared to $2,423 per ton in the nine-month period ended September 30, 2024. Crude salt segment Loss from operations from our crude salt segment was $247,727 for the nine-month period ended September 30, 2025, compared to a loss of $47,725 in the same period in 2024. The increase in operating losses is mainly due to the increase in administrative expenses. Chemical products segment Loss from operations from our chemical products segment was $1,055,947 for the nine-month period ended September 30, 2025, compared to a loss of $993,116 in the same period in 2024. Natural g as segment Loss from operations from our natural gas segment was $127,880 for the nine-month period ended September 30, 2025, compared to a loss of $140,554 in the same period in 2024. Interest Income (Loss), Net. interest income, net of $56,378 represented bank interest income, net of finance lease interest expense for the nine -month period ended September 30, 2025, a decrease of $62,614 as compared to the same period in 2024. Other Expenses, net As the company was the joint guarantor party for the debts of the Vegetable Group. Currently, the Vegetable Group is unable to repay the debt. As the joint liability party, our company has to accrue a provision of $3,524,825. Loss on Disposal of Long-lived Assets As the company was the joint responsible party for the debts of the Vegetable Group, the court auctioned the idle land and the attached properties on it of SYCI, resulting in a total asset disposal loss of $2,008,853. Impairment of Long-lived Assets The court engaged a third-party valuer for evaluation of the land at xiangjiang road, yangkou town ,shouguang city and its attached properties. The valuation report returned a fair value of $4,580,892. The Company recognized an impairment loss of $29,782,912 accordingly. Net Loss. Net loss was $41,067,789 for the nine-month period ended September 30, 2025, compared to a net loss of $40,582,933 in the same period in 2024. 31 LIQUIDITY AND CAPITAL RESOURCES As of September 30, 2025, cash and cash equivalents were $5,820,083 as compared to $10,075,162 as of December 31, 2024. The components of this decrease of $4,255,079 are reflected below. Statement of Cash Flows Nine-Month Period Ended September 30, 2025 2024 Net cash provided by (used in) operating activities $ 4,574,613 $ (293,463 ) Net cash used in investing activities (8,673,384 ) (60,526,213 ) Net cash used in financing activities (260,997 ) (264,094 ) Effects of exchange rate changes on cash and cash equivalents 104,689 97,369 Net increase (decrease) in cash and cash equivalents $ (4,255,079 ) $ (60,986,401 ) For the nine-month period ended September 30, 2025, we met our working capital and capital investment requirements by using cash on hand. Net Cash provided by (used in) Operating Activities During the nine-month period ended September 30, 2025, cash flow provided by operating activities of approximately $4.57 million was mainly due to a non-cash adjustment related to depreciation and amortization of property, plant and equipment of $11.75 million, a loss on disposal of long-lived assets of $2 million, a impairment of long-lived assets of 29.78 million, and offset by a net loss of $41.07 million, a decrease in accounts receivable of $2.83 million. During the nine-month period ended September 30, 2024, cash flow used in by operating activities of approximately $0.29 million was mainly due to a net loss of $40.58 million, a decrease in deferred taxes of $3.62 million and offset by depreciation and amortization expense of $14.04 million and loss on disposal of equipment of $29.17 million. Accounts receivable Cash collections on our accounts receivable had a major impact on our overall liquidity. The following table presents the aging analysis of our accounts receivable as of September 30, 2025 and December 31, 2024. September 30, 2025 December 31, 2024 % of total % of total Aged 1-30 days $ 3,422,564 100 % $ 419,581 74 % Aged 31-60 days — — 144,942 26 % Aged 61-90 days — — — — Aged 91-120 days — — — — Aged 121-150 days — — — — Aged 151-180 days — — — — Aged 181-210 days — — — — Aged 211-240 days — — — — Total $ 3,422,564 100 % $ 564,523 100 % The overall accounts receivable balance as of September 30, 2025 increased by $2,858,041, as 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 customers. 32 Inventory Our inventory consists of the following: September 30, 2025 December 31, 2024 % of total % of total Raw materials $ 30,870 6 % $ 10,610 3 % Finished goods 451,842 94 % 304,761 97 % Total $ 482,712 100 % $ 315,371 100 % The net inventory level as of September 30, 2025 increased by $167,341, as compared to the net inventory level as of December 31, 2024. The main reason for the increase in inventory is to ensure the timely demands of customers, thereby increasing the stock. Raw materials increased by $20,260 as of September 30, 2025 as compared to December 31, 2024. Our finished goods increased by $147,081 as of September 30, 2025 as compared to December 31, 2024. Net Cash Used in Investing Activities During the nine months ended September 30, 2025, the Company carried out and completed an update and renovation on them during year 2025, with a total cost of $8,673,384. For the nine-month period ended September 30, 2024, we used approximately $60.5 million to the flood prevention project aiming to prevent flooding that could harm the wells, aqueducts and crude salt pans at our plant. Net Cash Used in Financing Activities For the nine-month period ended September 30, 2025 and 2024, we used $0.3 million to repay finance lease obligations. We believe that our available funds and cash flows generated from operations will be sufficient to meet our anticipated ongoing operating needs and our obligations as they full due in the next twelve (12) months. We had available cash of approximately $5.82 million at September 30, 2025, all of 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 or profitably manage any businesses or business segment we may acquire, or any expansion of our business. An expansion may involve a number of risks, including possible adverse effects on our operating results, diversion of management’s attention, inability to retain key personnel, risks associated with unanticipated events, risks associated with the pandemic and the financial statement effect of potential impairment of acquired intangible assets, any of which could have a materially adverse effect on our condition and results of operations. In addition, if competition for acquisition candidates or operations were to increase, the cost of acquiring businesses could increase materially. We may effect an acquisition with a target business which may be financially unstable, under-managed, or in its early stages of development or growth. Our inability to implement and manage our expansion strategy successfully may have a material adverse effect on our business and future prospects. Contractual Obligations and Commitments We have no significant contractual obligations not fully recorded on our consolidated balance sheets or fully disclosed in the notes to our consolidated financial statements. Additional information regarding our contractual obligations and commitments at September 30, 2025 is provided in the notes to our consolidated financial statements. See “Notes to Condensed Consolidated Financial Statements. Material Off-Balance Sheet Arrangements We do not currently have any off balance sheet arrangements falling within the definition of Item 303(a) of Regulation S-K. 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 nine months ended September 30, 2025. Item 3. Quantitative and Qualitative Disclosures About Market Risk Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1). 33