What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2026-08-28 compared with 2025-11-19 · 1021 added, 1044 removed, 444 unchanged (82% of the section changed)

2 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED BALANCE

(Expressed in U.S.

September 30, 2025

December 31, 2024

2026 (Unaudited)

Current Assets

2 unchanged sentences

Prepayments and deposits

Amount due from related parties

Other receivable

Amounts due from related parties

Other receivables

Total current assets

6 unchanged sentences

Total non-current assets

$ 131,907,547

$ 169,455,995

Liabilities and Stockholders’ Equity

Current Liabilities

Short-term bank borrowing

Accounts payable and accrued expenses

8 unchanged sentences

Operating lease liabilities, net of current portion

Long-term bank borrowing

Total non-current liabilities

Total Liabilities

Commitment and Loss Contingencies

Stockholders’ Equity

7 unchanged sentences

and 1,568,114 shares issued;

and 1,353,531 and 1,091,562 shares outstanding as of September 30, 2025 and December 31, 2024, respectively (1)

and 1,683,531

and 1,539,531 shares outstanding as of March 31, 2026 and

December 31, 2025, respectively

Treasury stock;

28,583 shares as of September 30, 2025 and December 31, 2024 at cost

28,583 shares as of March 31, 2026 and December 31, 2025 at cost

( 1,372,673 )

1 unchanged sentence

Additional paid-in capital

Share to be issued

Retained earnings unappropriated

( 11,452,728 )

( 7,526,347 )

Retained earnings appropriated

6 unchanged sentences

$ 133,731,810

(1) The shares and per

share data are presented on a retroactive basis to reflect the stock split.

See accompanying notes to the condensed consolidated financial statements.

(1) The shares and per share data are presented on a retroactive basis to reflect the stock split.

See accompanying notes to the

condensed consolidated financial statements.

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE

CONDENSED CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME (LOSS)

(Expressed in U.S.

Three-Month Period Ended September 30,

Nine -Month Period Ended September 30,

OPERATING COSTS AND EXPENSES

Cost of net revenue

( 7,996,785 )

( 4,071,616 )

Three-Month Period Ended March 31,

2026 (Unaudited)

2025 (Unaudited)

OPERATING COSTS AND EXPENSE

Cost of revenues

( 2,353,412 )

4 unchanged sentences

( 3,225,808 )

( 7,185,537 )

General and administrative expenses

1 unchanged sentence

( 1,389,523 )

( 2,409,957 )

TOTAL OPERATING COSTS AND EXPENSE

1 unchanged sentence

( 6,214,654 )

( 24,687,634 )

( 20,930,621 )

LOSS FROM OPERATIONS

1 unchanged sentence

( 4,610,207 )

( 14,998,025 )

OTHER INCOME (EXPENSE)

1 unchanged sentence

Interest income

Other expense, net

( 3,521,613 )

( 3,524,825 )

Loss on disposal of long-lived assets

( 2,008,853 )

( 29,169,008 )

Impairment of long-lived assets

( 29,782,912 )

LOSS BEFORE TAXES

( 35,664,512 )

( 4,596,580 )

( 41,067,789 )

( 44,164,800 )

INCOME TAX BENEFIT (EXPENSE)

$ ( 35,664,512 )

$ ( 3,492,883 )

LOSS BEFORE INCOME TAXES

( 3,926,381 )

( 4,629,500 )

COMPREHENSIVE LOSS

INCOME TAX EXPENSE

$ ( 3,926,381 )

$ ( 4,629,500 )

COMPREHENSIVE INCOME (LOSS):

$ ( 3,926,381 )

$ ( 4,629,500 )

OTHER COMPREHENSIVE (LOSS) INCOME

OTHER COMPREHENSIVE INCOME

- Foreign currency translation adjustments

2 unchanged sentences

$ ( 4,407,484 )

$ ( 39,530,615 )

$ ( 38,723,178 )

BASIC AND DILUTED LOSS PER SHARE (1)

2 unchanged sentences

to reflect the stock split.

See accompanying notes to the condensed consolidated financial statements.

The shares and per share data are presented on a retroactive basis

to reflect the stock split.

See accompanying

notes to the condensed consolidated financial statements.

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2025

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’

THREE-MONTH PERIOD ENDED MARCH 31, 2026

(Expressed in U.S.

comprehensive

outstanding(1)

unappropriated

BALANCE AT JUNE 30, 2025 (Unaudited)

( 1,372,673 )

$ ( 20,228,352 )

$ 142,214,825

Translation adjustment

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

( 35,664,512 )

Number of shares issued

Number of shares outstanding

Number of treasury stock

Treasury stock

Additional paid-in capital

Retained earnings unappropriated

Retained earnings appropriated

Accumulated other comprehensive

BALANCE AT DECEMBER 31, 2025 (Audited)

$ ( 1,372,673 )

BALANCE AT SEPTEMBER 30, 2025 (Unaudited)

$ 105,927,142

2 unchanged sentences

$ 111,477,922

comprehensive

outstanding(1)

unappropriated

BALANCE AT JUNE 30, 2024 (Unaudited)

Restricted shares issued for services

Currency translation adjustment

Issuance of Private Placement Units

Net loss for three-month period ended March 31, 2026

( 3,926,381 )

BALANCE AT MARCH 31, 2026 (Unaudited)

$ ( 1,372,673 )

Translation adjustment

Net income for three-month period ended September 30, 2024

$ 106,441,150

$ ( 11,452,728 )

BALANCE AT SEPTEMBER 30, 2024 (Unaudited)

$ ( 10,337,543 )

$ 109,946,159

Number of shares issued (1)

Number of shares outstanding (1)

Number of treasury stock (1)

Treasury stock

Additional paid-in capital (1)

Retained earnings unappropriated

Retained earnings appropriated

Accumulated other comprehensive

BALANCE AT DECEMBER 31, 2024 (Audited) (Restated)

$ ( 1,372,673 )

comprehensive

outstanding(1)

unappropriated

BALANCE AT DECEMBER 31, 2024 (Audited)

$ 101,712,325

4 unchanged sentences

Currency translation adjustment

Net loss for nine-month period ended September 30, 2025

( 41,067,789 )

BALANCE AT September 30, 2025(Unaudited)

( 1,372,673 )

$ ( 3,708,985 )

$ ( 19,316,969 )

$ 107,461,696

comprehensive

outstanding(1)

unappropriated

BALANCE AT DECEMBER 31, 2023 (Audited)

( 1,372,673 )

$ ( 18,053,269 )

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

( 4,629,500 )

Translation adjustment

Net loss for nine-month period ended September 30, 2024

( 4,629,500 )

BALANCE AT MARCH 31, 2025 (Unaudited)

$ ( 1,372,673 )

BALANCE AT SEPTEMBER 30, 2024(Unaudited)

$ 105,192,535

1 unchanged sentence

$ 141,690,732

(1) The shares and per share data

are presented on a retroactive basis to reflect the stock split.

See accompanying notes to the condensed consolidated financial statements.

Treasury Stock

3 unchanged sentences

Share to be Issued

(1) The shares and per share data are presented on a retroactive basis

to reflect the stock split.

The shares and per share data are presented on a retroactive basis

to reflect the stock split.

See accompanying notes to the condensed consolidated financial statements.

GULF RESOURCES, INC.

2 unchanged sentences

(Expressed in U.S.

Nine-Month Period Ended September 30,

Three-Month Period Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

4 unchanged sentences

Depreciation and amortization

Deferred tax asset

( 3,615,091 )

Amortization of right-of-use asset

Amortization of operating lease right-of-use assets

Amortization of finance lease right-of-use asset

Stock-based compensation expense

Loss on disposal of long-lived assets

Impairment of long-lived assets

Accrued Liabilities

Bad debt expense

Accrued interest receivable

Changes in assets and liabilities:

2 unchanged sentences

Prepayments and deposits

Advance from customers

Other receivables

Accounts and other payable and accrued expenses

( 2,685,766 )

Amount due to related Parties

Taxes payable

Operating lease

Lease liabilities

Net cash provided by (used in) operating activities

( 1,580,128 )

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment

( 8,673,384 )

( 60,526,213 )

Net cash used in investing activities

( 8,673,384 )

( 60,526,213 )

Repayments for loans to third parties

Net cash provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of finance lease obligation

Net cash used in financing activities

Proceeds from sale of private placement units

Proceeds from interest-free loan from a related party

Net cash provided by financing activities

EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

1 unchanged sentence

( 1,552,117 )

( 60,986,401 )

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS - END OF PERIOD

Periods Ended September 30,

Periods Ended March 31,

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the nine-month period ended September 30, 2025 for:

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

Paid for taxes

Interest on finance lease obligation

Interest paid

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

MARCH 31, 2026

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING

of Presentation and Consolidation

The accompanying unaudited consolidated financial

statements have been prepared by Gulf Resources, Inc.

(“Gulf Resources”), a Nevada corporation and its subsidiaries (collectively,

the “Company”).

The consolidated financial statements

include the accounts of Gulf Resources, Inc.

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

the British Virgin Islands, which owns 100% of Hong Kong Jiaxing Industrial Limited, a company incorporated in Hong Kong

NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF

SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation and Consolidation

The accompanying unaudited consolidated

financial statements have been prepared by Gulf Resources, Inc.

(“Gulf Resources”), a Nevada corporation and its subsidiaries

(collectively, the “Company”).

The consolidated financial

statements include the accounts of Gulf Resources, Inc.

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

incorporated in the British Virgin Islands, which owns 100% of Hong Kong Jiaxing Industrial Limited, a company incorporated in Hong

Kong (“HKJI”).

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

1 unchanged sentence

(“DCHC”) and Shouguang Hengde Salt Industry Co.

All material intercompany transactions have been eliminated on consolidation.

(b) Going Concern Consideration

The consolidated financial statements are prepared on the going concern

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

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

financing, etc.

The company assesses its liquidity by monitoring cash and cash equivalents,

as well as operating and capital expenditure commitments.

As of September 30, 2025, the Company had

current assets of $ 15.67 million and current liabilities of $ 17.11 million.

As a result, the deficit was $ 1.44 million,

and it has suffered losses for the nine months ended by September 30, 2025.

If it is unable to raise

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

If there are significant doubts regarding the company's ability to

continue operations, the company is attempting to alleviate such concerns through measures such as controlling operating expenses, shifting

business focus to revenue-generating activities, obtaining authorization from domestic banks and other financial institutions, and seeking

equity or debt financing.

Additionally, the company will also obtain financial support commitments from related parties.

However, these

situations still pose significant doubts regarding the company's ability to continue operations.

The financial statements do not consider

the potential impact on the recoverability of assets, classification, and amounts and classification of liabilities if the company is

unable to continue operations.

Nature of Business

The Company manufactures and trades bromine through

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

manufactures and trades crude salt

through its wholly-owned subsidiary, SHSI;

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

industry and for human and animal antibiotics through its wholly-owned subsidiary, Shouguang Yuxin Chemical Industry Co., Limited (“SYCI”)

in the People’s Republic of China (“PRC”).

DCHC was established to further explore and develop natural gas and brine

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

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

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

All material intercompany transactions have

been eliminated on consolidation.

On December 22, 2025, SYCI was sold.

(b) Nature of Business

The Company manufactures and

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

and trades crude salt through its wholly owned subsidiary, SHSI;

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

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

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

DCHC was established to further explore

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

DCHC’s business commenced trial operation

in January 2019 but suspended production temporarily in May 2019 as required by the government to obtain project approval (see Note 1

(i) Bromine and Crude Salt Segments

In February 2019, the Company received a notification

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

9 passed inspection and could resume operations.

In February 2019, the Company

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

9 passed inspection and

could resume operations.

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

On November 25, 2019, the government of Shouguang City issued a notice

ordering all bromine facilities in Shouguang City, including the Company’s bromine facilities, including Factory No.

1 and Factory

On November 25, 2019, the

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

bromine facilities, including Factory No.

1 and Factory No.

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

Subsequently, due to the coronavirus outbreak in China,

the local government ordered those bromine facilities to postpone the commencement of production.

Subsequently, the Company received an

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

temporary closure.

Further, the Company received another approval from the Shouguang Yangkou People’s Government dated March 5,

2020 allowing the Company to resume production at its bromine factories No.

9 in order to meet the needs of bromide

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

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

commencement of production.

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

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

Further, the Company received another

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

bromine factories No.

4, No.7 and No.

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

(the “March 2020 Approval”).

The Company’s Factories No.

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

9 commenced commercial production

on May 6, 2020.

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

8, allowing it to recommence production

in August 2022.

8 began contributing revenue in the fourth quarter 2022.

The Company is still waiting for governmental approval for Factories

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

prevention of flood.

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

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

7 commenced trial production in mid-March 2020

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

9 commenced commercial production on May 6, 2020.

Company received verbal notification from the government regarding Factory No.

8, allowing it to recommence production in August

8 began contributing revenue in the fourth quarter of 2022.

The Company is awaiting governmental

approval for Factories No.

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

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

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

Pursuant to the notification

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

1, 2023 8:00 AM China Time.

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

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

In April 2022, Shouguang Hengde Salt Industry Co.

Ltd, our subsidiary,

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

This subsidiary was created in response to a new

government policy that required bromine and crude salt companies to have separate registrations.

The creation of this subsidiary and the

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

However, the establishment of this subsidiary has resulting

in a reallocation of costs between bromine and crude salt.

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

This subsidiary was created in response

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

The creation of this subsidiary

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

However, the establishment of this subsidiary has

resulted in a reallocation of costs between bromine and crude salt.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(ii) Chemical Segment

On November 24, 2017, the Company received a letter

from the Government of Yangkou County, Shouguang City notifying the Company to relocate its two chemical production plants located in

the second living area of the Qinghe Oil Extraction to the Bohai Marine Fine Chemical Industrial Park (“Bohai Park”).

This was because the two plants were located in a residential area and their production activities impacted the living environment of

the residents.

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

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

All chemical enterprises

which did not comply with the requirements of the safety and environmental protection regulations were ordered to shut down.

In December 2017, the Company secured from the

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

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

In January 2020, the Company received the environmental

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

The Company began

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

the civil works by the end of June 2021.

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

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

at the chemical factory had been delayed.

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

management that the electricity restrictions were eased.

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

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

The Company believes the relocation process will

cost approximately $ 69 million in total.

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

to the design of the new chemical factory, and progress payment and deposit for the construction of the new factory building in the amount

of $ 45,584,344 and $ 45,584,344 , which were recorded in the prepaid land leases and property, plant and equipment in the consolidated balance

sheets as of September 30, 2025 and December 31, 2024.

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

impact the overall cost of the project.

On November 24, 2017, the Company

received a letter from the Government of Yangkou County, Shouguang City notifying the Company to relocate its two chemical production

plants located in the second living area of the Qinghe Oil Extraction to the Bohai Marine Fine Chemical Industrial Park (“Bohai

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

environment of the residents.

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

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

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

to shut down.

In December 2017, the Company

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

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

In January 2020, the Company

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

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

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

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

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

beginning trial production at the chemical factory had been delayed.

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

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

Accordingly, the Company has contacted its

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

and trial production.

The Company believes this relocation process

will cost approximately $ 69 million in total.

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

related to the design of the new chemical factory, and progress payments and deposits for the construction of the new factory

building in the amount of $ 45,584,344 and $ 45,584,344 , which were recorded in the prepaid land leases, prepayments and deposits and

property, plant and equipment in the consolidated balance sheets as of March 31, 2026 and December 31, 2025.

On December 10, 2025, SCHC entered

into an equity transfer agreement with Shandong Rongyuan Pharmaceutical Co., Ltd.

Pursuant to the agreement, Shandong Rongyuan

Pharmaceutical Co., Ltd.

agreed to purchase 100 % of the equity interest in SYCI for an aggregate consideration of RMB 21.2 million (US$

The transaction was completed on December 22, 2025.

(iii) Natural Gas Segment

In January 2017, the Company completed the first

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

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

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

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

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

In compliance with

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

natural gas, respectively.

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

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

on May 1, 2020, privately owned enterprises are allowed to participate in the natural gas production.

The Company plans to proceed with

its applications for the natural gas and brine project approvals with related government departments until the governmental planning has

been finalized.

(d) Use of Estimates

The Company’s consolidated financial statements have been

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

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

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

The Company bases its estimates on

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

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

subjective judgments include, but are not limited to, useful lives of property, plant and equipment, recoverability of long-lived

assets, determination of impairment losses, assessment of market value of inventories and provision for inventory obsolescence,

allowance for doubtful accounts, recognition and measurement of deferred income taxes, valuation allowance for deferred tax assets,

and assumptions used for the valuation of share based payments.

Accordingly, actual results may differ significantly from these

estimates under different assumptions or conditions.

(e) Cash and Cash Equivalents

Cash and cash equivalents consist of all cash balances and highly

liquid investments with original maturities of three months or less.

Because of short maturity of these investments, the carrying

amounts approximate their fair values.

(f) Allowance

for Doubtful Accounts

We make estimates of the uncollectibility of accounts

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

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

Credit evaluations

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

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

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

If management were to make different

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

(g) Concentration

of Credit Risk

The Company is exposed to credit risk in the normal course of business,

primarily related to accounts receivable and cash and cash equivalents.

Substantially all of the Company’s cash and cash equivalents

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

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

The Company placed $ 5,820,083 and

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

The Company has not

experienced any losses in such accounts in the PRC.

Concentrations of credit risk with respect to accounts receivable exists

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

However, such concentrations of credit risks

are limited since the Company performs ongoing credit evaluations of its customers’ financial condition and extends credit terms

as and when appropriate.

In January 2017, the Company

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

production in January 2019.

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

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

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

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.

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

planning has been finalized.

The Company’s consolidated

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

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

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

The Company bases its

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

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

judgments include, but are not limited to, useful lives of property, plant and equipment, recoverability of long-lived assets, determination

of impairment losses, assessment of market value of inventories and provision for inventory obsolescence, allowance for doubtful accounts,

recognition and measurement of deferred income taxes, valuation allowance for deferred tax assets, and assumptions used for the valuation

of share based payments.

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

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(d) Cash and Cash Equivalents

Cash and cash equivalents consist

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

Because of short maturity of these

investments, the carrying amounts approximate their fair values.

(e) Accounts receivable and Allowance for Doubtful Accounts

Accounts receivable is stated

at cost, net of allowance for doubtful accounts.

The normal credit term extended to customers ranges between 90 and 180 days.

reviews all receivables that exceed the term.

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

of the collectability of trade and other receivables.

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

and the Company considers the historical level of credit losses.

The Company makes judgments about the credit worthiness of each customer

based on ongoing credit evaluations, and monitors current economic trends that might impact the level of credit losses in the future.

If the financial condition of the customer begins to deteriorate, resulting in their inability to make payments within credit term provided,

an allowance may be required.

As of March 31, 2026 and December

31, 2025, the provision for doubtful debts was $ 13,440 and $ 16,430 , respectively.

The reversal for doubtful accounts in the consolidated

statements of comprehensive income (loss) for the period ended March 31, 2026 was $ 3,236 .

(f) Concentration of Credit Risk

The Company is exposed to credit

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

Substantially all of the

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

of China Limited, China Merchants Bank Company Limited, Sichuan Rural Credit Union, Bank of China Limited and Shandong Shouguang Rural

Commercial Bank Co., Ltd., which are not insured or otherwise protected.

The Company placed $ 6,537,505 and $ 3,793 with these institutions

as of March 31, 2026 and December 31, 2025, respectively.

The Company has not experienced any losses in such accounts in the PRC.

Concentrations of credit risk

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

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

financial condition and extends credit terms as and when appropriate.

(g) Inventories

Inventories are stated at the

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

Costs of work-in-progress and finished goods comprise

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

Net realizable value is based on estimated selling

price less costs to complete and selling expenses.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

MARCH 31, 2026

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(h) Property,

Plant and Equipment

Property, plant and equipment are stated at cost

less accumulated depreciation and any impairment losses.

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

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

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

All other ordinary repair and maintenance

costs are expensed as incurred.

Mineral rights are recorded at cost less accumulated

depreciation and any impairment losses.

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

the units of production method, whichever is shorter.

Construction in process primarily represents direct

costs of construction of property, plant and equipment.

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

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

The Company’s depreciation and amortization

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

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(h) Advances to suppliers, net

Advances to suppliers are stated at

the original amount less an allowance for doubtful account.

Advances to suppliers primarily

consist of prepayments for purchase of raw materials and equipment for production purposes.

The Company reviews its advances to suppliers

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

against receive of products.

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

(i) Property, Plant and Equipment

Property, plant and equipment

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

Expenditures for new facilities or equipment, and major expenditures

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

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

All other ordinary repair

and maintenance costs are expensed as incurred.

Mineral rights are recorded at

cost less accumulated depreciation and any impairment losses.

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

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

Construction in process primarily

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

Costs incurred are capitalized and transferred to property,

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

The Company’s depreciation

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

Basis of Presentation and Summary of

Significant Accounting Policies - Schedule of Property, Plant and Equipment Useful Life

Buildings (including salt pans)

Useful life (in years)

Mineral rights

Leasehold Improvements Leasehold Improvements

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

1 unchanged sentence

Furniture, fixtures and equipment

Property, plant and equipment under the finance

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

Producing oil and gas properties are depreciated

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

Common facilities that are built specifically to service production

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

gas properties on a pro-rata basis.

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

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

Costs associated with significant development projects are

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

(i) Retirement

Producing oil and gas properties

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

Common facilities that are built specifically to service

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

oil and gas properties on a pro-rata basis.

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

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

Costs associated with significant development projects

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

depreciation.

(j) Asset Retirement Obligation

The Company follows Financial

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

for estimated reclamation and abandonment costs.

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

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

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

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

related asset.

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

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

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Currently, there are no reclamation

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

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

(k) Recoverability of Long-lived Assets

In accordance with Financial

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

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

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

no longer appropriate.

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

The Company determines the existence

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

the carrying amount of the assets.

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

asset exceeds the discounted estimated future cash flows.

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

fair value of such assets less costs to sell.

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

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

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

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

For the three-month period ended March

31, 2026 and 2025, the Company recognized impairment of long-lived assets of 0 nil.

(l) Retirement Benefits

Pursuant to the relevant laws and regulations

2 unchanged sentences

The required contributions

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

The Company’s

contributions totaled $ 121,872 and $ 99,035 for the three-month period ended September 30, 2025 and 2024, respectively, and totaled $ 418,457

and $ 322,448 for the nine-month period ended September 30, 2025 and 2024, respectively.

Net revenue is net of discount and value added

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

Revenue is recognized when the control of the promised goods

is transferred to the customers in an amount that reflects the consideration that the Company expects to receive from the customers in

exchange for those goods.

The acknowledgement of receipt of goods by the customers is when control of the product is deemed to be transferred.

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

Customers have no rights to return the goods upon acknowledgement

of receipt of goods.

Revenue from contracts with customers is disaggregated in Note 18.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(k) Recoverability

of Long-lived Assets

In accordance with Financial Accounting Standards

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

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

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

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

The Company determines the existence of such impairment

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

of the assets.

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

discounted estimated future cash flows.

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

assets less costs to sell.

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

or disposed of to their estimated fair values.

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

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

For the three-month and nine-month periods ending September 30, 2025,

the impairment of the company's long-term assets was $ 29,782,912 .

For the three-month and nine-month periods ending September 30, 2024, there

was no impairment of the company's long-term assets.

and Diluted Earnings per Share of Common Stock

Basic earnings per common share are based

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

Diluted earnings per share are computed using weighted

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

Potential common shares that would

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

the exercise prices of the outstanding

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

Anti-dilutive common stock equivalents which were excluded from

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

2025 and 2024, respectively.

Because the Company reported a net loss

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

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

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

The Company’s contributions totaled $ 107,657 and $ 173,485 for the three-month period ended March 31, 2026 and 2025, respectively.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(m) Reporting

Currency and Translation

The financial statements of the Company’s

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

whereas the functional

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

As such, the Company uses the “current rate

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

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

The capital accounts are translated at the historical rate.

Adjustments resulting from the translation of the balance sheets of the Company’s

PRC subsidiaries are recorded in stockholders’ equity as part of accumulated other comprehensive loss.

The statement of loss and

comprehensive loss is translated at average rate during the reporting period.

Gains or losses resulting from transactions in currencies

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

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

the acquisition of business which is translated at historical rates.

All of the Company’s operations and assets

are located in PRC.

The Company may be adversely affected by possible political or economic events in this country.

effect of these factors cannot be accurately predicted.

(o) Inventories .

Inventories are stated at the lower of cost, determined

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

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

labor and an attributable portion of manufacturing overhead.

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

and selling expenses.

The Company determines if an arrangement is a

lease at inception.

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

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(m) Mineral Rights

The Company follows FASB ASC 805

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

for based on their substance.

Mineral rights are included in property, plant and equipment.

The Company determines if an arrangement

is a lease at inception.

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

liabilities in the consolidated balance sheets.

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

in the consolidated balance sheets.

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

balance sheets.

ROU assets represent the Company’s right

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

from the lease.

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

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

ROU assets represent the Company’s

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

arising from the lease.

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

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

In cases where the implicit rate is not readily

2 unchanged sentences

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

The Company does not recognize operating lease

ROU assets and liabilities arising from lease arrangements with lease term of twelve months or less.

(q) Stock-based Compensation

Stock-based awards issued to employees are recorded

at their fair values estimated at grant date using the Black-Scholes model and the portion that is ultimately expected to vest is recognized

as compensation cost over the requisite service period.

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

stock-based awards are measured at the grant-date fair value of the equity instruments that the Company is obligated to issue when the

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

have been satisfied.

The Company has elected to account for the forfeiture

of stock-based awards as they occur.

Contingencies

The Company accrues for loss contingencies relating

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

such liabilities become probable and could be reasonably estimable.

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

judgment, as appropriate.

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

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

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

The Company accounts for income taxes in accordance

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

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

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

Deferred tax assets and liabilities are measured using

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

The Company has elected not to recognize

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

Finance leases are initially

recorded at the net present value of future minimum lease payments, which includes certain lease and non- lease components.

Finance leases

generally have one of these five attributes:

1) ownership of the underlying asset transfers to the Company at the end of the lease term,

2) the lease agreement contains a purchase option that the Company is reasonably certain to exercise, 3) the lease term represents the

major part of the asset’s economic life, 4) the present value of lease payments over the lease term equals or exceeds substantially

all of the fair value of the asset, and 5) the underlying asset is so specialized in nature that it provides no alternative use to the

lessor after the lease term.

Finance Lease Assets are presented separately on the Consolidated Balance Sheets.

(o) Basic and Diluted Earnings per Share of Common Stock

Basic earnings per common stock

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

Diluted earnings per share are computed using

weighted average number of common stocks plus dilutive common stock equivalents outstanding during the period.

Potential common stocks

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

the exercise prices of the

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

Anti-dilutive common stock equivalents which were excluded

from the calculation of number of dilutive common stock equivalents amounted to 0 share for the three-month periods ended March 31, 2026 and 2025.

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

(p) Reporting Currency and Translation

The financial statements of the

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

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

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

As such, the Company uses the

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

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

balance sheet date.

The capital accounts are translated at the historical rate.

Adjustments resulting from the translation of the balance

sheets of the Company’s PRC subsidiaries are recorded in stockholders’ equity as part of accumulated other comprehensive income

The statement of comprehensive income (loss) is translated at average rate during the reporting period.

Gains or losses resulting

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

and administrative expense.

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

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

(q) Revenue Recognition

Net revenue is net of discount and value added

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

Revenue is recognized at a point in time when the control

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

receive from the customers in exchange for those goods.

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

the product is deemed to be transferred.

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

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

Customers typically pay after the Company delivers and

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

Revenue from contracts with customers is

disaggregated in Note 20.

(r) Income Taxes

The Company accounts for income

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

income taxes.

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

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

Deferred tax assets and liabilities are

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

to be realized or settled.

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

If it is more likely than

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

The guidance also provides

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

A tax benefit from an uncertain tax

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

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

tax in the consolidated statement of income (loss).

Accounting Pronouncements

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

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

A tax benefit from an

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

its technical merits.

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

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

(s) Exploration Costs

Exploration costs, which included

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

resources, are charged to the income statement as incurred.

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

costs are capitalized.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

For oil and gas properties, the

successful efforts method of accounting is adopted.

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

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

and the economic and operating viability of the project.

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

wells that discover potentially economic reserves in areas where major capital expenditure will be required before production would begin

and when the major capital expenditure depends upon the successful completion of further exploratory work remain capitalized and are reviewed

periodically for impairment.

(t) Fair Value Measurement

The Company applies Accounting

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

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

ASC Topic 820 defines fair value

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

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

ASC Topic 820 specifies a hierarchy

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

The hierarchy

is as follows:

Level 1 inputs to the valuation methodology are quoted prices

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

Level 2 inputs to the valuation

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

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

Level 3 inputs to the valuation methodology are unobservable

and significant to the fair value.

The carrying amounts of the Company’s

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

The Company’s financial instruments

include cash, accounts receivable, amounts due to related parties, short-term borrowing, long-term borrowing, other receivables,

accounts payable and other current payables.

There were no material unrecognized financial assets and liabilities as of March 31,

2026 and December 31, 2025.

(u) Loss Contingencies

The Company accrues for loss

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

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

Such estimates may be based on advice from

third parties or on management’s judgment, as appropriate.

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

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

to the likelihood or amount of loss.

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

(v) Stock-based Compensation

The Company accounts for stock-based

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

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

Company estimates the fair value of stock-based awards on the date of grant using the Black- Scholes model.

The value of the portion of

the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the straight-line method.

In June 2018, the FASB issued ASU No.

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

Share-Based Payment Accounting.

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

for acquiring goods and services from non-employees.

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

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

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

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

have been satisfied.

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

(w) New Accounting Pronouncements

Recent accounting pronouncements adopted

There were no recent accounting pronouncements adopted during the nine

months ended September 30, 2025.

Recently Issued Accounting Pronouncements Not

There were no recently issued accounting pronouncements not yet adopted

during the nine months ended September 30, 2025.

(u) Fair Value Measurement

The Company applies Accounting Standards Codification

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

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

ASC Topic 820 defines fair value as the price

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

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

ASC Topic 820 specifies a hierarchy of valuation

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

The hierarchy is as follows:

Level 1 inputs to the valuation methodology are

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

Level 2 inputs to the valuation methodology include

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

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

Level 3 inputs to the valuation methodology are

unobservable and significant to the fair value.

The carrying amounts of the Company’s financial

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

The Company’s financial instruments include cash,

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

There were no material unrecognized

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

The Company determines the fair value with

the help from independent third party professional valuation specialists, and the assumptions used in estimating fair value require

significant judgment.

The use of different assumptions and judgments could result in a materially different estimate of fair value.

There are Base land price coefficient correction method and market comparison method for Prepaid land leases, and cost method for

Property, Plant and equipment are used in the valuation, which are all classified in Level 3 of the valuation hierarchy.

The following table presents the Company’s

assets measured at fair value on a non-recurring basis for the years ended September 30, 2025:

Basis of Presentation and Consolidation - Fair Value Assets

Measured on Non-Recurring Basis

Fair Value Measurement Non-Recurring

Fair Value Measurements at Reporting Date Using

September 30,2025

Quoted Prices

Total Gain(Loss)

September 30,2025

As of September 30, 2025

Prepaid land leases

As of September 30, 2025

Property, Plant and equipment

There was no recent accounting pronouncements adopted for the three

months ended March 31, 2026.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU No.

2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40), which

requires disaggregated disclosure of income statement expenses for public business entities.

The objective of ASU 2024-03 is to

“address requests from investors for more detailed information about the types of expenses .

in commonly presented expense

captions (such as cost of sales, selling, general, and administrative expenses, and research and development).” Investors

advised the FASB that “disclosure of disaggregated information about expenses is critically important in understanding an

entity’s performance, assessing an entity’s prospects for future cash flows, and comparing an entity’s performance

over time and with that of other entities.” ASU 2024-03 adds ASC 220-40 to require a footnote disclosure about specific

expenses by requiring public entities to disaggregate, in a tabular presentation, each relevant expense caption on the face of the

income statement that includes any of the following natural expenses:

(1) purchases of inventory, (2) employee compensation, (3)

depreciation, (4) intangible asset amortization, and (5) depreciation, depletion, and amortization (DD&A) recognized as part of

oil- and gas-producing activities or other types of depletion expenses.

The tabular disclosure would also include certain other

expenses, when applicable.

The ASU does not change or remove existing expense disclosure requirements;

however, it may affect where

that information appears in the footnotes to the financial statements.

ASU 2024-03 is effective for all public entities for fiscal

years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

Early adoption

is permitted.

The Company does not expect the adoption to have a material impact on the consolidated financial statements.

In July 2025, the FASB issued

ASU 2025-05, Financial Instruments—Credit Losses (Topic 326) Measurement of Credit Losses for Accounts Receivable and Contract Assets.

The ASU addresses challenges encountered when applying the guidance in Topic 326, Financial Instruments—Credit Losses, to current

accounts receivable and current contract assets arising from transactions accounted for under Topic 606, Revenue from Contracts with Customers.

The amendments will be effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within

those annual reporting periods.

Early adoption is permitted.

The Company is in the process of assessing the impact of the amendments on

the Company’s consolidated financial statements.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

1 unchanged sentence

Accounts receivable net consist of:

September 30,

Accounts Receivable, Net -

Schedule of Accounts Receivable

Accounts receivable

Allowance for doubtful debt

Accounts receivable, net

The overall accounts receivable balance as of

September 30, 2025 increased by $ 2,858,041 , as compared to those of December 31, 2024.

The increase was due to the rise in sales.

policies in place to ensure that sales are made to customers with an appropriate credit history.

We perform ongoing credit evaluation

on the financial condition of our customer.

March 31, 2026 decreased by $ 594,979 , as compared to those of December 31, 2025.

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

We have policies in place to ensure that sales are made to customers with an appropriate credit history.

We perform ongoing credit

evaluation on the financial condition of our customer.

NOTE 3 – INVENTORIES

1 unchanged sentence

Inventories - Schedule of Inventories, Current

September 30,

Raw materials

Finished goods

( 1,240,760 )

Inventory, net

The Company recorded impairment charges for slow moving inventory in

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

Inventories, net

The Company recorded impairment charges for slow moving inventory

in the amounts of nil 0 for the three months ended March 31, 2026 and 2025.

NOTE 4 – PREPAYMENTS AND DEPOSITS, NET

2 unchanged sentences

Deposits, Net - Schedule of Prepayments and Deposits, Net

September 30,

December 31, 2024

Prepayments and deposits

1 unchanged sentence

( 1,685,900 )

( 1,648,454 )

Prepayments and deposits, net

As of September 30, 2025, the total amount of advance payments and

deposits recorded by the company, net of impairment provisions was $ 5,916,171 .

NOTE 5 – PREPAID LAND LEASES

The Company has the rights to use certain parcels

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

The production

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

The lease term ranges from ten to fifty years.

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

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

new lease standard was adopted.

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

As of January 1,

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

In December 2017, the Company paid a one lump sum upfront amount of

$ 8,883,165 for a 50-year lease of a parcel of land at Bohai Marine Fine Chemical Industrial Park (“Bohai”) for the new chemical

factory under construction.

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

This was classified as an operating lease prior

to and as of January 1, 2019.

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

The lease term expires on August 12, 2069.

amount paid was recorded as prepaid land leases, net of current portion in the consolidated balance sheet as of September 30 2025 and

December 31, 2024.

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

duty and related land use rights fees.

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

placed in service.

The above leased-land had done the impairment of

based on the independent third party evaluation report , and further been auctioned by the court due to the compulsory execution

related to litigation.

Please see note 16 for more details.

For the three months ended March 31, 2026 and 2025, the Company recognized

provision of nil for the prepayments and deposits.

NOTE 5 – OTHER RECEIVABLES, NET

Other receivables consisted of the following:

Other Receivable, Net - Schedule of Other Receivable

Loan receivable (1)

Proceeds receivable from sale of subsidiary (2)

Other receivables, net

(1) During the year ended December 31, 2025, the Company entered into five borrowing arrangements with a third party for an aggregate principal amount of $14,383,955, bearing interest at 9% per annum.

Certain borrowings were guaranteed by individuals or entities or secured by certain assets.

As of March 31, 2026, the outstanding balance of these borrowings and the associated interests were $8,815,666 and $204,964, respectively.

To date, all of the above borrowings, including the related accrued interest, had been fully repaid.

(2) The amount represents the receivable from the sale of SYCI, which is

due in December, 2026 from Shandong Rongyuan Pharmaceutical Co., Ltd.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 6 – PROPERTY, PLANT AND EQUIPMENT, NET

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

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

and Equipment, Net

September 30,

plant and equipment, net consist of the following:

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

Mineral rights

Leasehold Improvements

Plant and machinery

5 unchanged sentences

( 79,598,798 )

( 6,744,380 )

Net book value

The rollforward of property, plant and equipment, net were as follows:

Property, Plant and

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

of Brine Well (a)

Remodel of Chlorine Gas

Mineral rights

Leasehold Improvements

Plant and machinery

Furniture, fixtures and office equipment

Motor vehicles

Construction in progress

Accumulated depreciation and amortization

( 79,598,798 )

( 3,356,786 )

The Company has certain buildings and salt

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

government authority.

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

The aggregate carrying values of these properties situated on parcels of the land are $ 57,674,442

and $ 50,219,026

as at September 30, 2025 and December 31, 2024, respectively.

The increase in this amount is

mainly due to the renovation project of crude salt pans.

During the three-month period ended September 30, 2025, depreciation

and amortization expense totaled $ 3,747,191 ,of which $ 353,924 , $ 193,767 and $ 3,199,500 were recorded in direct labor and factory overheads

incurred during plant shutdown , administrative expenses and cost of net

During the nine-month period ended September 30, 2025 , depreciation

and amortization expense totaled $ 11,735,615 of which $ 3,253,978 , $ 1,174,875 and $ 7,306,762 were recorded in direct labor and factory

overheads incurred during plant shutdown , administrative expenses and

cost of net revenue .

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

depreciation and amortization expense totaled $ 4,522,525 ,

of which $ 1,211,694 , $ 203,244 and $ 3,107,587 were recorded in direct labor and factory overheads incurred during plant shutdown ,

administrative expenses and cost of net revenue .

nine-month period ended September 30, 2024 , depreciation and

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

overheads incurred during plant shutdown , administrative expenses

and cost of net revenue .

The company had done the impairment of $ 22,790,991 for these assets based

on the independent third party evaluation report, and further been auctioned by the court due to the compulsory execution related to

Please see note 16 for more details.

For those acquired crude salt assets bought back

in year 2024.

The company carried out and completed an update and renovation on them during year 2025, with a total cost of $ 8,673,384 .

( 1,271,209 )

( 83,904,706 )

Net book value

( 3,356,786 )

Company was undergoing renovation and upgrade work on the brine well,

which remained incomplete as of March 31, 2026.

Accordingly, the brine well’s original cost and related accumulated depreciation

were reclassified to construction in progress pending completion of the renovation and upgrade work.

(b) In the first quarter of 2026, the Company completed the renovation and

upgrade project for the chlorine gas shed, at a total cost of $548,296.

March 31, 2026, depreciation and amortization expense totaled $ 3,356,786 were recorded in direct labor and factory overheads incurred

during plant shutdown, cost of revenue, and general & administrative expenses.

NOTE 7 – FINANCE LEASE RIGHT-OF-USE ASSETS

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

the following:

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

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

Plant and Equipment Under Finance Leases

September 30,

Buildings Buildings

Accumulated depreciation and amortization

( 20,433,786 )

( 19,390,837 )

Net book value

1 unchanged sentence

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

The Company has not been able to obtain property ownership

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

During the three and nine months period ended

September 30, 2025, depreciation and amortization expense totaled $ 1,266 and $ 3,778 , respectively, which was recorded in direct labor

and factory overheads incurred during plant shutdown.

During the three and nine months period ended

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

and factory overheads incurred during plant shutdown.

The Company has not been able to obtain property ownership certificates

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

During the three months ended March 31, 2026,

depreciation and amortization expense totaled $ 733,298 , which was recorded in direct labor and factory overheads incurred during plant

shutdown, cost of revenue, and general & administrative expenses.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 8 – OPERATING LEASE RIGHT–OF

NOTE 8 – OPERATING LEASE RIGHT–OF USE ASSETS

The Company has the rights to use certain parcels

3 unchanged sentences

The parcels of land of which the

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

lease right-of-use assets amount of $ 6,980,537 as at September 30, 2025.

As of September 30, 2025, the total operating

lease ROU assets was $ 5,847,348 .

The total operating lease cost for the nine-month

period ended September 30, 2025 and 2024 was $ 654,450 and $ 659,509 .

Company cannot obtain land use rights certificates covers a total of approximately 34.93 square kilometers at March 31, 2026.

As of March 31, 2026, the total operating lease right-of-use assets

was $ 5,621,918 .

The total operating lease cost for the three-month period ended March

31, 2026 and 2025 was $ 222,161 and $ 217,801 , respectively.

NOTE 9– BORROWINGS

The company entered into a loan agreement

with Shandong Shouguang Industrial and Commercial Bank Co., Ltd.

for a principal amount of $ 2,890,382 , bearing interest at 6.375 % per

annum, with a maturity date of December 26, 2025 .

The borrowing was guaranteed by Yang Ming, Yu Wenxiang, and Shouguang Broadcasting and

Television Group Col, Ltd.

The borrowing was also secured by land and buildings owned by Shandong Shouguang Vegetable Seed Industry Group

The Company paid interest on a monthly basis, however, the principal balance became past due and remained unpaid as of March 31, 2026 due to disputes between the Company and the bank.

The Company entered into a loan agreement

with Shandong Shouguang Rural Commercial Bank Co., Ltd.

for a principal amount of $ 2,381,675 , bearing interest at 6.35 % per annum, with

a maturity date of March 26, 2027 .

The borrowing was guaranteed by Yang Ming and Yu Wenxiang secured by the 15 th

and 16 th floors of Meilin Building, located in Shouguang, Shandong China, which are owned by Shandong

Shouguang Hongye Economic and Trade Co., Ltd.

The Company pays interest monthly and the principal is due at maturity.

NOTE 10 – PAYABLE AND ACCRUED EXPENSES

Payables and accrued expenses

consist of the following:

Payables and accrued expenses consist of the following:

Payable and Accrued

Expenses - Schedule of Accounts Payable and Accrued Liabilities

September 30,

Accounts payable

3 unchanged sentences

Accrued expense-others (1)

Accrued expense-others mainly include the purchase of the unpaid portion

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

NOTE 10– RELATED PARTY TRANSACTIONS

On September 25, 2012, the Company purchased

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

“Seller”) at a cost of approximately $ 5.7

million in cash, of which Mr.

Ming Yang, the former chairman of the board of directors of the Company, had a 99 %

equity interest in the Seller.

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

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

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

The expense associated with this agreement for the three and nine months

ended September 30, 2025 was approximately $ 21,877

and $ 65,300 .

The expense associated with this agreement for the three and nine months ended September 30, 2024 was approximately

$ 22,258 and $ 66,125 .

(1) Accrued expense-others mainly included

accrued professional fees and accrued interest payable that is disputed by the Company in connection with its borrowing from

Shouguang Industrial and Commercial Bank Co., Ltd.

Accrued expense-others mainly included

accrued professional fees and accrued interest payable that is disputed by the Company in connection with its borrowing from

Shouguang Industrial and Commercial Bank Co., Ltd.

NOTE 11– RELATED PARTY TRANSACTIONS

Related parties

Name of related parties

Former Chairman Of the Board

Chief Executive Officer and Chairman of the Board

Chief Executive Officer

Chief Financial Officer

Chief Operating Officer,Director

Chief Operating Officer

Chengdu Dianjinshi Culture media Co., LTD

Affiliated with company officers

September 30,

Amount due to related parties:

September 30,

Due from related party:

Amount due from related parties:

Chengdu Dianjinshi Culture media Co., LTD

NOTE 12– TAXES PAYABLE

September 30,

Land use tax payable

Value added tax and other taxes payable

NOTE 12 – LEASE LIABILITIES-FINANCE AND OPERATING

The components of finance lease liabilities were

Lease Liabilities - Finance and Operating

Lease - Schedule of Finance and Operating Leased Liabilities

September 30,

Interest rate

Of the remaining balance as of

March 31, 2026, $ 263,269 was overdue, as notified by the Tax Bureau in a Tax Matters Notice.

The overdue amount was attributable to certain

value-added tax invoices issued by the Company's upstream suppliers during 2018 and 2019 that were subsequently identified as abnormal

deductions in the tax authorities' system.

NOTE 13 – LEASE LIABILITIES - FINANCE AND OPERATING LEASE

The components of finance lease liabilities were as follows:

Liabilities - Finance and Operating Lease - Schedule of Finance Leased Liabilities

Total finance lease liability

1 unchanged sentence

Finance lease liability, net of current portion

Interest expenses from finance lease obligations

amounted to $ 18,184 and $ 21,191 for the three-month period ended September 30, 2025 and 2024, respectively, which were charged to the

condensed consolidated statement of income (loss).

Interest expenses from finance lease obligations amounted to $ 61,580 and $ 70,835 for

the nine-month period ended September 30, 2025 and 2024, respectively, which were charged to the condensed consolidated statement of income

The components of operating lease liabilities

September 30,

Discount rate

The financing lease includes

one contract with a lease term from January 1, 2011 to December 31, 2030, and five contracts with the lease term from June 29, 2024 to

June 28, 2044.

All contracts have a non-cancellable lease period of 20 years, and the company has the right to preferentially renew the

lease contract under the same conditions upon the contract expires.

However, the Company will decide whether to renew the lease based on

the market operation situation upon the expiration.

The components of operating lease liabilities are as follows:

Lease Liabilities - Finance and Operating Lease - Schedule of

operating Lease Liabilities

Total Operating lease liabilities

1 unchanged sentence

Operating lease liabilities, net of current portion

The weighted average remaining operating lease

term at September 3 0 , 2025 was 17 years and the weighted average discounts

rate was 4.89 %.

Lease payments for the three-month period ended September 30, 2025 and 2024, respectively, were $ 79,507 and $ 66,387 .

payments for the nine-month period ended September 30, 2025 and 2024, respectively, were $ 824,305 and $ 823,608 .

The components of lease cost were as follows:

Lease Liabilities -

Finance and Operating Lease - Schedule of Lease Cost

Three-Month Period Ended March 31,

Finance lease cost:

- Amortization of right-of-use assets

- Interest on lease liabilities

Operating lease cost

Total lease cost

Maturities of lease liabilities were as follows:

Lease Liabilities - Finance and Operating

Lease - Schedule of Financing and Operating Lease Maturities

Financial lease

Liabilities - Finance and Operating Lease - Schedule of Maturities of Lease Liabilities

Finance Lease

Operating Lease

Payable within:

the next 12 months

6 unchanged sentences

Present value of net minimum lease payments

A summary of supplemental information related to leases is listed as

Liabilities - Finance and Operating Lease - Schedule of Supplemental Information Related to Leases

Three-Month Period Ended March 31,

Weighted average remaining lease term:

Finance leases

Operating leases

Weighted average discount rate:

Finance leases

Operating lease

Supplemental cash flow information related to leases were as follows:

Liabilities - Finance and Operating Lease - Schedule of Cash Flow, Supplemental

Three-Month Period Ended March 31,

Cash paid for amounts included in measurement of lease liabilities :

-Operating cash flows from operating leases

-Financing cash flows from finance leases

Non-cash information on lease liabilities arising from obtaining right-of-use assets:

-Finance leases

-Operating leases

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

19 unchanged sentences

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

The Company granted an aggregate of 295,000 restricted shares

of common stock in January 2025 to a consultant, the Company's directors, officers, and an employee as compensation for services rendered

for the year ended December 31, 2024.

The Company granted an aggregate of 295,000 (post reverse share split

29,500 shares) restricted shares of common stock in January 25, 2025 to a consultant, the Company's directors, officers, and an employee

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

The restricted shares award was granted under the 2019 Omnibus

Equity Incentive Plan (See Note 16) and vested immediately.

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

share split 19,470 shares) which was expensed in full during the year ended December 31, 2024.

The Company granted in the aggregate, 265,000 (post reverse share split

26,500 shares) restricted shares of common stock on March 21, 2025 to a consultant, the Company's directors, officers and an employee

as compensation for services rendered.

The restricted shares award were granted under the 2019 Omnibus Equity Incentive Plan and vested

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

During the nine months ended September 30, 2025, the Company granted

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

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

The restricted shares award were granted under the 2019 Omnibus

Equity Incentive Plan and vested immediately.

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

full during the nine months period ended September 30, 2025.

The fair value of the award on the date of grant was $ 196,100 (post reverse share split 19,610 shares) which was expensed

in full during the year ended December 31, 2025.

The Company granted in the aggregate, 186,000 restricted shares of

common stock on November 21, 2025 to a consultant, the Company's directors, officers and an employee as compensation for services rendered.

The restricted shares award were granted under the 2025 Omnibus Equity Incentive Plan and vested immediately.

The fair value of the award

on the date of grant was $ 734,700 which was expensed in full during the year ended December 31, 2025.

Retained Earnings - Appropriated

In accordance with the relevant PRC regulations

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

tax to the following reserve:

Statutory Common Reserve Funds

SCHC, SYCI, SHSI and DCHC are required each year

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

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

This reserve can be used to make up any loss incurred

or to increase share capital.

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

reserve balance falling below 25% of the registered capital.

As at September 30, 2025 GULF RESOURCES 'statutory provident fund stood at

$ 26.67 million.

NOTE 14 – TREASURY STOCK

As of September 30, 2025 and December 31, 2024,

the number of treasury stock of the Company was 28,583 and 28,583 , respectively.

NOTE 15 – STOCK-BASED COMPENSATION

Pursuant to the Company’s 2019 Omnibus Equity

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

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

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

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

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

of the 2007 Plan and applicable award agreement.

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

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

The fair value of each option award is estimated

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

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

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

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

For the three and nine months ended September 30, 2025 and 2024, total

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

There were no related tax benefits as a

full valuation allowance was recorded in the three and nine months ended September 30, 2025 and 2024.

The following table summarizes all Company

stock option transactions between January 1, 2025 and September 30, 2025.

In accordance with the relevant PRC regulations and the PRC subsidiaries’

Articles of Association, the Company’s PRC subsidiaries are required to allocate its profit after tax to the following reserve:

Statutory Reserve

The Company’s PRC subsidiaries are required each year to transfer

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

reaches 50% of the registered share capital.

This reserve can be used to make up any loss incurred or to increase share capital.

for the reduction of losses incurred, any other application should not result in this reserve balance falling below 25% of the registered

As of March 31, 2026, the Company’s statutory provident fund stood at $26.67 million.

Issued For The Private Equity Financing

On January 26, 2026, March 5, 2026, March

19, 2026 and March 28, 2026, respectively, the Company entered into equity financing agreements (individually the “Private Placement

collectively the “Private Placement Agreements”), with four individual investors (individually the “Private

Placement Purchaser”;

collectively “Private Placement Purchasers”), pursuant to which the Company agreed to issue new

shares of common stock to such investors that in aggregate accounted for approximately 18% of the total shares issued and outstanding

of the Company as of December 31, 2025.

The purchase price per share under the Private Placement Agreement dated January 26, 2026, was

set at 90% of the average closing price of the Company’s common stock for the five trading days prior to the date of such agreement,

while the purchase prices under the Private Placement Agreements executed in March 2026 were set at 85% of, or 15% off, the closing price

of the Company’s common stock on the trading day immediately preceding the respective agreement dates, as quoted on the Nasdaq Stock

On February 10, 2026, the company issued 69,000 shares

of its common stock to one individual investor at an agreed price of $ 3.57 per

share for aggregate proceeds of $ 246,330 ,

pursuant to the private placement agreement dated on January 26, 2026.

On March 24, 2026, the company issued 75,000

shares of its common stock to one individual investor at an agreed price of $ 3.57

per share for aggregate proceeds of $ 267,750 ,

pursuant to the private placement agreement dated on March 5, 2026.

NOTE 15 – TREASURY

As of March 31, 2026 and December 31, 2025, the number of treasury

stock of the Company was 28,583 and 28,583 , respectively.

NOTE 16 – STOCK-BASED

Pursuant to the Company’s

2025 Omnibus Equity Incentive Plan adopted and approved in 2025 (“2025 Plan”), awards under the 2025 Plan are limited in the

aggregate to 2,000,000 shares of our common stock, inclusive of the awards that were previously issued and outstanding under the Company’s

2019 Omnibus Equity Incentive Plan,, as amended (the “2019 Plan”).

Upon adoption and approval of the 2025 Plan, the 2019 Plan

was frozen, no new awards will be granted under the 2019 Plan, and outstanding awards under the 2019 Plan will continue to be governed

by the terms and condition of the 2019 Plan and applicable award agreement.

As of March 31, 2026, the number of shares of the Company’s

common stock available for grant of stock options and issuance under the 2025 Plan is 14,000 shares.

The fair value of each option

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

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

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

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

the three months ended March 31, 2026 and 2025, total compensation costs for options issued recorded in the consolidated statement of

comprehensive income (loss) were nil.

There were no related tax benefits as a full valuation allowance was recorded in the three months

ended March 31, 2026 and 2025.

The following table summarizes all Company stock option transactions

between January 1, 2026 and March 31, 2026.

Stock-Based Compensation - Schedule of Stock

Option Activity

Number of Option

Outstanding and exercisable

Weighted- Average Exercise price of Option

Exercise Price per Common Share

Number of Option and Warrants Outstanding and exercisable

Weighted- Average Exercise price of Option and Warrants

Range of Exercise Price per Common Share

Balance, January 1, 2026

2 unchanged sentences

Expired during the period

Balance, September 30, 2025

Balance, March 31, 2026

Stock Options and Warrants Outstanding and Exercisable

Weighted Average

Outstanding at September 30, 2025

Outstanding at

March 31, 2026

Exercise Prices

Contractual Life

Weighted Average Remaining Contractual Life

Outstanding and exercisable

All options exercisable and outstanding at September

30, 2025 are fully vested.

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

The aggregate intrinsic value of options outstanding and exercisable

as of September 30, 2025 was $ 0 .

During the three and nine months ended September

30, 2025 and 2024, there were no options exercised.

All options exercisable and outstanding as at

March 31, 2026 are fully vested.

As of March 31, 2026 there was no unrecognized compensation cost related to outstanding stock options.

aggregate intrinsic value of options outstanding and exercisable as of March 31, 2026, was nil 0 .

During the three months ended March 31, 2026 and 2025, there were no

options exercised.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

16 – ACCRUED LIABILITIES

18, 2023 , Shandong Shouguang Vegetable Industry Group Co., Ltd.

NOTE 17 – ACCRUED LIABILITIES

Settled Litigation

On September 18, 2023, Shandong Shouguang Vegetable

Industry Group Co., Ltd.

and Shandong Shouguang Vegetable Seed Group Co., Ltd.

into loan agreements with Shandong Deepin City Emergency Loan Fund Co., Ltd..

A total of nine companies and individuals providing

guarantee to these loans, including SCHC and SYCI.

entered into loan agreements with Shandong Deepin City

Emergency Loan Fund Co., Ltd..

A total of nine companies and individuals providing guarantee to these loans, including SCHC and SYCI.

As of July 2024, Shangdong Shouguang Vegetable Industry Group Co., Ltd.

Shandong Shouguang Vegetable Seed Group Co., Ltd.

owed a principal of $2,104,050 and RMB $1,402,700 to Shandong Deepin City

Emergency Loan Fund Co., Ltd., respectively.

Mediated by the Local Arbitration

Commission and documented in mediation documents No.

and Shandong Shouguang Vegetable Seed Group Co., Ltd.

owed a principal

of $2,104,050 and RMB $1,402,700 to Shandong Deepin City Emergency Loan Fund Co., Ltd., respectively.

Mediated by the Local Arbitration Commission and

documented in mediation documents No.

1358 and 1357, Shandong Shouguang Vegetable Industry Group Co., Ltd.

Shouguang Vegetable Seed Industry Group Co., Ltd.

were to repay $2,104,050 and $1,402,700 to Shandong Deepin City Emergency Loan Fund

before May 8, 2024, respectively.

and Shandong Shouguang Vegetable

Seed Industry Group Co., Ltd.

were to repay $2,104,050 and $1,402,700 to Shandong Deepin City Emergency Loan Fund Co., Ltd.

8, 2024, respectively.

In addition, they were required to pay interests every ten days starting from January 1, 2024.

SCHC and SYCI are jointly and severally liable for both the principal and

SCHC and SYCI are

jointly and severally liable for both the principal and interests.

Shandong Deepin City Emergency Loan Fund Co.,

7 unchanged sentences

would be used to repay Shandong Deepin City Emergency Loan Fund Co., Ltd.

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 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.

The court imposed a forced

auction of the land and its attached properties in July, 2025 however the auction was filed.

The court imposed a forced auction of the land

and its attached properties in July, 2025 however the auction was failed.

A second auction was held on August 15, 2025.

The land and its attached properties were sold at $ 2,556,733 .

As the selling price was lower than the fair value, the Company recognized

a loss on disposal of long-term assets of $ 2,008,853 .

As of September 30, 2025, as

SCHC and SYCI were liable for a sum of principal and interests of $ 3,521,613 , net of auction proceeds, the Company recognized accrued

liabilities of $ 968,113 accordingly.

The land and its

attached properties were sold at $ 2,556,733 .

As the selling price was lower than the fair value, the Company recognized a loss on disposal

of long-lived assets of $ 2,008,853 .

As of March 31, 2026, as SCHC were liable for

a sum of principal and interests of $ 507,587 , net of auction proceeds, the Company recognized accrued liabilities of $ 507,587 accordingly.

NOTE 18 – INCOME TAXES

The Company utilizes the asset and liability

method of accounting for income taxes in accordance with FASB ASC 740-10.

If it is more likely

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

States (“US”)

United States

The Company utilizes the asset and liability method

of accounting for income taxes in accordance with FASB ASC 740-10.

If it is more likely than not that some portion or all of a deferred

tax asset will not be realized, a valuation allowance is recognized.

(a) United States (“US”)

Gulf Resources, Inc.

2 unchanged sentences

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

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

invested in the PRC.

Virgin Islands (“BVI”)

income for the three-month period ended March 31, 2026 and 2025, and management believes that its earnings are permanently invested in

(b) British Virgin Islands (“BVI”)

Upper Class Group Limited, a subsidiary of Gulf

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

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

2025 and 2024.

HKJI, a subsidiary of Upper Class Group Limited, was

incorporated in Hong Kong and is subject to Hong Kong taxation on its activities conducted in Hong Kong and income arising in or derived

Upper Class Group Limited did not generate assessable profit for the three-month period ended March 31, 2026 and 2025.

HKJI, a subsidiary of Upper Class Group Limited,

was incorporated in Hong Kong and is subject to Hong Kong taxation on its activities conducted in Hong Kong and income arising in or derived

from Hong Kong.

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

ended September 30, 2025 and 2024.

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

30, 2025 and 2024 are 16.5 %.

There is no dividend withholding tax in Hong Kong.

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

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

The operating subsidiaries SCHC is a wholly foreign-owned enterprises

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

The PRC tax losses

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

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

Tax losses of the operating subsidiaries of the Company

may be carried forward for five years.

On February 22, 2008, the Ministry of Finance

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

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

investor(s) in 2008 will be exempted from withholding tax (“WHT”) while distribution of the profit earned by an FIE after

January 1, 2008 to its foreign investor(s) shall be subject to WHT at 10% effective tax rate.

As of September 30, 2025 and December 31, 2024,

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

are $ 12,985,585 and $ 40,524,183 , respectively.

Since the Company intends to reinvest its earnings to further expand its businesses in

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

foreseeable future.

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

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

As of September 30, 2025

and December 31, 2024, the unrecognized WHT are $ 0 and $ 1,078,743 , respectively.

No provision for income tax has been made as it has no taxable income for the three-month period ended March 31, 2026

The applicable statutory tax rates for the three-month period ended March 31, 2026 and 2025 are 16.5 % .

There is no dividend

withholding tax in Hong Kong.

Enterprise income tax (“EIT”) for the subsidiaries in the PRC is charged at 25 % of the assessable profits.

SCHC, SYCI, DCHC, and SHSI are a wholly foreign-owned enterprises (“FIE”)

incorporated in the PRC.

They are subject to the PRC Local Income Tax Law.

The PRC tax losses may be carried forward to be utilized against

future taxable profit for ten years for High-tech enterprises and small and medium-sized enterprises of science and technology and for

five years for other companies.

Tax losses of the operating subsidiaries of the Company may be carried forward for five years.

The Company’s income tax returns are subject

12 unchanged sentences

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

The components of the income tax benefit from

continuing operations are:

The components of the income tax benefit from continuing operations

Income Taxes - Schedule of Components of Income Tax Expense Benefit

Three-Month Period Ended September 30,

Nine-Month Period Ended September 30,

Three-Month Period Ended March 31,

Current taxes – PRC

1 unchanged sentence

Total Income tax (expenses) benefits

Significant components of the Company’s

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

Significant components of the Company’s deferred tax assets and

liabilities at March 31, 2026 and December 31, 2025 are as follows:

Income Taxes - Schedule of Deferred

Tax Assets and Liabilities

September 30,

Deferred tax liabilities

10 unchanged sentences

Net deferred tax asset

Deferred tax assets consist of future reversals of existing taxable

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

As of September 30,

2025 and 2024, valuation allowances were mainly provided against deferred tax assets caused by exploration costs and net operating loss

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

The increase in valuation allowance for the three-month

period ended September 30, 2025 is $ 9,138,862 .

The decrease in valuation allowance for the three-month

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

The increase in valuation allowance for the nine-month

period ended September 30, 2025 is $ 10,491,391 .

The decrease in valuation allowance for the nine-month

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

Deferred tax assets consist of future reversals

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

As of March 31, 2026 and 2025, valuation allowances were mainly provided against deferred tax assets caused by exploration costs and net

operating loss where it was determined it was more likely than not that the benefits of the deferred tax assets will not be realized due

to their continuous losses.

The increase in valuation allowance for the three-month period ended

March 31, 2026 is $ 114,900 .

The increase in valuation allowance for the three-month period ended

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

There were no unrecognized tax benefits and accrual

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

and nine months ended September 30, 2025 and 2024.

for uncertain tax positions as of March 31, 2026 and December 31, 2025 and no amounts accrued for penalties and interest for the three

months ended March 31, 2026 and 2025.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 19 – BUSINESS SEGMENTS

The Company has four reportable segments:

bromine, crude

salt, chemical products and natural gas.

The reportable segments are consistent with how management views the markets served by the Company

and the financial information that is reviewed by its chief operating decision maker.

An operating segment’s performance is primarily

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

not associated with the operations of the segment.

These corporate costs (income) are separately stated below and also include costs that

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

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

its segments.

All the customers are located in PRC.

September 30, 2025 Operating Segment

Corporate Corporate

(external customers)

(intersegment)

Loss from operations before income tax benefit

Income tax benefit (expense)

Loss from operations after

income tax benefit (expense)

Depreciation and amortization

Capital expenditures

September 30, 2024

(external customers)

(intersegment)

Loss from operations before income tax benefit

( 4,029,999 )

( 4,510,766 )

( 4,581,609 )

Income tax benefit (expense)

Loss from operations after

income tax benefit (expense)

( 3,028,932 )

( 3,407,069 )

( 3,477,912 )

Depreciation and amortization

Capital expenditures

* Certain common production overheads, operating

and administrative expenses and asset items (mainly cash and certain office equipment) of bromine and crude salt segments in SCHC were

split by reference to the average selling price and production volume of the respective segment until April 2022.

Commencing May 2022,

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

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

(Expressed in U.S.

NOTE 18 – BUSINESS SEGMENTS – Continued

September 30, 2025

ASC 280, Disclosures about Segments,

of an Enterprise and Related Information, establishes standards for reporting information about operating segments.

Operating segments

are defined as components of an enterprise engaging in business activities from which they may earn revenues and incurred expenses, and

about which separate financial information is available that is evaluated regularly by the chief operating decision-marker, or decision-making

group( the “CODM”), in deciding how to allocate resources and assessing performance.

The Company’s Chief Executive

Xiaobin Liu) is determined as the CODM of the Company, Mr Liu measures the performance of each segment based on metrics of

revenue and profit before taxes from operations and uses these results to evaluate the performance of, and to allocate resources to each

of the segments.

The Company has organized operations into four different business segments:

(1) bromine, (2) crude salt, (3) chemical

products, (4) natural gas.

As of March 31, 2026 and March 31, 2025, the detailed

income statements of each of our divisions are presented below:

March 31, 2026

Operating Segment

(external customers)

(intersegment)

Loss from operations before income tax benefit

( 3,775,713 )

Loss from operations before income

( 3,067,778 )

2 unchanged sentences

Income tax benefit (expense)

Loss from operations after

income tax benefit (expense)

( 3,775,713 )

Loss from operations after income tax (expense) benefit

( 3,067,778 )

3 unchanged sentences

Capital expenditures

September 30, 2024

Three-Month Period Ended March 31, 2025

(external customers)

(intersegment)

Loss from operations before income tax benefit

Loss from operations before income expense

( 3,370,836 )

1 unchanged sentence

( 4,610,207 )

Income tax benefit (expense)

Loss from operations after

income tax benefit (expense)

Income tax (expense) benefit

Loss from operations after income taxes (expense) benefit

( 3,370,836 )

3 unchanged sentences

Capital expenditures

* Certain common production overheads, operating

and administrative expenses and asset items (mainly cash and certain office equipment) of bromine and crude salt segments in SCHC were

split by reference to the average selling price and production volume of each respective segment through April 2022.

Commencing May 2022,

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

Certain common production overheads, operating and administrative expenses

and asset items (mainly cash and certain office equipment) of bromine and crude salt segments in SCHC were split by reference to the average

selling price and production volume of the respective segments.

Certain common production overheads, operating and administrative expenses and asset items (mainly cash and certain office equipment)

of bromine and crude salt segments in SCHC were split by reference to the average selling price and production volume of the respective

segment until April 2022.

Commencing May 2022, costs were assigned to the two subsidiaries (SCHC and SHSI) by independent accounting.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2025

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 19 – BUSINESS SEGMENTS – Continued

Three-Month Period Ended September 30,

Nine-Month Period Ended September 30,

Three-Month Period Ended March 31,

Reconciliations

2 unchanged sentences

$ ( 4,328,371 )

$ ( 5,207,267 )

$ ( 14,656,795 )

Corporate costs

Unrealized gain (loss) on translation of intercompany balance

Loss from operations

1 unchanged sentence

( 4,610,207 )

( 14,998,025 )

Interest income, net of expense

Other expense, net

( 3,521,613 )

( 3,524,825 )

Loss on disposal of long-lived assets

( 2,008,853 )

( 29,169,008 )

Impairment of long-lived assets

( 29,782,912 )

Interest income

Interest expense

Loss before taxes

1 unchanged sentence

$ ( 4,629,500 )

$ ( 41,067,789 )

$ ( 44,164,800 )

The following table shows the major customer(s)

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

The following table shows the major customers

(10% or more) for the three-month period ended March 31, 2026.

Business Segments - Schedule of

1 unchanged sentence

Chemical Products

Percentage of Total Revenue (%)

Shandong Brother Technology Limited

Shandong Morui Chemical Company Limited

Shandong Shouguangshen Runfa Marine Chemical Company Limited

Shouguang Weidong Chemical Company Limited

Shandong Xurui New Materials Company Limited

The following table shows the major customer(s)

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

Chemical Products

Percentage of

Shandong Morui Chemical Company Limited

Shandong Shouguang Shenruifa Marine Chemical Company Limited

Shandong Brother Technology Limited

Shouguang Weidong Chemical Company Limited

Shandong Shouguangshen Runfa Marine Chemical Company Limited

The following table shows the major customer(s)

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

Chemical Products

Percentage of

Shandong Morui Chemical Company Limited

Shandong Brother Technology Limited

Shouguang Weidong Chemical Company Limited

The following table shows the major customer(s)

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

Weidong Chemical Company Limited

Shandong Xuruixin Materials Company Limited

The following table shows the major customers

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

Chemical Products

3 unchanged sentences

Shouguang Weidong Chemical Company Limited

Shouguangshen Runfa Marine Chemical Company Limited

NOTE 20– CUSTOMER CONCENTRATION

Customer Concentration

During the nine-month period ended September 30,

During the three-month period ended March

31, 2026, the Company sold 66 % of its products to its top five customers.

As of September 30, 2025, amounts due from these customers were

$ 2,579,855 .

During the nine-month period ended September 30,

As of March 31, 2026, amounts due from these customers

were $ 1,774,034 .

During the three-month period ended March

31, 2025, the Company sold 62.4 % of its products to its top five customers.

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

As of March 31, 2025, amounts due from these customers

were $ 1,462,756 .

NOTE 21– MAJOR SUPPLIERS

1 unchanged sentence

Cost of Goods

During the nine-month period ended September 30,

2025 the Company purchased 100 % of its raw materials from its top four suppliers.

As of September 30, 2025, amounts due to

those suppliers were $ 379,806 .

During the nine-month period ended September 30,

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

As of September 30, 2024, amounts due to

those suppliers were $ 127,698 .

During the three-month period ended March

31, 2026 the Company purchased 100 % of its raw materials from its top three suppliers.

As of March 31, 2026, amounts due to those

suppliers were $ 434,275 .

During the three-month period ended March

31, 2025, the Company purchased 100 % of its raw materials from its top three suppliers.

As of March 31, 2025, amounts due

to those suppliers were $ 390,250 .

NOTE 22 – LOSS CONTINGENCIES

Settled Litigation

On or about August 3, 2018, written decisions of administration penalty

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

On or about August 3, 2018, written decisions

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

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

292, Shou Guo Tu Zi Fa

Gao Zi [2018] No.

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

Guo Tu Zi Fa Gao Zi [2018] No.

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

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

296 (together, the

“Written Decisions”) were served on Shouguang City Haoyuan Chemical Company Limited (“SCHC”) by Shouguang City

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

The Decisions challenged

the land use of Factory nos.

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

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

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

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

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

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

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

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

payment in a timely manner.

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

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

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

The enforcement proceedings sought court orders to

enforce the Written Decisions.

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

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

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

Decisions challenged the land use of Factory nos.

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

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

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

respectively.

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

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

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

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

serving on SCHC.

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

penalty payment in a timely manner.

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

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

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

The enforcement proceedings sought court orders

to enforce the Written Decisions.

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

9 unchanged sentences

The Court Rulings became enforceable immediately upon service on SCHC on May 5, 2019.

In the last twenty years, to the Company’s knowledge, there were

no government regulations requiring bromine manufacturers to obtain land use and planning approval document.

As such, the Company believes

most of the bromine manufacturers in Shouguang City do not have land use and planning approval documents and lease their land parcels

from the village associations.

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

To the Company’s

knowledge, the local government has submitted its plan to solve the issues to higher authority and are waiting for approval from the higher

The Company is in the process of resolving the issues in connection

with SCHC’s land use and planning diligently.

The Company has been in discussions closely with the local government authorities

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

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

authorities and may be revoked.

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

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

7, Factory No.

In the last twenty years, to the Company’s

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

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

lease their land parcels from the village associations.

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

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

waiting for approval from the higher authority.

The Company is in the process of resolving the

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

The Company has been in discussions closely with the local government

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

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

government authorities and may be revoked.

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

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

8 and Factory No.10.

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

389 Zhi Yi, dated November

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

Production of Factory

389 Zhi Yi, dated

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

Production of

7 was allowed to resume in April 2019.

The Company received a notification from the Shouguang City Government in February 2019 informing

the Company that Factory No.

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

2019 informing the Company that Factory No.

9 have passed inspection and were approved to resume operation.

In addition, on August 28, 2019, the People’s Government of Shandong

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

permitting the construction of facilities on existing sites or infrastructure of bromine manufacturing and other chemical industry-related

types of projects (clause 11 of section 3).

The Company believes that the goal of the government is to standardize and regulate the industry

and not to demolish the facilities or penalize the manufacturers.

As of the date of this report, the Company has not been notified by

the local government that it will take any measure to enforce the administrative penalties.

Based on information known to date, the Company

believes that it is remote that the Written Decisions or Court Rulings will be enforced within the expected timeframe and a material penalty

or costs and expenses against the Company will result.

However, there can be no assurance that there will not be any further enforcement

action, the occurrence of which may result in further liabilities, penalties and operational disruption.

In view of the above facts and circumstances, the Company believes

that it is not necessary to accrue for any estimated losses or impairment as of September 30, 2025.

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

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

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

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

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

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

As of the date of this report, the Company

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

Based on information

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

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

However, there can be no assurance that there

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

In view of the above facts and circumstances,

the Company believes that it is not necessary to accrue for any estimated losses or impairment as of March 31, 2026.

NOTE 23 - SUBSEQUENT EVENT

Subsequent Event

As previously disclosed, at the 2025 Annual Meeting

of Stockholders of the Company held on September 9, 2025, the stockholders of the Company approved a proposal to authorize the Company’s

Board of Directors (the “Board”) to amend the Company’s Articles of Incorporation with the Secretary of State of the

State of Nevada to effect a reverse stock split of the outstanding shares of the Company’s common stock, par value $0.0005 (“Common

Stock”) at a reverse split ratio of between 1-for-2 and 1-for-10 as determined by the Board.

On October 10, 2025, pursuant to the authority granted

by the Company’s stockholders, the Board effectuated and approved a one-for-ten (1:10) reverse stock split ratio (the “Reverse

Stock Split”) of the Common Stock.

The Reverse Stock Split became effective at 12:01 am Eastern Time on October 27, 2025 (the

“Effective Time”).

When the Reverse Stock Split became effective, every ten (10) shares of the Company’s issued and

outstanding Common Stock immediately prior to the Effective Time automatically be reclassified into one (1) share of Common Stock, without

any change in the par value per share.

The Reverse Stock Split reduced the number of issued and outstanding shares of Common stock from

approximately 13.3 million to approximately 1.3 million.

The Reverse Stock Split did not change the total number of authorized shares

of Common Stock.

No fractional shares were issued as a result of the

Reverse Stock Split.

Stockholders who otherwise be entitled to receive a fractional share in connection with the Reverse Stock Split received

one full share of the post-reverse stock split Common Stock in lieu of such fractional share.

Commencing on October 27, 2025, trading of the Company’s

Common Stock continues The Nasdaq Capital Market on a Reverse Stock Split-adjusted basis.

The new CUSIP number for the Company’s

Common Stock following the Reverse Stock Split is 40251W507.

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.

Private Placement

On June 25, 2026, Company received a written notice from Nasdaq (the

“Extension Letter”) stating that it had accepted the Company’s plan to regain compliance with Nasdaq Listing Rule 5250(c)(1)

(the “Rule”).

Nasdaq granted the Company a plan period to regain compliance with the Rule.

(I) As previously reported in the

current report on Forms 8- K (the “Previous Announcements”) filed on April 27, 2026 and May 29, 2026 with the Securities Exchange

Commission by the Company, the Company announced that it received delinquency notifications from Nasdaq on April 23, 2026 and May 26,

2026 (the “Deficiency Letters”), due to the Company’s non-compliance with the Rule as a result of the Company’s

failure to timely file its annual report on Form 10-K for the period ended December 31, 2025 (the “2025 Form 10-K”) and its

quarterly report on Form 10-Q for the period ended March 31, 2026 (the “2026 Q1 Form 10-Q” and together with the “2025

Form 10- K”, the “Delinquent Reports”), respectively.

(II) The Company submitted a plan to the Nasdaq Listing Qualification

(the “Staff”) to regain compliance (the “Compliance Plan”) with the Nasdaq Requirements on June 17, 2026.

the Extension Letter, the Company is required to file its delinquent 2025 Form 10-K and 2026 Q1 Form 10-Q by the applicable extended deadline

to evidence compliance with the relevant Nasdaq requirements.The Extension Letter further provides that if the Company fails to evidence

compliance upon filing the Delinquent Reports, Staff will notify the Company that its securities will be subject to delisting.

previously received Deficiency Letters and the Extension Letter have no immediate effect on the listing or trading of the Company’s

common stock on Nasdaq, subject to the Company’s continued compliance with the other applicable listing requirements.

(IV)The Company

subsequently filed the 2025 Form 10-K on August 17, 2026 with the Securities and Exchange Commission.

On April 8,2026, the company issued

70,000 shares of its common stock to one individual investor at an agreed price of $ 3.94 per share for aggregate proceeds of $ 275,800 , pursuant

to the private placement agreement dated on March 19, 2026.

On April 14,2026, the company

issued 60,000 shares of its common stock to one individual investor at an agreed price of $ 4.1 per share for aggregate proceeds of $ 246,000 , pursuant

to the private placement agreement dated on March 28, 2026.

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

What changed 10-Q

Item 1. Financial Statements