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Item 7. Management’s Discussion and Analysis

2026-09-29 compared with 2026-08-24 · 398 added, 536 removed, 48 unchanged (95% of the section changed)

Management’s Discussion and Analysis

of Financial Condition and Results of Operations.

following is a discussion of the results of operations for our fiscal years ended December 31, 2024, and 2023, and changes in financial

condition during those years.

The Consolidated Financial Statements for the year ended December 31, 2024, have been restated to correct

prior period misstatements.

The discussion and tables included below have been corrected to reflect the restatements.

For more information

see Note 23 – Restatement of Previously Issued Financial Statements in the Consolidated Financial Statements of this Annual

Report on Form 10-K.

The following information should be read in conjunction with the consolidated financial statements and related notes

thereto included in this Annual Report on Form 10-K.

addition to historical information, this report contains forward-looking statements that involve risks and uncertainties which may cause

our actual results to differ materially from plans and results discussed in forward-looking statements.

We encourage you to review the

risks and uncertainties discussed in the sections entitled Item 1A.

“Risk Factors” and “Forward-Looking Statements”

included at the beginning of this Annual Report on Form 10-K.

The risks and uncertainties can cause actual results to differ significantly

from those forecasts in forward-looking statements or implied in historical results and trends.

We are a Nevada holding company

which conducts operations through our wholly-owned China-based subsidiaries.

Our business is conducted and reported in four segments,

namely, bromine, crude salt, chemical products and natural gas.

Through our wholly-owned subsidiary,

SCHC, we produce and trade bromine and SHSI for crude salt production and trading.

We are one of the largest producers of

bromine in China, as measured by production output.

Elemental bromine is used to manufacture a wide variety of bromine compounds used

in industry and agriculture.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

are a Nevada holding company which conducts operations through our wholly-owned China-based subsidiaries.

Our business is conducted and

reported in four segments, namely, bromine, crude salt, chemical products and natural gas.

our wholly-owned subsidiary, SCHC, we produce and trade bromine and SHSI for crude salt production and trading.

of the largest producers of bromine in China, as measured by production output.

Elemental bromine is used to manufacture a wide variety

of bromine compounds used in industry and agriculture.

Bromine also is used to form intermediary chemical compounds such as Tetramethylbenzidine.

Bromine is commonly

used in brominated flame retardants, fumigants, water purification compounds, dyes, medicines and disinfectants.

Crude salt is the principal

material in alkali production as well as chlorine alkali production and is widely used in the chemical, food and beverage, and other industries.

Through our wholly-owned subsidiary,

SYCI, we manufacture and sell chemical products used in oil and gas field exploration, oil and gas distribution, oil field drilling, papermaking

chemical agents, inorganic chemicals and materials that are used for human and animal antibiotics.

Our wholly-owned subsidiary, DCHC,

was established to explore and develop natural gas and brine resources (including bromine and crude salt) in Sichuan Province, China.

Bromine and Crude Salt

As disclosed in the Company’s

Current Report on Form 8-K filed on September 8, 2017, the Company received, on September 1, 2017, letters from the Yangkou County, Shouguang

City government addressed to each of its subsidiaries, SCHC and SYCI, which stated that in an effort to improve the safety and environmental

protection management level of chemical enterprises, the plants are requested to immediately stop production and perform rectification

and improvements in accordance with the country’s new safety and environmental protection requirements.

In the Company’s press

release of August 11, 2017 and on its conference call of August 14, 2017, the Company addressed concerns that increased government enforcement

of stringent environmental rules that were adopted in early 2017 to insure corporations bring their facilities up to necessary standards

so that pollution and other negative environmental issues are limited and remediated, could have an impact on our business in both the

short and long-term.

The Company also expressed that although it believed its facilities were fully compliant at the time, the Company

did not know how its facilities would fare under the new rules.

Teams of inspectors from the government were sent to many provinces to

inspect all mining and manufacturing facilities.

The local government requested that facilities be closed, so that the facilities could

undergo the inspection and analysis in the most efficient manner by inspectors’ team.

As a result, our facilities were closed on

September 1, 2017.

The Company believes that this

is another step by the government to improve the environment.

It further believes the goal of the government is not to close all plants,

but rather to codify the regulations related to project approval, land use, planning approval and environmental protection assessment

approval so that illegal plants are not able to open in the future and so that plants close to population centers do not cause serious

environmental damage.

In addition, the Company believes that the Shandong provincial government wants to assure that each of its regional

and county governments has applied the Notice in a consistent manner.

The Shouguang City Bromine Association,

on behalf of all the bromine producers in Shouguang, initiated negotiations with the local government agencies.

The local governmental

agencies acknowledged the fact that their initial requirements for the bromine industry did not include the project, the planning and

the land use rights approvals, which were later introduced by the provincial government as new requirements.

The Company understood from

the local government that local government was coordinating with various government agencies to solve these three outstanding approval

issues in a timely manner and that all impacted bromine plants will not be allowed to commence production prior to obtaining those approvals.

In February 2019, the Company received a notification from the local government of Yangkou County that its Factories No.

Bromine is commonly used in brominated flame retardants, fumigants, water purification compounds, dyes, medicines and disinfectants.

Crude salt is the principal material in alkali production as well as chlorine alkali production and is widely used in the chemical, food

and beverage, and other industries.

our wholly-owned subsidiary, SYCI, we manufacture and sell chemical products used in oil and gas field exploration, oil and gas distribution,

oil field drilling, papermaking chemical agents, inorganic chemicals and materials that are used for human and animal antibiotics.

wholly-owned subsidiary, DCHC, was established to explore and develop natural gas and brine resources (including bromine and crude salt)

in Sichuan Province, China.

and Crude Salt

disclosed in the Company’s Current Report on Form 8-K filed on September 8, 2017, the Company received, on September 1, 2017, letters

from the Yangkou County, Shouguang City government addressed to each of its subsidiaries, SCHC and SYCI, which stated that in an effort

to improve the safety and environmental protection management level of chemical enterprises, the plants are requested to immediately

stop production and perform rectification and improvements in accordance with the country’s new safety and environmental protection

requirements.

In the Company’s press release of August 11, 2017 and on its conference call of August 14, 2017, the Company addressed

concerns that increased government enforcement of stringent environmental rules that were adopted in early 2017 to insure corporations

bring their facilities up to necessary standards so that pollution and other negative environmental issues are limited and remediated,

could have an impact on our business in both the short and long-term.

The Company also expressed that although it believed its facilities

were fully compliant at the time, the Company did not know how its facilities would fare under the new rules.

Teams of inspectors from

the government were sent to many provinces to inspect all mining and manufacturing facilities.

The local government requested that facilities

be closed, so that the facilities could undergo the inspection and analysis in the most efficient manner by inspectors’ team.

a result, our facilities were closed on September 1, 2017.

Company believes that this is another step by the government to improve the environment.

It further believes the goal of the government

is not to close all plants, but rather to codify the regulations related to project approval, land use, planning approval and environmental

protection assessment approval so that illegal plants are not able to open in the future and so that plants close to population centers

do not cause serious environmental damage.

In addition, the Company believes that the Shandong provincial government wants to assure

that each of its regional and county governments has applied the Notice in a consistent manner.

Shouguang City Bromine Association, on behalf of all the bromine producers in Shouguang, initiated negotiations with the local government

The local governmental agencies acknowledged the fact that their initial requirements for the bromine industry did not include

the project, the planning and the land use rights approvals, which were later introduced by the provincial government as new requirements.

The Company understood from the local government that local government was coordinating with various government agencies to solve these

three outstanding approval issues in a timely manner and that all impacted bromine plants will not be allowed to commence production

prior to obtaining those approvals.

In February 2019, the Company received a notification from the local government of Yangkou County

that its Factories No.

9 passed inspection and were allowed to resume operations.

1 unchanged sentence

7 resumed operations.

Subsequently, the Company received

approval dated February 27, 2020 issued by the local governmental authority which allows us to resume production after the winter

temporary closure.

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

5, 2020, to resume production at its bromine factories No.1, No.

Subsequently,

the Company received approval dated February 27, 2020, issued by the local governmental authority which allows us to resume production

after the winter temporary closure.

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

dated on March 5, 2020, to resume production at its bromine factories No.1, No.

4, No.7 and No.

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

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

The Company’s factories No.7 and No.1 started trial production in

middle-March, 2020, and commenced commercial production on April 3, 2020.

The Company received oral notification

from the government regarding Factory No.

9 in order to meet the needs of bromide

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

The Company’s factories No.7 and No.1 started

trial production in middle-March 2020, and commenced commercial production on April 3, 2020.

Company received oral notification from the government regarding Factory No.

8, allowing it to resume production in August 2022.

Factory No.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.

The Company completed its flood prevention project

in December 2023.

No.8 began contributing revenue in the fourth quarter of 2022.

Company is awaiting governmental approval for Factories No.

To our knowledge, the government is finalizing plans for all

mining areas, including flood prevention measures.

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.

Company completed its flood prevention project in December 2023.

This project was implemented for safeguarding its bromine facilities.

Pursuant to the notification from

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

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

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

Chemical Products

On November 24, 2017, the Company

received a letter from the People’s Government of Yangkou County, Shouguang City notifying the Company that due to the new standards

and regulations relating to safety production and environmental pollution, from certain local governmental departments, such as the municipal

environmental protection department, the security supervision department and the fire department, its chemical enterprises would have

to be relocated to a new industrial park called Bohai Marine Fine Chemical Industry Park.

Although our chemical companies were in compliance

with regulations, they were also close to a residential area.

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

to the notification from the government of Shouguang City, all bromine facilities in Shouguang City were temporarily closed from December

15, 2024, until February 12, 2025.

In compliance with the notification, the Company ceased production at its bromine facilities during

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

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

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

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

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

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

As a result, the government determined

we should relocate to the Bohai park.

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

Since our factories closed, the Company

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

On January 6, 2020, the Company received the environmental

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

Construction of the

new chemical facilities at Bohai Marine Fine Chemical Industrial Park commenced in June 2020.

Initially, the construction was projected

to last around one year, with an additional six months for equipment installation and testing.

However, due to the COVID epidemic and

electrical restrictions, the opening of the chemical factory has been postponed.

The Company has received refrigeration and air compressor

Additionally, the procurement of the final equipment for our chemical factory has been postponed until we have a better understanding

of the potential for derivative bromine products.

We anticipate proceeding with the completion of its chemical factory in due course.

However, in the event that the Chinese economy persists in its weakness and if we perceive this trend to be ongoing, there is a possibility

that the chemical factory could be repurposed for the production of Sodium-Ion batteries.

In January 2017, the Company completed

the construction of the first brine water and natural gas well field in Daying County, Sichuan Province, and commenced trial production

in January 2019.

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

mandating the need for project approval for its Daying well, encompassing the entire natural gas and brine water project.

This also includes

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

Until these approvals

are obtained, the Company must temporarily suspend trial production at its natural gas well in Daying.

Additionally, in compliance with

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

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 natural gas production.

The Company is engaged in ongoing discussions with the government

of Daying County regarding the establishment of a joint venture for the exploration and production of natural gas and brine products in

As a result of our

acquisitions of SCHC and SYCI, our historical consolidated financial statements and the information presented below reflects the

accounts of SCHC , SYCI and DCHC, the consolidated financial

statements and the information presented below as of and for the year ended December 31, 2024.

The following discussion should be

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

Flood Prevention Project

2023, the Company initiated its preventive measures for safeguarding its bromine facilities.

Our strategy involves the renovation of the

channels of four major rivers within our mining area, encompassing the tributary of the Mihe River.

The aim is to prevent flooding that

could harm the wells, aqueducts and crude salt pans at our plant.

In December 2023, the Company completed this flood prevention project.

As of December 31, 2023, we incurred $46,510,856 in other expenses for the project.

The cost incurred for four major

(1) Liansigou Section for $8,057,722;(2) Mi River Section for $20,168,321;(3) Ta River Section $10,070,033;

(4) Weitan River

Section for $8,214,780.

RESULTS OF OPERATIONS.

Year ended December 31, 2024 as compared to year ended

December 31, 2023

2024 (Restated)

Percent Change

Increase/ (Decrease)

Cost of Net Revenue

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

On January 6, 2020,

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

Chemical factory.

Construction of the new chemical facilities at Bohai Marine Fine Chemical Industrial Park commenced in June 2020.

the construction was projected to last around one year, with an additional six months for equipment installation and testing.

due to the COVID epidemic and electrical restrictions, the opening of the chemical factory has been postponed.

The Company has received

the refrigeration and air compressor units.

Additionally, the procurement of the final equipment for our chemical factory has been postponed

until we have a better understanding of the potential for derivative bromine products.

We anticipate proceeding with the completion of

its chemical factory in due course.

However, in the event that the Chinese economy persists in its weakness and if we perceive this trend

to be ongoing, there is a possibility that the chemical factory could be repurposed for the production of Sodium-Ion batteries.

January 2017, the Company completed the construction of the first brine water and natural gas well field in Daying County, Sichuan Province,

and commenced trial production in January 2019.

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

Daying County, Sichuan Province, mandating the need for project approval for its Daying well, encompassing the entire natural gas and

brine water project.

This also includes approvals for safety production inspection, environmental protection assessment, and to solve

the related land issue.

Until these approvals are obtained, the Company must temporarily suspend trial production at its natural gas

well in Daying.

Additionally, in compliance with the Chinese government new policies, the Company is required to obtain an exploration

license for bromine and a mining license for natural gas.

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 natural gas production.

is engaged in ongoing discussions with the government of Daying County regarding the establishment of a joint venture for the exploration

and production of natural gas and brine products in Sichuan.

a result of our acquisitions of SCHC and SYCI, our historical consolidated financial statements and the information presented below reflects

the accounts of SCHC、SYCI and DCHC, the consolidated financial statements and the information presented below as of and for the

year ended December 31, 2025.

The following discussion should be read in conjunction with our consolidated financial statements and notes

thereto appearing elsewhere in this report.

OF OPERATIONS.

ended December 31, 2025, as compared to year ended December 31, 2024

$ (23,257,971 )

$ (14,746,741 )

Gross (Loss)/Profit

$ (7,085,731 )

Sales and Marketing Expense

Direct labor and factory overheads incurred during plant shutdown

and Marketing Expense

labor and factory overheads incurred during plant shutdown

$ (5,098,990 )

$ (8,880,643 )

General and Administrative Expenses

and Administrative Expenses

$ (5,580,071 )

$ (6,235,931 )

Loss from Operations

from Operations

$ (8,568,624 )

$ (22,248,569 )

Other Income, Net

Expenditure on water pollution treatment

$ (3,948,736 )

Loss on disposal of property, plant and equipment

on disposal of long-lived assets

$ (2,008,853 )

Impairment of Property, plant and equipment

$ (29,169,008 )

Loss before Taxes

of long-lived assets

$ (30,068,794 )

$ (6,772,500 )

Income Tax Expense (Benefit)

on disposal of subsidiary

$ (43,920,231 )

$ (58,252,190 )

Tax Expense (Benefit)

$ (1,648,182 )

$ (43,920,231 )

Net Loss of $59,900,372 for year 2024 was mainly attributable to decreased

sales and reduced margins.

The company also suffered a loss of $29,169,008 and $6,772,500 on retirement of fixed assets and impairment

of fixed assets.

Additionally, the compensation expenses amounted to $194,700 for shares issued to company employees, officers and consultants

for the year 2024.

of $61,795,279 for year 2023 was mainly attributable to decreased sales and reduced margins.

Additionally, the compensation expenses amounted

to $451,350 for shares issued to company employees, officers and consultants for the year 2023 .

The Company also incurred losses

of $46,510,856 on a flood prevention project.

Net Revenue The

table below shows the changes in net revenue in the respective segments of the Company for the fiscal year 2024 compared to the same period

Net Revenue by Segment

December 31, 2024

December 31, 2023

Percent Increase (Decrease)

of Net Revenue

Chemical Products

Years Ended December 31

Percent Change

Bromine and crude salt segments product sold in tonnes

Bromine (excluded volume sold to SYCI)

Bromine se g ment

Net revenue from our bromine segment decreased by 79.4%

to $5,549,815 for the year ended December 31, 2024, compared to $26,921,462 for the year ended December 31, 2023.

This decrease was due

to a decrease in bromine unit price of 27% and a decrease in volume of 72%.

Crude salt se g ment

Net revenue from our crude salt segment decreased by 31.0%

to $2,049,988 for the year ended December 31, 2024, compared to $2,971,467 for the last year.

This decrease was due to a decrease in crude

salt unit price of 13% and a decrease in volume of 20%.

Chemical products segment

For the years ended December 31, 2024,

and December 31, 2023, the net revenue for the chemical products segment was $0 due to the closure of our chemical factories since September

Natural Gas segment

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

the net revenue for the n atural g as se g ment was $61,207 and $150,861.

The 59.4% decrease in revenue was primarily

due to the expiration of contracts.

Cost of Net Revenue

Cost of Net Revenue by Segment

December 31, 2024

December 31, 2023

Chemical Products

Cost of net revenue

primarily includes costs of the raw materials consumed, the direct salaries and benefits for production staff, electricity costs,

depreciation and amortization of manufacturing plants and machinery, and other manufacturing-related costs.

Our cost of net revenue

was $14,746,741 for the year ended December 31, 2024, representing a $13,343,212 (or 48%) decrease compared to the preceding year.

The decrease in costs was mainly due to a significant decrease in sales volume.

Bromine production capacity and utilization of our factories

The table below represents the annual capacity and utilization

ratios for all of our bromine producing properties:

Annual Production Capacity

Fiscal year 2024

Fiscal year 2023

Variance of the fiscal year 2024 and 2023

(i) Utilization ratio is calculated based on the annualized actual production volume in tonnes for the periods

$ (59,900,372 )

Loss for fiscal year 2025 decreased to $43,920,231 from $59,900,372 in 2024, mainly due to increased sales and margins, a $17,757,325

increase in net revenue and a $27,160,155 reduction in loss on disposal of long-lived assets.

These positive factors were partially offset

by a sharp rise in impairment of long-lived assets to $30,068,794.

Loss of $59,900,372 for fiscal year 2024 was mainly attributable to decreased sales and reduced margins.

The company also suffered a

loss of $29,169,008 and $6,772,500 on retirement of fixed assets and impairment of fixed assets.

Additionally, the compensation expenses

amounted to $194,700 for shares issued to company employees, officers and consultant for the year 2024 .

Revenue The table below shows the changes in net revenue in the respective segment of the Company for the fiscal year 2025 compared

to the same period in 2024:

Revenue by Segment

and crude salt segments product sold in tonnes

revenue from our bromine segment increased by 314.4% to $23,000,303 for the year ended December 31, 2025, compared to $5,549,815 for

the year ended December 31, 2024.

This increase was due to an increase in bromine unit price of 55% and an increase in volume of 168%.

revenue from our crude salt segment increased by 18.0% to $2,418,032 for the year ended December 31, 2025, compared to $2,049,988 for

the last year.

This increase was due to an increase in volume of 22%.

products segment

the years ended December 31, 2025, and December 31, 2024, the net revenue for the chemical products segment was $0 due to the closure

of our chemical factories since September 1, 2017.

the years ended December 31, 2025, and December 31, 2024, the net revenue for natural gas production was nil and $61,207.

This decrease

was due to the expiration of contracts.

of Revenue by Segment

of revenue primarily includes costs of the raw materials consumed, the direct salaries and benefits for production staff, electricity

costs, depreciation and amortization of manufacturing plants and machinery, and other manufacturing-related costs.

Our cost of revenue

was $23,257,971 for the year ended December 31, 2025, representing a $8,511,230 (or 58%) increase compared to the preceding year.

increase in costs was mainly due to a significant increase in sales volume.

production capaci ty and utilization of our factories

table below represents the annual capacity and utilization ratios for all of our bromine producing properties:

Production Capacity

of the fiscal year 2025 and 2024

(i) Utilization

ratio is calculated based on the annualized actual production volume in tonnes for the periods

divided by the annual production capacity in tonnes.

Bromine segment

For the year ended December 31, 2024, the cost of net revenue

for the bromine segment was $13,750,051.

For the year ended December 31, 2023, the cost of net revenue for the bromine segment was $26,521,281.

Crude salt segment

For the year ended December 31, 2024, the cost

of net revenue for the crude salt segment was $996,396.

The cost of net revenue for our crude salt segment for the year ended

December 31, 2023 was $1,567,993.

Chemical products segment

Cost of net revenue for our chemical products segment for

the fiscal year 2024 and 2023 was $0.

Natural Gas segment

Cost of net revenue for our natural gas segment for the

year ended December 31, 2024, and 2023 was $294 and $679.

Gross (Loss) Profit.

Gross (loss) was $7,085,731or

93%, of net revenue for the year ended December 31, 2024, compared to $1,953,837, or 7%, of net revenue for the same period in 2023.

Gross Profit (Loss) by Segment

December 31, 2024

December 31, 2023

% Point Change

Profit Margin

(loss) Margin

the year ended December 31, 2025, the cost of revenue for the bromine segment was $22,221,144.

For the year ended December 31, 2024,

the cost of revenue for the bromine segment was $13,750,051.

the year ended December 31, 2025, the cost of revenue for the crude salt segment was $1,036,827.

The cost of revenue for our crude salt

segment for the year ended December 31, 2024, was $996,396.

products segment

of revenue for our chemical products segment for the fiscal year 2025 and 2024 was nil.

of revenue for our natural gas segment for the year ended December 31, 2025, and 2024 was nil and $294.

Profit/(Loss).

Gross profit was $2,160,364 or 8%, of net revenue for the year ended December 31, 2025, compared to the gross

loss of $7,085,731 or 93%, of net revenue for the same period in 2024.

Profit (Loss) by Segment

Gross Profit Margin

Profit (loss) Margin

$ (8,200,236 )

Chemical Products

Total Gross (Loss) Profit

Gross Profit/(Loss)

$ (7,085,731 )

Bromine se g ment

For the year ended December 31, 2024, the gross loss margin

for our bromine segment was 147% compared to the gross profit of 2% in the previous year.

This decrease was due to a decrease in bromine

unit price of 27% and a decrease in volume of 72%.

Crude salt se g ment

ended December 31, 2024, the gross profit margin for our crude salt segment was 51%, compared to 47% in the preceding year, representing

a 4% increase.

Direct labor and

factory overheads were incurred during plant shutdown.

On September 1, 2017, the Company received notification from the

government of Yangkou County, Shouguang City of PRC stating that production at all its bromine and crude salt and chemical factories

should be halted with immediate effect in order for the Company to perform rectification and improvement in accordance with the

county’s new safety and environmental protection requirements.

On November 24, 2017, the Company received a letter from the

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

second living area of the Qinghe Oil Extraction Plant to Bohai Park.

As such, direct labor and factory overhead costs (including

depreciation of plant and machinery) amounted to $8,880,643 and $9,544,675 for fiscal years 2024 and 2023, which were presented as

operating expenses instead of in cost of revenue.

The decrease in direct labor and factory overhead costs was primarily attributable

to the factories operation status during the fiscal year 2024 and year 2023, respectively.

These five factories (including No.1, No.4,No.7,No.8 and No.9)were

in production during the year 2024.

General and Administrative

General and administrative expenses were $6,235,931 for the year ended December 31, 2024, representing an increase of

$1,995,099 (or 47%) as compared to $4,240,832 for the same period in 2023.

The increase was mainly contributed by an increase in bad debt

the year ended December 31, 2025, the gross profit margin for our bromine segment was 3% compared to the gross loss of 147% in the previous

This increase was due to an increase in bromine unit price of 55% and an increase in volume of 168%.

the year ended December 31, 2025, the gross profit margin for our crude salt segment was 57%, compared to 51% in the preceding year,

representing a 6 percentage point increase.

the year ended December 31, 2025, the gross profit margin for our natural gas segment was nil, compared to 100% in the preceding year.

The decrease was due to the expiration of contracts.

labor and factory overheads were incurred during plant shutdown.

On September 1, 2017, the Company received notification from

the government of Yangkou County, Shouguang City of PRC stating that production at all its bromine and crude salt and chemical factories

should be halted with immediate effect in order for the Company to perform rectification and improvement in accordance with the county’s

new safety and environmental protection requirements.

On November 24, 2017, the Company received a letter from the Government of Yangkou

County, Shouguang City notifying the Company to relocate its two chemical production plants located in the second living area of the

Qinghe Oil Extraction Plant to Bohai Park.

As such, direct labor and factory overhead costs (including depreciation of plant and machinery)

amounted to $5,098,990 and $8,880,643 for fiscal years 2025 and 2024, which were presented as operating expenses instead of in cost of

The decrease in direct labor and factory overhead costs was primarily attributable to the factories operation status during

the fiscal year 2025 and year 2024.

These five factories (including No.1, No.4, No.7, No.8 and No.9) were in production during the year

and Administrative Expenses.

General and administrative expenses were $5,580,071 for the year ended December 31, 2025, representing

a decrease of $655,860 (or 11%) as compared to $6,235,931 for the same period in 2024.

The decrease was mainly contributed by a decrease

in bad debt expenses.

Loss from Operations.

Operating loss was $22,248,569 for the fiscal year 2024, compared to

a loss of $11,890,725 in the same period in 2023.

Income (loss) from Operations by Segment

ended December 31, 2024 (Restated)

Year ended December 31, 2023

Operating loss

was $8,568,624 for the fiscal year 2025, compared to a loss of $22,248,569 in the same period in 2024.

(loss) from Operations by Segment

31, 2024 (Restated)

$ (4,658,726 )

$ (17,455,130 )

Chemical Products

$ (1,393,175 )

$ (3,185,472 )

Loss from operations before corporate costs

from operations before corporate costs

$ (7,118,494 )

$ (21,504,076 )

Corporate costs

Loss from operations before taxes

$ (1,450,130 )

from operations before taxes

$ (8,568,624 )

Bromine se g ment

Loss from operations from our bromine segment was $17,455,130 for the

fiscal year 2024, compared to a loss of $10,005,755 in the same period in 2023.

This decrease was due to a decrease in bromine unit price

of 27% and a decrease in volume of 72%.

Crude salt se g ment

Loss from operations from our crude salt segment was $668,110 for fiscal

year 2024 compared to an income of $640,309 in the same period in 2023.

The main reason for the decline in crude salt in 2024 compared

with 2023 is that the unit price of sales is down by 13%, and the sales volume is also down by 20%.

Chemical products segment

Loss from operations from our chemical products segment was $3,185,472

for the fiscal year 2024, compared to a loss of $1,653,349 in the same period in 2023.

Natural Gas segment

Loss from operations from our natural gas segment was $195,364

for the fiscal year 2024, compared to a loss of $86,284 in the same period in 2023.

Other (Expense)/Income, Net .

income, net, which represent bank interest income, net of finance lease interest expense and $50,470 of non-operating expenses was

$62,113 for the fiscal year 2024, representing a decrease of $207,032 (or approximately 143% as compared to the preceding year.

Loss on disposal of property, plant and equipment.

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

In June 2024, considering the bromide

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

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

Impairment of property, plant and equipment.

of property, plant and equipment was $6,772,500 in the fiscal year 2024.

In December 2024, due to the delayed completion of some machinery

and equipment of Yuxin Chemical's new plant resulting from the impact of the current market environment, our company hired professional

evaluators to perform impairment tests on these assets.

The latter determined impairment was $6,772,500.

Net loss was $59,900,372 for the fiscal year 2024, compared to net

loss of $61,795,279 in the preceding year.

Net Loss Per Share

For the fiscal year 2024, net loss per share was $54.88 compared to

net loss per share of $58.16 in the preceding year.

There were 1,091,562 shares outstanding compared to 1,091,562 shares

Foreign Currency Translation

For the fiscal year 2024, the Company had a negative foreign currency

translation adjustment of $2,730,049 versus a negative adjustment of $5,025,980 in the previous year.

This adjustment impacts all balance

sheet translations into U.S.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2024, cash and cash equivalents were

$10,075,162 as compared to $72,223,894 as of December 31, 2023.

The components of this decrease of $62,148,732 are reflected below.

Statement of Cash Flows

Years Ended December 31

Net cash provided by (used in) operating activities

$ (22,248,569 )

Net cash used in investing activities

from operations from our bromine segment was $4,658,726 for the fiscal year 2025, compared to a loss of $17,455,130 in the same period

This decrease was due to an increase in bromine unit price of 55% and an increase in volume of 168%.

from operations from our crude salt segment was $908,680 for fiscal year 2025 compared to a loss of $668,110 in the same period in 2024.

The main reason for the increase in loss in crude salt in 2025 compared with 2024 is due to the increase in depreciation expenses.

products segment

from operations from our chemical products segment was $1,393,175 for the fiscal year 2025, compared to a loss of $3,185,472 in the same

period in 2024.

The main reason for the changes was due to the decrease in the bad debt for the fiscal year 2025 compared to the fiscal

from operations from our natural gas segment was $157,913 for the fiscal year 2025, compared to a loss of $195,364 in the same period

Expense, Net .

Other expenses, net was $4,003,497 for the fiscal year 2025, representing an increase of $3,953,027 as compared

to the preceding year.

It represents provision for guaranteed litigation for the fiscal year 2025.

on Disposal of Long-lived Assets

on disposal of long-lived assets was $2,008,853 in the fiscal year 2025.

As the company was the joint responsible party for the debts

of the Vegetable Group, the court auctioned the land and the attached properties on it of SYCI.

on disposal of long-lived assets was $29,169,008 in the fiscal year 2024.

In June 2024, considering the bromide well and transmission

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

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

of Long-lived Assets

court engaged a third-party valuer for evaluation of the land at xiangjiang road, yangkou town, shouguang city and its attached properties;

The Company engaged an independent third-party valuer for evaluation of the fixed assets of Daying County.

The valuation reports returned

a total fair value of $ 5,066,558.

The Company recognized a total impairment loss of $30,068,794 accordingly.

on disposal of subsidiary

sale of SYCI was completed in December 2025, and the gain on disposal of subsidiary amounted to $674,776.

Net loss was $43,920,231 for the fiscal year 2025, compared to net loss of $59,900,372 in the preceding year.

Loss Per Share

the fiscal year 2025, net loss per share was $32.95 compared to net loss per share of $54.88 in the preceding year.

There were 1,332,954

shares outstanding compared to 1,091,562 shares.

Currency Translation Adjustment

the fiscal year 2025, the Company had a positive foreign currency translation adjustment of $2,677,801 versus a negative adjustment of

$2,730,049 in the previous year.

This adjustment impacts all balance sheet translations into U.S.

AND CAPITAL RESOURCES

of December 31, 2025, cash and cash equivalents were $3,793 as compared to $10,075,162 as of December 31, 2024.

The components of this

decrease of $10,071,369 are reflected below.

of Cash Flows

Ended December 31

cash provided by operating activities

cash used in investing activities

$ (22,571,837 )

Net cash used in financing activities

$ (28,948,917 )

Effects of exchange rate changes on cash and cash equivalents

cash provided by/(used in) financing activities

$ (31,851,811 )

of exchange rate changes on cash and cash equivalents

$ (2,023,830 )

Net decrease in cash and cash equipment

decrease in cash and cash equipment

$ (10,071,369 )

$ (62,148,732 )

For the fiscal years 2024 and

2023, we met our working capital and capital investment requirements by using cash flows from operations and cash on hand.

Net Cash Provided by (Used

in) Operating Activities

During the year ended December 31, 2024, cash flow used in operating

activities of approximately $0.68 million was mainly due to a net loss of $59.9 million, offset by a non-cash adjustment related to depreciation

and amortization of property, plant and equipment of $15.82 million, impairment of property, gain on disposal of equipment of $29 million,

plant and equipment of $6.8 million and an decrease in account receivable of $4.26 million.

During the year ended

December 31, 2023, cash flow used in operating activities of approximately $32.75 million was mainly due to a net loss of $61.8

million, offset by a non-cash adjustment related to depreciation and amortization of property, plant and equipment of $27.13 million

and an increase in accounts and other payable and accrued expenses of $1.11 million.

Accounts receivable

Cash collections on our accounts

receivable had a major impact on our overall liquidity.

The following table presents the aging analysis of our accounts receivable as

of December 31, 2024, and 2023.

December 31, 2024

December 31, 2023

Aged 1-30 days

Aged 31-60 days

Aged 61-90 days

Aged 91-120 days

Aged 121-150 days

Aged 151-180 days

Aged 181-210 days

Aged 211-240 days

The overall accounts receivable

balance as of December 31, 2024, decreased by $4,301,173, compared to those of December 31, 2023.

The decrease was mainly due to the decrease

in the amount of accounts receivable in the current period as a result of the decrease in sales revenue.

We have policies in place to

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

We perform ongoing credit evaluations on the financial condition

of our customers.

Our inventory consists of the following:

December 31, 2024

December 31, 2023

Raw materials

Finished goods

The net inventory level as of

December 31, 2024, decreased by $261,858, as compared to the net inventory level as of December 31, 2023, one of the main reasons for the

reduction in inventories was the decline in sales.

Raw materials decreased by $22,230 as of December 31,

2024, as compared to December 31, 2023.

Finished goods decreased by $239,628 as of December

31, 2024, as compared to December 31, 2023.

Net Cash Used In Investing Activities

For the fiscal year 2024, we used approximately $28.92 million

for purchase of fixed assets.

For the fiscal year 2023, we used $0 for investing activities.

Net Cash Used In Financing

For the fiscal year 2024 and 2023, we used $31.87 and $0.3 million

to repay finance lease obligations.

We believe that our available

funds and cash flows generated from operations will be sufficient to meet our anticipated ongoing operating needs for the next twelve

As of December 31, 2024, we had

approximately $10 million in available cash, all of which is in highly liquid current deposits yielding minimal or no interest.

not anticipate paying cash dividends in the foreseeable future.

We intend to continue to focus

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

We may not be able to identify,

successfully integrate or profitably manage any business or business segment we may acquire, or any expansion of our business.

may involve a number of risks, including possible adverse effects on our operating results, diversion of management’s attention,

inability to retain key personnel, risks associated with unanticipated events and the financial statement effect of potential impairment

of acquired intangible assets, any of which could have a materially adverse effect on our condition and results of operations.

if competition for acquisition candidates or operations were to increase, the cost of acquiring businesses could increase materially.

We may effect an acquisition with a target business which may be financially unstable, under-managed, or in its early stages of development

Our inability to implement and manage our expansion strategy successfully may have a material adverse effect on our business

and future prospects.

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.

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

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

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

As of December

31, 2024, As of Dec 31, 2024, the Company had current assets of $17.45 million and current liabilities of $12.98 million.

the surplus was $4.47 million, and it has suffered losses in both the fiscal years of 2024 and 2023 as well.

If it is unable to raise

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

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.

Contractual Obligations and Commitments

We have no significant contractual

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

Additional information regarding our contractual obligations and commitments on December 31, 2024, is provided in the notes to our consolidated

financial statements.

Material Off-Balance Sheet Arrangements

We do not currently have any off-balance sheet arrangements

falling within the definition of Item 303(a) of Regulation S-K.

Critical Accounting Policies and Estimates

the fiscal years 2025 and 2024, we met our working capital and capital investment requirements by using cash flows from operations and

cash on hand.

Cash Provided by Operating Activities

the year ended December 31, 2025, cash flow provided by operating activities of approximately $7.8 million was mainly due to a non-cash

adjustment related to depreciation and amortization of property, plant and equipment of $13.1 million, amortization of finance lease

right-of-use asset of $3.1 million, accrued liabilities of $4 million, a loss on disposal of long-lived assets of $2 million, an impairment

of long-lived assets of $30.1 million, and offset by a net loss of $43.9 million.

the year ended December 31, 2024, cash flow provided by operating activities of approximately $0.68 million was mainly due to a net loss

of $59.9 million, offset by a non-cash adjustment related to depreciation and amortization of property, plant and equipment of $15.82

million, impairment of long-lived assets of $6.8 million, loss on disposal of equipment of $29 million, and a decrease in account receivable

of $4.26 million.

collections on our accounts receivable had a major impact on our overall liquidity.

The following table presents the aging analysis of

our accounts receivable as of December 31, 2025 and 2024.

overall accounts receivable balance as of December 31, 2025 increased by $2,704,897, compared to those of December 31, 2024.

was mainly due to an increase in the amount of accounts receivable in the current period as a result of the increase in sales revenue.

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

We perform ongoing credit evaluations

on the financial condition of our customers.

inventory consists of the following:

net inventory level as of December 31, 2025 increased by $247,446, as compared to the net inventory level as of December 31, 2024, one

of the main reasons for the increase in inventories was the rise in sales.

materials increased by $9,469 as of December 31, 2025, as compared to December 31, 2024.

goods increased by $237,977 as of December 31, 2025, as compared to December 31, 2024.

Cash Used In Investing Activities

the fiscal year 2025, net cash used in investing activities was $22.57 million.

This was driven by $8.85 million for purchase of fixed

assets and $13.93 million of loans to third parties.

the fiscal year 2024, net cash used in investing activities was $28.95 million.

This was driven by $28.92 million for purchase of fixed

Cash Provided By / (Used In) Financing Activities

the fiscal year 2025, net cash provided by financing activities was $4.84 million.

This was driven by cash inflows from borrowings, including

$2.31 million from long-term borrowing and $2.80 million from short-term borrowing, offset by $0.26 million of principal payments for

obligations under finance leases.

the fiscal year 2024, net cash used in financing activities was $31.85 million, which was almost entirely used for the principal payment

for obligations under finance leases.

We believe that our available funds and cash flows generated from operations will be sufficient

to meet our anticipated ongoing operating needs for the next twelve months.

of December 31, 2025, we had approximately $3,793 in available cash, all of which is in highly liquid current deposits yielding minimal

or no interest.

We do not anticipate paying cash dividends in the foreseeable future.

intend to continue to focus our efforts on the activities of SCHC, SHSI and DCHC as these segments continue to expand within the Chinese

may not be able to identify, successfully integrate or profitably manage any business or business segment we may acquire, or any expansion

of our business.

An expansion may involve a number of risks, including possible adverse effects on our operating results, diversion of

management’s attention, inability to retain key personnel, risks associated with unanticipated events and the financial statement

effect of potential impairment of acquired intangible assets, any of which could have a materially adverse effect on our condition and

results of operations.

In addition, if competition for acquisition candidates or operations were to increase, the cost of acquiring businesses

could increase materially.

We may effect an acquisition with a target business which may be financially unstable, under-managed, or in

its early stages of development or growth.

Our inability to implement and manage our expansion strategy successfully may have a material

adverse effect on our business and future prospects.

Obligations and Commitments

have no significant contractual obligations not fully recorded on our consolidated balance sheets or fully disclosed in the notes to

our consolidated financial statements.

are prepared in accordance with accounting principles generally accepted in the United States of America (U.S.

GAAP), which requires us

to make judgments, estimates and assumptions.

See “Note 1 – Nature of Business and Summary of Significant Accounting Policies,”

in Notes to the Consolidated Financial Statements, which is included in “Item 8.

Financial Statements and Supplementary Data,”

which describes our significant accounting policies and methods used in the preparation of our Consolidated Financial Statements.

methods, estimates and judgments that we use in applying our accounting policies require us to make difficult and subjective judgments,

often as a result of the need to make estimates regarding matters that are inherently uncertain.

Our most critical estimates include:

· allowance for doubtful accounts, which impacts revenue;

· the valuation of inventory, which impacts gross margins;

· impairment of long-lived assets;

· the valuation and recognition of share-based compensation, which impacts operating expenses;

· the recognition and measurement of deferred income taxes, which impact our provision for taxes.

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.

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

Inventory Valuation

Inventory is stated at the lower

of cost or market, with cost determined on a first-in first-out basis.

The carrying value of inventory is reduced for estimated obsolescence

by the difference between its cost and the estimated market value based upon assumptions about future demand.

We evaluate the inventory

carrying value for potential excess and obsolete inventory exposures by analyzing historical and anticipated demand.

If actual future

demand or market conditions are less favorable than those projected by management, additional inventory write-downs may be required in

the future, which could have a material adverse effect on our results of operations.

Depreciation of 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 using the straight-line method at rates sufficient

to depreciate such costs over the estimated productive lives.

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

Additional information regarding our contractual obligations and commitments on December 31, 2025

is provided in the notes to our consolidated financial statements.

Off-Balance Sheet Arrangements

do not currently have any off-balance sheet arrangements falling within the definition of Item 303(a) of Regulation S-K.

Accounting Policies and Estimates

Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America

GAAP), which requires us to make judgments, estimates and assumptions.

See “Note 1 – Nature of Business and Summary

of Significant Accounting Policies,” in Notes to the Consolidated Financial Statements, which is included in “Item 8.

Statements and Supplementary Data,” which describes our significant accounting policies and methods used in the preparation of

our Consolidated Financial Statements.

The methods, estimates and judgments that we use in applying our accounting policies require us

to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain.

most critical estimates include:

for doubtful accounts;

valuation of inventory, which impacts gross margins;

of long-lived assets;

valuation and recognition of share-based compensation, which impacts operating expenses;

recognition and measurement of deferred income taxes, which impact our provision for taxes.

f or Doub tf ul Accounts

make estimates of the uncollectibility of accounts receivable, especially analyzing accounts receivable and historical bad debts, customer

concentrations, customer creditworthiness, 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.

is stated at the lower of cost or market, with cost determined on a first-in first-out basis.

The carrying value of inventory is reduced

for estimated obsolescence by the difference between its cost and the estimated market value based upon assumptions about future demand.

We evaluate the inventory carrying value for potential excess and obsolete inventory exposures by analyzing historical and anticipated

If actual future demand or market conditions are less favorable than those projected by management, additional inventory write-downs

may be required in the future, which could have a material adverse effect on our results of operations.

of Property, Plant and Equipment

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 using the straight-line method

at rates sufficient to depreciate such costs 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.

In some situations, the life

of the asset may be extended or shortened if circumstances arose that would lead us to believe that the estimated life of the asset has

Mineral rights are

amortized ratably over the term of the lease, or the equivalent term under the units of production method, whichever is shorter.

situations, the life of the asset may be extended or shortened if circumstances arose that would lead us to believe that the estimated

life of the asset has changed.

The life of leasehold improvements may change based on the extension of lease contracts with our landlords.

Changes in the estimated

lives of assets will result in an increase or decrease in the amount of depreciation recognized in future periods.

Impairment of Long Lived Assets

We periodically evaluate whether

events or circumstances have occurred that indicate long-lived assets may not be recoverable or that the remaining useful life may warrant

When such events or circumstances are present, we assess the recoverability of long- lived assets by determining whether the

carrying value will be recovered through the expected undiscounted future cash flows resulting from the use of the asset.

the sum of the expected undiscounted future cash flows is less than the carrying value of the asset, an impairment loss equal to the excess

of the asset’s carrying value over its fair value is recorded.

on D eferred Tax Assets

We evaluate our deferred income

tax assets to determine if valuation allowances are required or should be adjusted.

A valuation allowance is established against our deferred

tax assets based on consideration of all available evidence, both positive and negative, using a “more likely than not” standard.

This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability,

the duration of statutory carry forward periods, our experience with expiring unused tax attributes and tax planning alternatives.

making such judgments, significant weight is given to evidence that can be objectively verified.

Stock-based compensation

We account for stock-based compensation

in accordance with the fair value recognition provisions of U.S.

We use the Black- Scholes model which requires the input of highly

subjective assumptions.

These assumptions include estimating the length of time employees will retain their vested stock options before

exercising them, the estimated volatility of our common stock price over the expected term and the number of options that will ultimately

not complete their vesting requirements.

The assumptions for expected volatility and expected term are the two assumptions that significantly

affect the grant date fair value.

Changes in expected risk-free rate of return do not significantly impact the calculation of fair value,

and determining this input is not highly subjective.

We use annualized historical stock

price volatility, which is deemed to be appropriate to serve as the expected volatility of our stock price and is assumed to be constant

and prevailing.

The expected term represents the weighted-average period that our stock options are expected to be outstanding.

life is based on historical option exercise pattern.

Recent Accounting Pronouncements

See “Note 1 – Nature

of Business and Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in Item 8.

Statements and Supplementary Data for a full description of recent accounting pronouncements including the respective expected dates of

adoption and effects on the consolidated financial statements.

Changes in the estimated lives of assets will result in an increase or decrease in the amount of depreciation recognized in future periods.

of Long-Lived Assets

periodically evaluate whether events or circumstances have occurred that indicate long-lived assets may not be recoverable or that the

remaining useful life may warrant revision.

When such events or circumstances are present, we assess the recoverability of long- lived

assets by determining whether the carrying value will be recovered through the expected undiscounted future cash flows resulting from

the use of the asset.

In the event the sum of the expected undiscounted future cash flows is less than the carrying value of the asset,

an impairment loss equal to the excess of the asset’s carrying value over its fair value is recorded.

on D ef erred Tax Assets

evaluate our deferred income tax assets to determine if valuation allowances are required or should be adjusted.

A valuation allowance

is established against our deferred tax assets based on consideration of all available evidence, both positive and negative, using a

“more likely than not” standard.

This assessment considers, among other matters, the nature, frequency and severity of recent

losses, forecasts of future profitability, the duration of statutory carry forward periods, our experience with expiring unused tax attributes

and tax planning alternatives.

In making such judgments, significant weight is given to evidence that can be objectively verified.

account for stock-based compensation in accordance with the fair value recognition provisions of U.S.

We use the Black- Scholes

model which requires the input of highly subjective assumptions.

These assumptions include estimating the length of time employees will

retain their vested stock options before exercising them, the estimated volatility of our common stock price over the expected term and

the number of options that will ultimately not complete their vesting requirements.

The assumptions for expected volatility and expected

term are the two assumptions that significantly affect the grant date fair value.

Changes in expected risk-free rate of return do not

significantly impact the calculation of fair value, and determining this input is not highly subjective.

use annualized historical stock price volatility, which is deemed to be appropriate to serve as the expected volatility of our stock

price and is assumed to be constant and prevailing.

The expected term represents the weighted-average period that our stock options are

expected to be outstanding.

The expected life is based on historical option exercise pattern.

Accounting Pronouncements

“Note 1 – Nature of Business and Summary of Significant Accounting Policies” of the Notes to Consolidated Financial

Statements in Item 8.

Financial Statements and Supplementary Data for a full description of recent accounting pronouncements including

the respective expected dates of adoption and effects on the consolidated financial statements.

Quantitative and Qualitative Disclosures about Market Risk.

to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as

it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

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

What changed 10-K/A

Item 7. Management’s Discussion and Analysis