What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-09-29 compared with 2026-08-24 · 1457 added, 1991 removed, 612 unchanged (85% of the section changed)

Financial Statements and Supplementary Data

The financial statements and supplementary

data required by this item are included in a separate section of this Report.

See “Index to Consolidated Financial Statements”

GULF RESOURCES, INC.

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2024 and 2023

C O N T E N T S

financial statements and supplementary data required by this item are included in a separate section of this Report.

to Consolidated Financial Statements” on Page F-1.

RESOURCES, INC.

FINANCIAL STATEMENTS

31, 2025, and 2024

O N T E N T S

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID # 2729 )

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FINANCIAL STATEMENT SCHEDULE:

STATEMENT SCHEDULE:

SCHEDULE I – PARENT ONLY FINANCIAL INFORMATION

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Resources, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Gulf

Resources, Inc.

and subsidiaries (collectively the “Company”) as of December 31, 2024 and 2023, and the related consolidated

statements of comprehensive income (loss), stockholders’ equity, and cash flows for the year ended December 31, 2024 and 2023, the

related notes, and financial statement schedule (collectively referred to as the “consolidated financial statements”).

our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as

of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the year ended December 31,

2024 and 2023, in conformity with accounting principles generally accepted in the United States of America.

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and Stockholders of Gulf Resources, Inc.

on the Financial Statements

have audited the accompanying consolidated balance sheets of Gulf Resources, Inc.

and subsidiaries (collectively the “Company”)

as of December 31, 2025 and 2024, and the related consolidated statements of comprehensive income (loss), stockholders’ equity,

and cash flows for the year ended December 31, 2025 and 2024, the related notes, and financial statement schedule (collectively referred

to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in

all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and

its cash flows for each of the years in the year ended December 31, 2025 and 2024, in conformity with accounting principles generally

accepted in the United States of America.

to Correct Previously Issued Consolidated Financial Statements

As discussed in Note 23 to the Financial Statements,

the consolidated financial statements for the years ended December 31, 2024 and 2023 have been restated.

Basis for Opinion

These consolidated financial statements

are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities

laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance

with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were

we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding

of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting.

discussed in Note 26 to the Consolidated Financial Statements, the consolidated financial statements for the years ended December 31,

2024 have been restated.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public

Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance

with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing

an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing

procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing

procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures

in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates

made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit

provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated

below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to

be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial

statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matters

does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the

critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they

Property, plant and equipment, net

As described in Note 1 to the

consolidated financial statements, property, plant and equipment consisted of facilities for products, mineral rights, constructions in

process and producing oil and gas properties.

The Company reviews the economic benefits associated with the item purchased periodically.

Once the Company determines the likelihood of economic benefits associated is probable, the item would be recognized as an asset.

We identified determining carrying

amount of property, plant and equipment as a critical audit matter due to the material balance on the balance sheet and significant judgement

and assumptions were used by the Management regarding the timing and ability to contribute to the generation of cash flows, which in turn

led to a high degree of auditor judgement, subjectivity and effort in performing procedures and evaluating audit evidence relating to

Management’s assessment of the carrying amount.

The primary procedures we performed to address this critical

audit matter included the following:

- Reviewed the Company’s accounting policies, assumptions and estimates.

- Physical inspection.

- Examined contracts.

- Performed independent analysis for impairment testing.

/s/ GGF CPA LTD

We have served as the Company’s auditor since

Guangzhou, Guangdong, China

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Expressed in U.S.

audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due

to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Audit Matters

audit matters are matters arising from the current year audit of the consolidated financial statements that were communicated or required

to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements

and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there were no critical audit matters.

have served as the Company’s auditor since 2024.

Guangdong, China

RESOURCES, INC.

BALANCE SHEETS

receivable, net

due from related parties

current assets

Accounts receivable, net

Inventories, net

Prepayments and deposits

Amount due from related parties

Other receivables

Total current assets

plant and equipment, net

lease right-of use assets

lease right-of-use assets

land leases, net of current portion

tax assets, net

non-current assets

Property, plant and equipment, net

Finance lease right-of use assets

Operating lease right-of-use assets

Prepaid land leases, net of current portion

Deferred tax assets, net

Total non-current assets

Liabilities and Stockholders’ Equity

and Stockholders’ Equity

bank borrowing

payable and accrued expenses

payable-current

due to related parties

lease liability, current portion

lease liabilities, current portion

current liabilities

Accounts payable and accrued expenses

Taxes payable-current

Advance from customer

Amount due to related parties

Finance lease liability, current portion

Operating lease liabilities, current portion

Total current liabilities

lease liability, net of current portion

lease liabilities, net of current portion

bank borrowing

non-current liabilities

Finance lease liability, net of current portion

Operating lease liabilities, net of current portion

Total non-current liabilities

Total Liabilities

Commitment and Contingencies

Stockholders’ Equity

PREFERRED STOCK;

Stockholders’

$ 0.001 par value;

1 unchanged sentence

none outstanding

COMMON STOCK;

80,000,000 shares

1,568,114 and

shares issued;

1,120,145 shares

and 1,539,531 and

shares outstanding as of December 31, 2024 and 2023 (1)

1,091,562 shares

outstanding as of December 31, 2025 and 2024 (1)

Treasury stock;

2 unchanged sentences

( 1,372,673 )

Additional paid-in capital (1)

Share to be issued

Retained earnings unappropriated

Retained earnings appropriated

Accumulated other comprehensive loss

paid-in capital (1)

earnings unappropriated

( 7,526,347 )

earnings appropriated

other comprehensive loss

( 12,218,081 )

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

( 20,783,318 )

Stockholders’ Equity

Liabilities and Stockholders’ Equity

$ 133,731,810

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

The accompanying notes are an integral

part of these consolidated financial statements.

GULF RESOURCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE

INCOME (LOSS)

(Expressed in U.S.

Years Ended December 31,

OPERATING COSTS AND EXPENSE

$ 167,822,288

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

accompanying notes are an integral part of these consolidated financial statements.

RESOURCES, INC.

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Ended December 31,

COSTS AND EXPENSE

Cost of revenues

1 unchanged sentence

( 14,746,741 )

Sales and marketing expenses

Direct labor and factory overheads incurred during plant shutdown

and marketing expenses

labor and factory overheads incurred during plant shutdown

( 5,098,990 )

( 8,880,643 )

General and administrative expenses

and administrative expenses

( 5,580,071 )

3 unchanged sentences

( 29,909,579 )

LOSS FROM OPERATIONS

( 22,248,569 )

FROM OPERATIONS

( 8,568,624 )

OTHER INCOME (EXPENSE)

Interest expense

Interest income

Other expenses, net

Loss on disposal of property, plant and equipment

( 22,248,569 )

Impairment of property, plant and equipment

INCOME (EXPENSE)

expenses, net

( 4,003,497 )

Expenditure on water pollution treatment

of long-lived assets

( 30,068,794 )

INCOME BEFORE INCOME TAXES

( 6,772,500 )

on disposal of long-lived assets

( 2,008,853 )

INCOME TAX EXPENSE

( 29,169,008 )

on disposal of subsidiary

BEFORE INCOME TAXES

( 43,920,231 )

1 unchanged sentence

( 1,648,182 )

COMPREHENSIVE INCOME (LOSS):

$ ( 43,920,231 )

$ ( 59,900,372 )

OTHER COMPREHENSIVE (LOSS) INCOME

- Foreign currency translation adjustments

COMPREHENSIVE

INCOME (LOSS):

$ ( 43,920,231 )

$ ( 59,900,372 )

TOTAL COMPREHENSIVE LOSS

COMPREHENSIVE (LOSS) INCOME

Foreign currency translation adjustments

( 2,730,049 )

COMPREHENSIVE LOSS

$ ( 41,242,430 )

BASIC AND DILUTED LOSS PER SHARE (1)

BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF SHARES (1) :

(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.

The accompanying notes are an integral

part of these consolidated financial statements.

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

YEARS ENDED DECEMBER 31, 2024 AND 2023

(Expressed in U.S.

shares issued (1)

shares outstanding (1)

treasury stock (1)

paid-in capital (1)

earnings unappropriated

earnings appropriated

other comprehensive Income(loss)

BALANCE AT JANUARY 1, 2023(Restated)

$ ( 62,630,421 )

AND DILUTED LOSS PER SHARE(1)

AND DILUTED WEIGHTED AVERAGE NUMBER OF SHARES(1):

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

accompanying notes are an integral part of these consolidated financial statements.

RESOURCES, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

ENDED DECEMBER 31, 2025, AND 2024

outstanding(1)

unappropriated

comprehensive

outstanding(1)

unappropriated

comprehensive

AT JANUARY 1, 2024 (Restated)

$ ( 1,372,673 )

2 unchanged sentences

$ 205,248,296

Restricted shares issued for services

Currency translation adjustment

shares to be issued for service

translation adjustment

( 2,730,049 )

Net loss for year ended December 31, 2023

loss for year ended December 31, 2024

( 59,900,372 )

BALANCE AT DECEMBER 31, 2023(Restated)

AT DECEMBER 31, 2024 (Restated)

$ ( 1,372,673 )

2 unchanged sentences

$ 142,812,575

comprehensive

outstanding(1)

unappropriated

BALANCE AT JANUARY 1, 2024(Restated)

comprehensive

AT JANUARY 1, 2025

$ ( 1,372,673 )

2 unchanged sentences

$ 142,812,575

Restricted shares to be issued for service

Currency translation adjustment

$ ( 1,372,673 )

$ ( 20,783,318 )

Net loss for year ended December 31, 2024

$ 142,812,575

shares to be issued for service

translation adjustment

of subsidiary

loss for year ended December 31, 2025

( 43,920,231 )

31, 2024(Restated)

( 43,920,231 )

1 unchanged sentence

( 43,920,231 )

AT DECEMBER 31, 2025

$ ( 1,372,673 )

Treasury Stock

Additional Paid-In Capital

Retained Earnings Unappropriated

Accumulated Other Comprehensive Income (Loss)

Share to be Issued

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

The accompanying notes are an integral

part of these consolidated financial statements.

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH

(Expressed in U.S.

Years Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES

$ 105,927,142

$ ( 7,526,347 )

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

Amortization on capital lease

Depreciation and amortization

Deferred tax asset

Stock-based compensation expense

Bad debt expense

$ ( 12,218,081 )

$ 111,477,922

$ ( 1,372,673 )

$ 105,927,142

$ ( 7,526,347 )

$ ( 12,218,081 )

$ 111,477,922

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

accompanying notes are an integral part of these consolidated financial statements.

RESOURCES, INC.

STATEMENTS OF CASH FLOWS

Ended December 31,

FLOWS FROM OPERATING ACTIVITIES

$ ( 43,920,231 )

$ ( 59,900,372 )

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

on capital lease

and amortization

compensation expense

Impairment of inventory

Impairment of property plant and equipment

Amortization of operating lease right-of-use asset

of property plant and equipment

of operating lease right-of-use asset

of finance lease right-of-use asset

Loss on disposal of property, plant and equipment

Changes in assets and liabilities

Accounts receivable

Prepayment and deposits

on disposal of long-lived assets

on disposal of subsidiary

interest receivable

in assets and liabilities

( 2,635,370 )

Advance from customers

Other receivables

Accounts and Other payable and accrued expenses

from customers

and Other payable and accrued expenses

( 2,191,652 )

Taxes payable

Lease liabilities

Net cash provided by (used in) operating activities

cash provided by operating activities

FLOWS FROM INVESTING ACTIVITIES

of property, plant and equipment

( 8,848,156 )

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment

( 28,923,642 )

Interest-free loan lent to related parties

Net cash used in investing activities

Interest-free

loan repaid by related parties

Interest-free

loan lent to related parties

from disposal of subsidiary

to third parties

( 13,934,085 )

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of finance leases obligation

cash used in investing activities

( 22,571,837 )

Proceeds from interest-free loan from a related party

Net cash used in financing activities

( 28,948,917 )

EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

FLOWS FROM FINANCING ACTIVITIES

from long-term borrowing

from short-term borrowing

of finance leases obligation

( 31,866,665 )

from interest-free loan from a related party

cash provided by / (used in) financing activities

( 31,851,811 )

NET DECREASE IN CASH AND CASH EQUIVALENTS

OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

( 2,023,830 )

DECREASE IN CASH AND CASH EQUIVALENTS

( 10,071,369 )

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS - END OF YEAR

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH

FLOWS (CONTINUED)

(Expressed in U.S.

Years Ended December 31,

2024 (Restated)

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the year for:

Paid for taxes

Interest on finance lease obligation

Paid for Flood Prevention Project

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING

The accompanying notes are an integral

part of these consolidated financial statements.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 1 – NATURE OF BUSINESS AND

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation and Consolidation

The accompanying audited consolidated

financial statements have been prepared by Gulf Resources, Inc.

( 62,148,732 )

AND CASH EQUIVALENTS - BEGINNING OF YEAR

AND CASH EQUIVALENTS - END OF YEAR

RESOURCES, INC.

STATEMENTS OF CASH FLOWS (CONTINUED)

Ended December 31,

DISCLOSURE OF CASH FLOW INFORMATION

paid during the year for:

DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

accompanying notes are an integral part of these consolidated financial statements.

RESOURCES, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of Presentation and Consolidation

accompanying audited 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

corporation and its subsidiaries (collectively, the “Company”).

consolidated financial statements include the accounts of Gulf Resources, Inc.

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

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

in Hong Kong (“HKJI”).

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

100% of Shouguang Yuxin Chemical Industry Co., Limited (“SYCI”), Daying County Haoyuan Chemical Company Limited

(“DCHC”) and Shouguang Hengde Salt Industry 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

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

flows, obtaining financing, etc.

The company assesses its

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

As of December 31, 2024,

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

As a result, 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.

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.

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 suspended production temporarily in

May 2019 as required by the government to obtain project approval (see Note 1 (c)(iii)).

(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.

100 % of Shouguang Yuxin Chemical Industry Co., Limited (“SYCI”) ,Daying County Haoyuan Chemical Company Limited (“DCHC”)

and Shouguang Hengde Salt Industry Co.

All material intercompany transactions have been eliminated on consolidation.

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

Note 1 (c)(iii)).

and Crude Salt Segments

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.

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

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 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.

7, to temporarily stop production from December 16, 2019

to February 10, 2020.

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

postpone the commencement of production.

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

4, No.7 and No.

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

control (the “March 2020 Approval”).

9 in order to meet the needs of bromide products for epidemic prevention and control (the “March 2020

The Company’s Factories No.

7 commenced trial production in

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

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.

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 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.

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 CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(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

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 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

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 December 31, 2024 and 2023.

(iii) Natural Gas Segment

In January 2017, the Company completed

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

in January 2019.

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

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

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

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

In compliance

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

and natural gas, respectively.

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

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

on May 1, 2020, privately owned enterprises are allowed to participate in 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.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

STATEMENTS DECEMBER 31, 2024

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(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) Accounts receivable and Allowance for Doubtful Accounts

Accounts receivable are stated

at cost, net of allowance for doubtful accounts.

The normal credit term extended to customers ranges between 90 and 240 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 terms provided,

an allowance may be required.

As of December 31, 2024, and December

31, 2023, the provision for doubtful debts was $ 29,711 and $ 25,060 .

The provision for doubtful accounts in the consolidated statements

of comprehensive (loss) income for the years ended December 31, 2024, is $ 5,069 .

(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 and Sichuan Rural Credit Union, which are not insured or otherwise protected.

Company placed $ 10,075,162 and $ 72,223,894 with these institutions as of December 31, 2024, and 2023, respectively.

The Company has not

experienced any losses in such accounts in the PRC.

Concentrations of credit risk

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

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.

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.

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

April 2022, Shouguang Hengde Salt Industry Co.

Ltd, our subsidiary, was incorporated in Shandong Province, China, for crude salt production

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

However, the establishment of this subsidiary has resulting in a reallocation of costs between bromine and crude salt.

RESOURCES, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Chemical Segment

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 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.

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 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.

Company believes this relocation process will cost approximately $ 69 million

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 December 31, 2025 and 2024.

December 10, 2025, SCHC entered into an equity transfer agreement with Shandong Rongyuan Pharmaceutical Co., Ltd.

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$ 2,999,304 ).

The transaction was completed on December 22, 2025.

(iii) Natural

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

China, and commenced trial production in January 2019.

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

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

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

to solve the related land issue.

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

natural gas well in Daying.

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

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

Pursuant to the Opinions of the Ministry of Natural Resources

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

PRC on January 9, 2020, which came into effect on May 1, 2020, privately owned enterprises are allowed to participate in the natural

gas production.

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

departments until the governmental planning has been finalized.

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

The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable

under the circumstances.

The most 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.

RESOURCES, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

and Cash Equivalents

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

of short maturity of these investments, the carrying amounts approximate their fair values.

receivable and Allowance for Doubtful 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.

The company 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.

of December 31, 2025 and December 31, 2024, the provision for doubtful debts was $ 16,430 and $ 29,711 .

The reversal for doubtful accounts

in the consolidated statements of comprehensive income (loss) for the years ended December 31, 2025 was $ 13,375 .

(f) Concentration

of Credit Risk

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 $ 3,793 and $ 10,075,162 with

these institutions as of December 31, 2025 and 2024, respectively.

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

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.

(h) 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.

(i) Advances to suppliers, net

Advances to suppliers are stated at the original amount less

an allowance for doubtful account.

Advances to supplier primarily consists of prepayments for purchase

of raw materials and equipments 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.

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

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(j) 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

Improvements Leasehold Improvements

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

Motor vehicles Motor Vehicles

(g) 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.

RESOURCES, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

to suppliers, net

to suppliers are stated at the original amount less an allowance for doubtful account.

to suppliers primarily consists 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 is remote.

(i) 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, 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

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

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 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.

Company’s depreciation and amortization policies on property, plant and equipment, other than mineral rights and construction in

process, are as follows:

OF PROPERTY PLANT AND EQUIPMENT

Mineral rights

Leasehold Improvements

Plant and machinery (including protective shells,

transmission channels and ducts)

Motor vehicles

Furniture, fixtures and equipment

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.

(k) 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 CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(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.

(l) 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 flow (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 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 year ended December 31, 2024, and 2023, the Company

determined that the impairment of long-lived assets was $ 6,772,500 and $ nil , respectively.

(m) Retirement Benefits

Pursuant to the relevant laws and

regulations in the PRC, the Company participates in a defined contribution retirement plan for its employees arranged by a governmental

organization.

The Company makes contributions to the retirement plan at the applicable rate based on the employees’ salaries.

required contributions under the retirement plans are charged to the consolidated statement of comprehensive income (loss) on an accrual

basis when they are due.

The Company’s contributions totaled $ 535,475 and $ 691,033 for the years ended December 31, 2024, and 2023,

respectively.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(n) 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.

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.

Retirement Obligation

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.

When the liability is initially recorded, the offset is capitalized by increasing the carrying amount of

the related long-lived asset.

Over 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.

RESOURCES, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

there are no reclamation or abandonment obligations associated with the land being utilized for exploitation by the bromine and crude

salt factories.

Also, for 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

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.

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.

the year ended December 31, 2025 and 2024, the Company recognized impairment of long-lived assets of $ 30,068,794 and $ 6,772,500 , respectively.

(l) Retirement

to the relevant laws and regulations in the PRC, the Company participates in a defined contribution retirement plan for its employees

arranged by a governmental organization.

The Company makes contributions to the retirement plan at the applicable rate based on the employees’

The required contributions under the retirement plans are charged to the consolidated statement of comprehensive income (loss)

on an accrual basis when they are due.

The Company’s contributions totaled $ 508,947 and $ 535,475

for the years ended December 31, 2025 and 2024, respectively.

RESOURCES, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

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.

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 on 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

determinable, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the

present value of lease payments.

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

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 include 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.

(p) Basic 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 years ended December 31, 2024, and

2023, respectively.

These 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 awards.

(q) 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 CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(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.

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.

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 determinable, the Company uses its incremental borrowing rate based on the information

available at commencement date in determining the present value of lease payments.

Lease expense for lease payments is recognized on

a straight-line basis over the lease term.

Company has elected not to recognize operating lease ROU assets and liabilities arising from short-term lease.

leases are initially recorded at the net present value of future minimum lease payments, which includes certain lease and non- lease

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 on separately on the Consolidated Balance Sheets.

and Diluted Earnings per Share of Common Stock

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 years

ended December 31, 2025 and 2024.

These 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 awards.

(p) Reporting

Currency and Translation

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”

RESOURCES, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

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 income

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 (loss).

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 expenses.

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.

(r) 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 time when the

control of the promised goods is transferred to the customers at 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.

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.

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 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.

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 with terms set forth in their contract.

Revenue from contracts with customers is disaggregated in Note

(s) 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.

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).

(t) Exploration Costs

Exploration costs, which included

the cost of researching 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 CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(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.

(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 December 31, 2024, and 2023.

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

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 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).

RESOURCES, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(s) 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.

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.

Exploratory 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.

Value Measurement

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.

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.

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:

1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

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.

3 inputs to the valuation methodology are unobservable and significant to the fair value.

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

December 31, 2025 and 2024.

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 market valuation methods for property, plant and equipment that are used in

the valuation, which are all classified in Level 3 of the valuation hierarchy.

following table presents the Company’s assets measured at Market Valuation on a non-recurring basis for the years ended December

Basis of Presentation and Summary of Significant Accounting Policies - Assets measured at non-recurring basis

Market Valuation Method at Reporting Date Using

Quoted Prices

Property, Plant and Equipment

(v) 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 estimates.

(w) 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.

The use of different assumptions and judgments could result in a materially

different estimate of fair value.

Market valuation method was applied to land and cost method was applied to property and equipment,

all of which are classified as Level 3 within the valuation hierarchy.

following table presents the Company’s assets measured at fair value on a non-recurring basis for the years ended December 31,

OF ASSETS MEASURED AT FAIR VALUE ON A NON-RECURRING

of December 31,

Prices in Active

Other Observable

Unobservable Inputs

Gain (Loss) for the Year Ended

Property, Plant and

( 6,772,500 )

following table presents the Company’s assets measured at fair value on a non-recurring basis for the years ended December 31,

of December 31,

Prices in Active Markets for

Other Observable Inputs

(Loss) for the Year Ended

Inputs (Level

Property, Plant and

( 23,076,873 )

Prepaid Land Leases

( 6,991,921 )

Contingencies

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 estimates.

(v) Stock-based

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.

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

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.

(x) New Accounting Pronouncements

Recent accounting pronouncements adopted

In June 2016, the FASB

issued ASU No.

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

The amendments in this Update affect loans, debt securities, trade receivables, and any other financial assets that

have the contractual right to receive cash.

The ASU requires an entity to recognize expected credit losses rather than incurred

losses for financial assets.

For public entities, the amendments are effective for fiscal years beginning after December 15, 2019,

including interim periods within those fiscal years.

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

2019-10 extends

the effective dates for two years.

The Company has evaluated the effect of the adoption of this standard on the consolidated

financial statements and related disclosures.

And the Company had adopted this standard beginning January 1, 2024.

Recently Issued Accounting Pronouncements Not Yet

There were no recently issued accounting pronouncements

not yet adopted for the year ended December 31, 2024.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 2 – ACCOUNTS RECEIVABLE, NET

Accounts receivable

Allowance for doubtful debt

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.

New Accounting Pronouncements

accounting pronouncements adopted

was no recent accounting pronouncements adopted for the year ended December 31, 2025.

Issued Accounting Pronouncements Not Yet Adopted

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.

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.

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.

2 – DISPOSAL OF SUBSIDIARY

December 10, 2025, SCHC entered into an equity transfer agreement with Shandong Rongyuan Pharmaceutical Co., Ltd.

to the agreement, Shandong Rngyuan Pharmaceutical Co., Ltd.

agreed to purchase 100 % of the equity interest in SYCI for an aggregate consideration

of RMB 21.2 million (US$ 2,999,304 ).

The transaction was completed on December 22, 2025.

The Company recognized a disposal gain of $ 674,776 ,

calculated as the difference between consideration received and the carrying value of the subsidiaries’ net assets after adjusting

for foreign currency translation.

a result of the disposal, the Company recognized a gain from the disposal of subsidiary amounted of $ 674,776 during the years ended December

The following table summarizes the total consideration received and assets disposed in the current period:

OF TOTAL CONSIDERATION RECEIVED AND ASSETS DISPOSED

Total consideration (sale price)

Total liabilities

Total net assets

( 3,562,908 )

Less:Total foreign exchange

Total gain on disposal

of subsidiary

RESOURCES, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

3 – ACCOUNTS RECEIVABLE, NET

The overall accounts receivable

balance as of December 31, 2024, decreased by $ 4,301,173

compared to those of December 31, 2023.

The decrease in accounts receivable is due to 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 customer.

NOTE 3 – INVENTORIES

Inventories consist of:

Inventories - Schedule of Inventories, Current

receivable consist of the following:

OF ACCOUNTS RECEIVABLE, NET

Accounts receivable

Allowance for doubtful

Accounts receivable,

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

in accounts receivable is due to 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 evaluation on the financial condition of our customer.

4 – INVENTORIES

consist of the following:

OF INVENTORIES

Raw materials

2 unchanged sentences

Inventory, net

The Company recorded impairment

charges for slow moving inventory in the amounts of $ 989,035 and $ 230,776 for the years ended December 31, 2024, and 2023.

NOTE 4 – PREPAYMENTS

AND DEPOSITS, NET

Prepayments and deposits consisted of the following:

Prepayments and

Deposits, Net - Schedule of Prepayments and Deposits, Net

December 31, 2024

December 31, 2023

Prepayments and deposits

Provision for impairment

( 1,648,454 )

Company recorded impairment charges for slow moving inventory in the amounts of $ 293,586 and $ 989,035 for the years ended December 31,

2025 and 2024.

5 – PREPAYMENTS AND DEPOSITS, NET

For the year December 31, 2024, and 2023, the Company recorded

provision of $ 1,663,933 and nil for the prepayments and deposits.

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

and deposits consist of the following:

OF PREPAYMENTS AND DEPOSITS, NET

for impairment

( 1,685,900 )

( 1,648,454 )

and deposits, net

the year December 31, 2025 and 2024, the Company recognized provision of nil and $ 1,663,933 for the prepayments and deposits.

6 – OTHER RECEIVABLES,NET

receivables consisted of the following:

SCHEDULE OF OTHER RECEIVABLE

Loan receivable (1)

Proceeds receivable from sale of subsidiary (2)

Other receivables, net

the year ended December 31, 2025, the Company entered into five borrowing arrangements with

a third party for an aggregate principal amount of $ 14,160,101 , bearing interest at 9 % per

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

As of December 31, 2025, the aggregate accrued and unpaid interest related to these

borrowings was $ 195,182 .

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

was $ 2,416,086 receivable from the sale of the Company’s subsidiary, SYCI, which is

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

7 – PREPAID LAND LEASES

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 10 ten

to fifty years.

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

These leases 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.

Some of the lease contracts were paid

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

These leases 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

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

In December 2017, the

Company paid a one lump sum upfront amount of $ 8,846,282 for a 50-year lease of a parcel of land at Bohai Marine Fine Chemical

Industrial Park (“Bohai”) for the new chemical factory to be built.

There is no purchase option at the end of the lease

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”).

December 2017, the Company paid a one lump sum upfront amount of $ 9,047,232 for a 50-year lease of a parcel of land at Bohai Marine Fine

Chemical Industrial Park (“Bohai”) for the new chemical factory to be built.

There is no purchase option at the end of the

This was classified as an operating lease prior to and as of January 1, 2019.

1 unchanged sentence

The lease term expires on August 12, 2069.

The amount paid was recorded as prepaid land leases, net of current portion in

the consolidated balance sheet as of December 31 2024, and 2023.

As of December 31, 2024, the prepaid land lease increased to

$ 9,204,556 due to an additional amount paid for stamp duty and related land use rights fees.

Amortization of this prepaid land lease

will commence when the chemical factory is built and placed in service.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

The leased land was impaired by $ 6,991,921 based on an independent third-party valuation

report and was subsequently auctioned by the court.

RESOURCES, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

8 – PROPERTY, PLANT AND EQUIPMENT, NET

plant and equipment, net consist of the following:

SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT

December 31, 2024

(Expressed in U.S.

NOTE 6 – PROPERTY, PLANT AND EQUIPMENT, NET

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

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

Mineral rights

Leasehold Improvements

Plant and machinery

7 unchanged sentences

Net book value

$ 112,227,512

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

Property, Plant and

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

31, 2023 (Restated)

Impairment(d)

Depreciation(a)

31, 2024 (Restated)

Mineral rights

Leasehold Improvements

Plant and machinery

( 69,074,091 )

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

SCHEDULE OF ROLLFORWARD OF PROPERTY, PLANT AND EQUIPMENT

Renovating Salt

Remodel chlorine

Impairment(c)

Disposal of fixed

Depreciation(e)

subsidiary(f)

Foreign currency

translation(g)

and machinery

( 21,627,487 )

Furniture, fixtures and office

Motor vehicles

Construction in process

fixtures and office equipment

( 10,240,327 )

6 unchanged sentences

( 6,744,380 )

Net book value

( 23,076,873 )

2 unchanged sentences

( 13,065,486 )

( 1,274,087 )

(a) During the year

ended December 31, 2024, depreciation and amortization expense totaled $ 15,819,827

were recorded in direct labor and factory overheads incurred during plant

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

During the year ended

December 31, 2023, depreciation and amortization expense totaled $ 25,860,222 were recorded in direct labor and factory overheads incurred during plant

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

Company built new bromine wells and delivery channels totaling $ 30,198,704 in

the second quarter of 2024, which included Plant and Machinery of $29,911,710, and Leasehold Improvements

(c) In June 2024, due to the fact that the bromine wells and aqueducts have been in use for many years, the Company conducted a site inspection and found that some wells and aqueducts were seriously damaged by water seepage, so they need to be scrapped and new construction, and the scrapping amount is $ 29,169,008 .

The original value of scrapped fixed assets was $ 69,365,091 , consisting of $ 290,186 in Leasehold

Improvements and $ 69,074,091 in Plant and Machinery, minus the accumulated depreciation of $ 40,235,525 , resulting in a disposal loss

of $ 29,169,008 .

December 2024, due to the delayed completion of some machinery and equipment of Yuxin Chemical's new plant due to the impact of the current

market environment, our company has conducted impairment of these assets by professional evaluators, the amount is $ 6,772,500 .

23- Restatement, for discussion regarding the impact of the Restatement

NOTE 7 – FINANCE LEASE RIGHT-OF-USE ASSETS

Finance lease right-of-use asset, net consists of the following:

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

Plant and Equipment Under Finance Leases

Buildings Buildings

Accumulated depreciation and amortization

(a) For those crude

salt pans acquired in fiscal year 2024, the Company completed renovation and upgrade activities during fiscal year 2025, with a total

cost of $ 9,129,878 .

(b) The Company completed

renovation and upgrade work on the chlorine shed during fiscal year 2025, with a total cost of $ 214,761 .

the impairment of $ 23,076,873 based on independent valuation reports.

(d) During the year

ended December 31, 2025, a piece of land with a value of $ 2,276,204 was disposed due to court-ordered auction.

(e) During the year

ended December 31, 2025, depreciation and amortization expense totaled $ 13,065,486 were recorded in direct labor and factory overheads

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

the year ended December 31, 2024, depreciation and amortization expense totaled $ 15,819,827 were recorded in direct labor and factory

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

(f) On December 22,

2025, the SYCI was sold.

The net value of transferred fixed assets was $ 727,033 , including furniture, fixtures and office equipment of

$ 630,271 , motor vehicles of $ 96,762 and accumulated depreciation and amortization of $ 722,195 .

Note 26- Restatement, for discussion regarding the impact of the Restatement.

9 – FINANCE LEASE RIGHT-OF-USE ASSETS

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

OF PROPERTY PLANT AND EQUIPMENT

31, 2024 (Restated)

Accumulated depreciation

and amortization

( 19,390,837 )

1 unchanged sentence

Net book value

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

The above buildings erected on

parcels of land 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

During the year ended December

31, 2024, depreciation and amortization expense totaled $ 3,045,602 were recorded in direct labor and factory overheads incurred during plant

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

During the year ended

December 31, 2023, depreciation and amortization expense totaled $ 1,279,367 were

recorded in direct labor and factory overheads incurred during plant

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

2024, Company, SHSI, entered into a Crude Salt Assets Acquisition Agreement with the total transfer price of $ 18,010,850 .

On June 27, 2024, SHSI entered into four Crude Salt Field Acquisition Agreements with 4 sellers, with the total transfer price of

$ 5,644,388 ,

$ 6,140,260 ,

$ 2,892,097 ,

and $ 6,369,207 ,

respectively.

above buildings erected on parcels of land 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.

the year ended December 31, 2025, depreciation and amortization expense totaled $ 3,124,602 , which was recorded in direct labor and factory

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

the year ended December 31, 2024, depreciation and amortization expense totaled $ 3,045,602 , which was recorded in direct labor and factory

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

June 26, 2024, SHSI entered into a Crude Salt Assets Acquisition Agreement with the total transfer price of $ 18,010,850 .

2024, SHSI entered into four Crude Salt Field Acquisition Agreements with 4 sellers, with the total transfer prices of $ 5,644,388 , $ 6,140,260 ,

$ 2,892,097 , and $ 6,369,207 , respectively.

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

In 2024, Company

purchased crude salt assets at a total cost of $ 39,056,802 .

See Note 23- Restatement, for

discussion regarding the impact of the Restatement.

NOTE 8 – OPERATING LEASE RIGHT–OF-USE

The Company has the right to use

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

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

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

aggregate operating lease right-of-use assets amount of $ 7,318,031 as at December 31, 2024.

As of December 31, 2024, the total operating lease ROU assets

was $ 6,169,855 .

The total operating lease cost for the years ended December

31, 2024, and 2023 was $ 877,809 and $ 887,603 .

NOTE 9 – PAYABLE AND ACCRUED EXPENSES

Payable and accrued expenses consist of the following:

Payable and Accrued

Expenses - Schedule of Accounts Payable and Accrued Liabilities

2024, Company purchased crude salt pans at a total cost of $ 39,056,802 .

Note 26- Restatement, for discussion regarding the impact of the Restatement.

10 – OPERATING LEASE RIGHT–OF-USE ASSETS

Company has the rights to use certain parcels of land located in Shouguang, the PRC, through lease agreements signed with local townships

or the government authority.

For parcels of land that are collectively owned by local townships, the Company cannot obtain land use rights

certificates.

The parcels of land of which the Company cannot obtain land use rights certificates covers a total of approximately 34.95

square kilometers at December 31, 2025.

of December 31, 2025, the total operating lease right-of-use assets was $ 5,669,794 .

total operating lease cost for the years ended December 31, 2025, and 2024 was $ 875,201 and $ 877,809 .

11 – BORROWINGS

Company entered into a loan agreement with Shandong Shouguang Industrial and Commercial Bank Co., Ltd.

for a principal amount of $ 2,845,400 ,

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 Co., Ltd.

The Company paid interest on a monthly basis, however, the principal balance became past due

and remained unpaid as of December 31, 2025 due to disputes between the Company and the bank.

Company entered into a loan agreement with Shandong Shouguang Rural Commercial Bank Co., Ltd.

for a principal amount of $ 2,344,610 , 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 15th and 16th 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.

12 – PAYABLE AND ACCRUED EXPENSES

Payable and accrued expenses consist of

the following:

OF PAYABLE AND ACCRUED EXPENSES

31, 2024 (Restated)

Accounts payable

1 unchanged sentence

Social security insurance contribution payable

Other payable-related party

Accrued expense for construction

Accrued expense-others

See Note 23- Restatement, for discussion regarding the impact

of the Restatement.

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.

(the “Seller”) at a cost of approximately $ 5.7 million

in cash, of which Mr.

Ming Yang, the Chairman of the Company, had a 99 %

equity interest in the Seller that time.

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 $ 87,927 for five

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

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 26 - Restatement for discussion regarding the impact of the restatement.

13 – RELATED PARTY TRANSACTIONS

September 25, 2012, the Company purchased five floors of a commercial building in the PRC, through SYCI, from Shandong Shouguang Vegetable

Seed Industry Group Co., Ltd.

(the “Seller”) at a cost of approximately $ 5.7 million in cash, of which Mr.

Ming Yang, the

Chairman of the Company, had a 99 % equity interest in the Seller that time.

During the first quarter of 2018, the Company entered into

an agreement with the Seller, a related party, to provide property management services for an annual amount of approximately $ 86,911

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

The expense associated with this agreement for the year ended December 31,

2024, was $ 87,821 .

The expense associated with this agreement for the year ended December 31, 2023, was $ 88,049 .

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

2025 and 2024 was $ 87,655 and $ 87,821 , respectively.

13 – RELATED PARTY TRANSACTIONS – Continued

Related parties

of related parties

Executive Officer

Financial Officer

Operating Officer

Dianjinshi Culture media Co., LTD

with company officers

OF RELATED PARTY TRANSACTIONS

December 31, 2025

(Expressed in U.S.

NOTE 10 – RELATED PARTY TRANSACTIONS – Continued

a) Related parties

Name of related parties

Chief Executive Officer

Chief Financial Officer

Chief Operating Officer

Chengdu Dianjinshi Culture media Co., LTD

Affiliated with company officers

December 31, 2024

Amount due to related parties:

Due to related party :

Chengdu Dianjinshi Culture media Co., LTD

NOTE 11 – TAXES PAYABLE

Land use tax payable

Value added tax and other taxes payable

NOTE 12 – LEASE LIABILITIES - FINANCE AND OPERATING LEASE

The components of finance lease liabilities

were as follows:

Lease Liabilities - Finance and Operating

Lease - Schedule of Finance Leased Liabilities

due to related parties

Amount due from related parties:

Chengdu Dianjinshi

Culture media Co., LTD

14 – TAXES PAYABLE

OF TAXES PAYABLE

Value added tax and other

taxes payable

the remaining balance as of December 31, 2025, $ 259,171 was overdue, as notified by the Tax Bureau in a Tax Matters Notice.

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.

15 – LEASE LIABILITIES - FINANCE AND OPERATING LEASE

components of finance lease liabilities were as follows:

OF FINANCE LEASE LIABILITIES

December 31, 2024

Total finance lease liability

1 unchanged sentence

( 3,342,293 )

Finance lease liability, net of current portion

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

contact expires.

However, the company will decide whether to renew the lease based on the market operation situation upon the expiration.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

The components of operating lease liabilities are as follows:

Lease Liabilities - Finance and Operating Lease - Schedule of

operating Lease Liabilities

Finance lease liability,

net of current portion

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 contact expires.

However, the company will decide whether

to renew the lease based on the market operation situation upon the expiration.

components of operating lease liabilities are as follows:

OF OPERATING LEASE LIABILITIES

Total Operating lease liabilities

Current portion

Operating lease liabilities, net of current portion

The components of lease cost were as follows:

Lease Liabilities -

Finance and Operating Lease - Schedule of Lease Cost

Operating lease liabilities,

net of current portion

components of lease cost were as follows:

OF LEASE COST

31, 2024 (Restated)

Finance lease cost:

- Amortization of right-of-use assets

- Amortization of right-of-use

- Interest on lease liabilities

1 unchanged sentence

Total lease cost

of lease liabilities were as follows:

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

Finance Lease

Operating Lease

Maturities of lease liabilities were as

OF MATURITIES OF FINANCE AND OPERATING LEASE LIABILITIES

the next 12 months

3 unchanged sentences

the next 49 to 60 months

Amount representing interest

Amount representing

( 4,741,422 )

Present value of net minimum lease payments

summary of supplemental information related to leases is listed as follows:

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

Present value of net

minimum lease payments

A summary of supplemental information

related to leases is listed as follows:

OF SUPPLEMENTAL INFORMATION RELATED TO LEASES

Weighted average remaining lease term:

4 unchanged sentences

Operating leases

cash flow information related to leases were as follows:

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

Cash paid for amounts included in measurement of lease liabilities:

-Operating cash flows from operating leases

Supplemental cash

flow information related to leases was as follows:

OF SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for amounts included in measurement

of lease liabilities :

-Operating cash flows from operating

-Financing cash flows from finance leases

Non-cash information on lease liabilities arising from obtaining ROU assets:

Non-cash information on lease liabilities arising

from obtaining right-of-use assets:

-Finance leases

-Operating leases

See Note 23- Restatement, for discussion regarding the impact

of the Restatement.

NOTE 13 –– EQUITY

Reverse Stock Split and Authorized Shares

On October 27, 2025, the Company completed a 1-for-10 reverse stock

split of the Company’s common stock, such that for each ten shares outstanding prior to the stock split there was one share outstanding

after the reverse stock split.

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

Restricted Shares

A restricted stock award (“RSA”) is an award of common shares that is subject

to certain restrictions during a specified period.

Restricted stock awards are independent

of option grants and are generally subject to forfeiture if employment terminates prior to the release of the restrictions.

cannot transfer the shares before the restricted shares vest.

Shares of nonvested restricted stock have the same voting rights as common

stock, are entitled to receive dividends and other distributions thereon and are considered to be currently issued and outstanding.

Company expenses the cost of the restricted stock awards, which is determined to be the fair market value of the shares at the date of

grant, straight-line over the period during which the restrictions lapse.

For these purposes, the fair market value of the restricted

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

During the year ended December

31, 2023, the Company granted in the aggregate, 295,000 restricted shares of common stock to a consultant, the company's directors, officers

and an employee.

Issued For The Acquisition

June 2024, SHSI entered into crude salt field acquisition agreements with five sellers.

On February 28, 2025 (“closing date”),

the transactions as contemplated by the acquisition agreements were closed.

On the closing date, the Company issued an aggregate of 2,059,694

(post reverse share split 205,969 shares) shares of its common stock to the sellers at an agreed price of $ 1.50 per share, pursuant to

the acquisition agreements.

Stock Split and Authorized Shares

October 27, 2025, the Company completed a 1-for-10 reverse stock split of the Company’s common stock, such that for each ten shares

outstanding prior to the stock split there was one share outstanding after the reverse stock split.

All shares of common stock referenced

in this report have been adjusted to reflect the stock split figures.

restricted stock award (“RSA”) is an award of common stocks that is subject to certain restrictions during a specified period.

stock awards are independent of option grants and are generally subject to forfeiture if employment terminates prior to the release of

the restrictions.

The grantee cannot transfer the shares before the restricted shares vest.

Shares of nonvested restricted stock have

the same voting rights as common stock, are entitled to receive dividends and other distributions thereon and are considered to be currently

issued and outstanding.

The Company expenses the cost of the restricted stock awards, which is determined to be the fair market value

of the shares at the date of grant, straight-line over the period during which the restrictions lapse.

For these purposes, the fair market

value of the restricted stock is determined based on the closing price of the Company’s common stock on the grant date.

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

The restricted shares award was granted under the 2019 Omnibus Equity Incentive Plan (See Note 18) and vested immediately.

The fair value of the award on the date of grant was $ 451,350 which was expensed in full during the year ended December 31, 2023.

The Company granted an

aggregate of 295,000

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

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

The restricted shares award was granted under the 2019

Omnibus Equity Incentive Plan (See Note 15) and vested immediately.

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

which was expensed in full during the year ended December 31, 2024.

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 Reserve

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

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.

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 of December 31, 2024, the Company’s statutory provident fund stood at $26.67 million.

NOTE 14 – TREASURY STOCK

As of December 31, 2024, and December

31, 2023, the number of treasury stocks 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 December 31, 2024, the number of shares of the Company’s common

stock available for grant of stock options and issuance under the 2019 Plan is 561,801 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 year ended December 31,

2024, and 2023, total compensation costs for options issued recorded in the consolidated statement of comprehensive income (loss) were

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.

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 immediately.

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.

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.

Earnings - Appropriated

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:

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.

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 of December 31, 2025, the Company’s statutory

provident fund stood at $26.67 million.

17 – TREASURY STOCK

of December 31, 2025 and December 31, 2024, the number of treasury stock of the Company was 28,583 and 28,583 , respectively.

18 – STOCK-BASED COMPENSATION

to the Company’s 2025 Omnibus Equity Incentive Plan adopted and approved in 2025 (“2025 Plan”), awards under the 2025

Plan is 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 December 31, 2025, 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

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.

the year ended December 31, 2025 and 2024, 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 years ended December 31,

2025 and 2024.

There were no related tax benefits as a full valuation allowance was recorded in the years ended December 31, 2024, and 2023.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 15 – STOCK-BASED COMPENSATION – Continued

The following table summarizes all Company stock option

transactions between January 1, 2024, and December 31, 2024.

Stock-Based Compensation - Schedule of Stock

Option Activity

of Option and Warrants Outstanding and

Average Exercise price of Option

of Exercise Price per Common Share

18 – STOCK-BASED COMPENSATION – Continued

following table summarizes all Company stock option transactions between January 1, 2025 and December 31, 2025.

OF STOCK OPTION ACTIVITY

of Option and

Outstanding and

Average Exercise

of Option and

of Exercise Price per

Balance, January 1, 2025

Balance, December 31, 2025

Stock and Warrants Options Exercisable and Outstanding

Outstanding at December 31, 2024

Range of Exercise Prices

Weighted Average Remaining Contractual Life (Years)

Exercisable and outstanding

All options exercisable and outstanding on December 31,

2024, are fully vested.

As of December 31, 2024, there was no unrecognized compensation cost related to outstanding stock options,

The aggregate intrinsic value of options outstanding and

exercisable as of December 31, 2024, and 2023 were $ 0 and $ 0 .

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 16– EXPENDITURE ON WATER POLLUTION TREATMENT

Expenditure on water pollution treatment

The Company had done the flood

prevention project which involved 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.

incurred total expense of $ 46,510,856 in the fiscal year 2023.

NOTE 17 – 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.

(a) United States (“US”)

United States

Gulf Resources, Inc.

may be subject

to the United States of America Tax laws at a tax rate of 21 %.

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

had no US taxable income for the years ended December 31, 2024, and 2023, and management believes that its earnings are permanently invested

(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 in the BVI.

Upper Class Group Limited did not generate assessable profit for the years ended December 31, 2024, and 2023.

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 years ended December

31, 2024, and 2023.

The applicable statutory tax rates for the years ended December 31, 2024, and 2023 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 CaiShui [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 5% effective tax rate.

As of December 31, 2024,

and 2023, the accumulated distributable earnings under the Generally Accepted Accounting Principles (“GAAP”) of PRC that are subject

to WHT are $ 40,524,183

and $ 87,160,228 ,

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 December 31, 2024, and December 31, 2023, 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 December 31, 2024, and December 31, 2023, the unrecognized

WHT are $ 1,078,743 and $ 3,396,379 , respectively.

The Company’s income tax

returns are subject to the various tax authorities’ examination.

The federal, state and local authorities of the United States may

examine the Company’s income tax returns filed in the United States for three years from the date of filing.

The Company’s

US income tax returns since 2017 are currently subject to examination.

Inland Revenue Department of Hong

Kong (“IRD”) may examine the Company’s income tax returns filed in Hong Kong for seven years from date of filing.

the years 2012 through 2018, HKJI did not report any taxable income.

It did not file any income tax returns during these years except

for 2014 and 2018.

For companies which do not have taxable income, IRD typically issues notification to companies requiring them to file

income tax returns once in every four years.

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

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

The components of the provision for income tax benefit (expense)

from continuing operations are:

Income Taxes - Schedule of Components of Income Tax Expense Benefit

Years Ended December 31,

Current taxes – PRC

and Warrants Options Exercisable and Outstanding

at December 31, 2025

of Exercise Prices

Contractual Life

and Outstanding

options exercisable and outstanding at December 31, 2025 are fully vested.

As of December 31, 2025, there was no unrecognized compensation

cost related to outstanding stock options,

aggregate intrinsic value of options outstanding and exercisable as of December 31, 2025 and 2024 was $ 0 and $ 0 .

19 – ACCRUED LIABILITIES

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.

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

and Shandong Shouguang

Vegetable Seed Group Co., Ltd.

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

by the Local Arbitration Commission and documented in mediation documents No.

1358 and 1357, Shandong Shouguang Vegetable Industry Group

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.

before May 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 interests.

Deepin City Emergency Loan Fund Co., Ltd.

sought court action as Shandong Shouguang Vegetable Industry Group Co., Ltd.

and Shandong Shouguang

Vegetable Seed Industry Group Co., Ltd.

were unable to pay principal before deadline or interests as scheduled.

Pursuant to court orders

(2024) Lu 07 Exec 640 and (2024) Lu 07 Exec 641, SCHC and SYCI, as guarantors, are required to repay the principal and interests.

Shandong Weifang Intermediate People’s Court ruled to auction the land at Xiangjiang road, Yangkou town, Shouguang City and the

attached properties on it, and the auction proceeds would be used to repay Shandong Deepin City Emergency Loan Fund Co., Ltd.

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.

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

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 .

Deferred taxes – PRC entities

of December 31, 2025, as SCHC was liable for a sum of principal and interests of $ 499,688 , net of auction proceeds, the Company recognized

accrued liabilities of $ 499,688 accordingly.

20 – INCOME TAXES

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”)

Resources, Inc.

may be subject to the United States of America Tax laws at a tax rate of 21 %.

No provision for the US federal income

taxes has been made as the Company had no US taxable income for the years ended December 31, 2025 and 2024, and management believes that

its earnings are permanently invested in the PRC.

Virgin Islands (“BVI”)

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 in the BVI.

Upper Class Group Limited did not generate assessable profit for the years ended

December 31, 2025 and 2024.

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 years ended December 31, 2025 and 2024.

The applicable statutory tax rates for the years ended December 31, 2025 and 2024 are 16.5 %.

There is no dividend withholding tax in Hong Kong.

income tax (“EIT”) for SCHC, SYCI, SHSI and DCHC in the PRC is charged at 25 % of the assessable profits.

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 .

February 22, 2008, the Ministry of Finance (“MOF”) and the State Administration of Taxation (“SAT”) jointly issued

CaiShui [2008] Circular 1 (“Circular 1”).

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 5% effective tax rate.

of December 31, 2025 and 2024, the accumulated distributable earnings under the Generally Accepted Accounting Principles

(“GAAP”) of PRC that are subject to WHT are $ 35,595,921 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 December 31, 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 December 31, 2025 and

December 31, 2024, the unrecognized WHT are $ 2,521,128 and

$ 1,078,743 ,

Total Income tax (expenses) benefits

respectively.

Company’s income tax returns are subject to the various tax authorities’ examination.

The federal, state and local authorities

of the United States may examine the Company’s income tax returns filed in the United States for three years from the date of filing.

The Company’s US income tax returns since 2017 are currently subject to examination.

Revenue Department of Hong Kong (“IRD”) may examine the Company’s income tax returns filed in Hong Kong for seven years

from date of filing.

For the years 2012 through 2018, HKJI did not report any taxable income.

It did not file any income tax returns

during these years except for 2014 and 2018.

For companies which do not have taxable income, IRD typically issues notification to companies

requiring them to file income tax returns once in every four years.

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

components of the provision for income tax benefit (expense) from continuing operations are:

SCHEDULE OF COMPONENTS OF INCOME TAX EXPENSE BENEFIT

Ended December 31,

Current taxes

taxes – PRC entities

( 1,632,978 )

Income tax (expenses) benefits

$ ( 1,648,182 )

Significant components of the

Company’s deferred tax assets and liabilities on December 31, 2024, and December 31, 2023, are as follows:

Income Taxes - Schedule of Deferred

components of the Company’s deferred tax assets and liabilities at December 31, 2025 and December 31, 2024 are as follows:

SCHEDULE OF DEFERRED

TAX ASSETS AND LIABILITIES

Deferred tax liabilities

Deferred tax assets:

Exploration costs

Impairment of property plant and equipment

Impairment of long-lived assets

PRC tax losses

US federal net operating loss

Accrued liabilities

US federal net operating

Total deferred tax assets

3 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

tax assets consist of future reversals of existing taxable temporary differences and adequate future taxable income, exclusive of reversing

deductible temporary differences.

As of December 31, 2024, and 2023, valuation allowances were mainly provided against deferred tax

assets caused by exploration costs, Impairment of property plant and equipment , Allowance

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 year ended

December 31, 2024, is $ 1,401,232 .

The increase in valuation allowance for the year ended

December 31, 2023, is $ 3,516,915 .

There were no unrecognized tax benefits and accrual

for uncertain tax positions as of December 31, 2024, and 2023.

There were no amounts accrued for penalties and interest for the years ended

December 31, 2024, and 2023.

There was no change in unrecognized tax benefits during

the years ended December 31, 2024, and 2023.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 18 – BUSINESS SEGMENTS

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 Officer (Mr.

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.

As of December 31, 2025 and 2024, valuation allowances were mainly provided against deferred tax assets

caused by exploration costs, impairment of long-lived assets, allowance 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.

decrease in valuation allowance for the year ended December 31, 2025 is $ 3,437,308 .

increase in valuation allowance for the year ended December 31, 2024 is $ 1,401,232 .

were no unrecognized tax benefits and accrual for uncertain tax positions as of December 31, 2025 and 2024.

were no amounts accrued for penalties and interest for the years ended December 31, 2025 and 2024.

were no change in unrecognized tax benefits during the years ended December 31, 2025 and 2024.

21 – BUSINESS SEGMENTS

280, Disclosures about Segments, of an Enterprise and Related Information, establishes standards for reporting information about operating

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.

Company’s Chief Executive Officer (Mr.

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) chemicals products, (4) natural gas.

As of December

31, 2024, and December 31, 2023, the detailed income statements of each of our divisions are presented below:

December 31, 2024

(Restated) Operating Segment

Corporate Corporate

(2) crude salt, (3) chemical products, (4) natural gas.

of December 31, 2025 and December 31, 2024, the detailed income statements of each of our divisions are presented below:

OF SEGMENT REPORTING BY SEGMENT

(external customers)

1 unchanged sentence

Loss from operations before

income tax expense

( 4,658,726 )

2 unchanged sentences

( 1,450,130 )

Income tax (expense) benefit

( 8,568,624 )

( 1,648,182 )

Loss from operations after

Income tax (expense) benefit

Loss from operations after

income tax (expense)

( 4,658,726 )

2 unchanged sentences

( 1,450,130 )

Depreciation and amortization

( 8,568,624 )

Depreciation and

Capital expenditures

December 31, 2023

(external customers)

1 unchanged sentence

Loss from operations before

income tax expense

( 17,455,130 )

7 unchanged sentences

Loss from operations after

income tax (expense) benefit

income tax (expense)

( 19,088,108 )

2 unchanged sentences

( 23,896,751 )

Depreciation and amortization

Depreciation and

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 segments.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

Years Ended December 31,

* 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.

OF SEGMENT COST

Reconciliations

2024 (Restated)

Ended December 31,

Reconciliations

Total segment operating loss

2 unchanged sentences

Corporate costs

Unrealized gain (loss) on translation of intercompany balance

( 1,450,130 )

Unrealized gain (loss)

on translation of intercompany balance

Loss from operations

1 unchanged sentence

( 22,248,569 )

Other expenses, net

Expenditure on water pollution treatment

Interest income, net of expense

Other expense, net

( 4,003,497 )

Loss on disposal of property, plant and equipment

Gain on disposal of subsidiary

Loss on disposal of long-lived assets

( 2,008,853 )

Impairment of property, plant and equipment

( 29,169,008 )

Impairment of long-lived

( 30,068,794 )

( 6,772,500 )

Loss before taxes

1 unchanged sentence

$ ( 58,252,190 )

The following table shows the major customers (10% or more)

for the year ended December 31, 2024

following table shows the major customers (10% or more) for the year ended December 31, 2025:

BUSINESS SEGMENTS - SCHEDULE OF

REVENUE BY MAJOR CUSTOMERS

Total Revenue

Shandong Morui Chemical Company Limited

Shandong Brother Technology Limited

Shandong Shouguang Shenrunfa Marine Chemical

Company Limited

Shouguang Weidong Chemical Company Limited

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

year ended December 31, 2023

following table shows the major customers (10% or more) for the year ended December 31, 2024:

Chemical Products

Total Revenue

Percentage of

Total Revenue

Shandong Morui Chemical Company Limited

1 unchanged sentence

Shouguang Weidong Chemical Company Limited

Shandong Shouguang Shenrunfa Marine Chemical Company Limited

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 19 – CUSTOMER CONCENTRATION

22 – CUSTOMER CONCENTRATION

The Company sells a substantial

portion of its products to a limited number of customers.

During the year ended December 31, 2024, the Company sold 66.05 % of its products

to its top five customers, respectively.

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

During the year ended December 31, 2025, the Company

sold 67.6 % of its products to its top five customers.

As of December 31, 2025, amounts due from these customers were $ 2,347,943 .

The Company sells a substantial

portion of its products to a limited number of customers.

During the year ended December 31, 2023, the Company sold 61.8 % of its products

to its top five customers, respectively.

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

During the year ended December 31, 2024, the Company

sold 66.05 % of its products to its top five customers.

As of December 31, 2024, amounts due from these customers were $ 594,234 .

NOTE 20 – MAJOR SUPPLIERS

Product Concentration

Cost of Goods

During the year ended December

31, 2024, the Company purchased 100 % of its raw materials from its top four suppliers.

As of December 31, 2024, amounts due to those suppliers

were $ 30,003 .

During the year ended December

31, 2023, the Company purchased 100 % of its raw materials from its top four suppliers.

As of December 31, 2023, amounts due to those suppliers

were $ 206,984 .

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 21 – 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.

291, Shou Guo Tu Zi Fa Gao Zi [2018]

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

23 – MAJOR SUPPLIERS

the year ended December 31, 2025, the Company purchased 100 % of its raw materials from its top four suppliers.

As of December 31, 2025,

amounts due to those suppliers were $ 146,148 .

the year ended December 31, 2024, the Company purchased 100 % of its raw materials from its top four suppliers.

As of December 31, 2024,

amounts due to those suppliers were $ 30,003 .

24 – LOSS CONTINGENCIES

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.

294, Shou Guo Tu Zi Fa Gao Zi

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”),

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 meters, on which 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.

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.

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.

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.

384, (2019) Lu 0783 Xing Shen No.

1 unchanged sentence

(2019) Lu 0783 Xing Shen No.

390, (2019) Lu 0783 Xing Shen

390, (2019) Lu 0783 Xing Shen No.

393, and (2019) Lu 0783 Xing Shen No.

394, respectively (together, the “Court Rulings”) were made by the Court in

favor of the Bureau.

The Court orders, among other relief, to enforce each of the Written Decisions, to return each subject land to

its legal owners and demolish or confiscate the buildings and facilities thereon and restore the land to its original state within

10 days from the service of the Court Rulings on SCHC.

The Court Rulings became enforceable immediately upon service on SCHC on May

In the last twenty

years, to the Company’s knowledge, there have been no government regulations requiring bromine manufacturers to obtain land

use and planning approval document.

394, respectively (together, the

“Court Rulings”) were made by the Court in favor of the Bureau.

The Court orders, among other relief, to enforce each of

the Written Decisions, to return each subject land to its legal owners and demolish or confiscate the buildings and facilities thereon

and restore the land to its original state within 10 days from the service of the Court Rulings on SCHC.

The Court Rulings became enforceable

immediately upon service on SCHC on May 5, 2019.

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

2 unchanged sentences

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 is 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.

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.

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.

8 and Factory No.10.

Pursuant to a written decisions of administrative ruling captioned (2019) Lu 0783 Xing

389 Zhi Yi, dated November 25, 2020, the Court orders to terminate the enforcement of the case captioned (2019) Lu 0783 Xing

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 No.

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.

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 measures to enforce the administrative penalties.

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

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 December 31, 2024.

NOTE 22 - SUBSEQUENT EVENT

Subsequent Events

Private Placement

On January 20, 2025,

the company issued total 295,000 shares to its employees, officers and consultants for the services rendered for the year ended

December 31, 2024.

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 12, 2025.

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.

February 28, 2025 (the “Closing Date”), a wholly owned subsidiary of the Company, SHSI, closed the transactions contemplated

by the Acquisition Agreements (the “Agreements”) dated June 26, 2024 by and between SHSI, and Shouguang Qingshuibo Farm Co.,

(“Seller 1”), dated June 27, 2024 by and between SHSI and each of Shouguang city Yangkou Town Dingjia Zhuangzi Village

Stock Economic Cooperative (“Seller 2”), Shouguang city Yangkou town Renjia Zhuangzi village stock economic cooperative (“Seller

3”), Shouguang city Yangkou town Shanjia Zhuangzi village stock economic cooperative (“Seller 4”), Shouguang city Yangkou

town Zhengjia Zhuangzi village stock economic cooperative (“Seller 5”), respectively, as amended on December 17, 2024.

to the Agreements, SHSI acquired the crude salt field owned by each seller located in Shandong province, China.

On the Closing Date,

the Company issued a total of 2,059,694 shares of the Company’s common stock, par value $ 0.0005 per share (the “Shares”),

at a price of $ 1.50 per share, to five individuals, who are citizens residing in the People’s Republic of China, designated by

each the Seller 1, the Seller 2, the Seller 3, the Seller 4 and the Seller 5.

The issuance of the Shares was exempt from registration

pursuant to Regulation S of the Securities Act of 1933, as amended.

by the civil mediation document issued by Shouguang People's Court on March 17, 2025, SCHC owed Shouguang Chengyu Trading Co., Ltd.

sum of RMB 226,825.44 for goods.

SCHC is required to pay RMB 50,000 to Shouguang Chengyu Trading Co., Ltd.

before the 15th day of each

month starting from April 2025 until the debt is fully repaid.

March 21, 2025, the company issued total 265,000 shares to its employees, officers and consultants for the service rendered in the year

ended December 31, 2025.

On May 6, 2025, the Company was notified by the

Listing Qualifications Staff of The Nasdaq Stock Market LLC that the Staff granted the Company’s request to transfer the listing

of its common stock, par value $ 0.0005 per share, from The Nasdaq Global Select Market tier to The Nasdaq Capital Market tier.

27, 2025, our shares began trading on the Nasdaq Capital Market under the same symbol “GURE”.

On July 3, 2025, the Company filed a shelf

registration statement covering up to $ 10,000,000 of common stock, preferred stock, and warrants, individually or in combination.

registration statement provides that any future offerings will be made pursuant to applicable prospectus supplements, which

will set forth the specific terms of each offering and the manner of sale.

Effective on October 27, 2025, the Company completed

a 1-for-10 reverse stock split of our common stock, such that for each ten shares outstanding prior to the stock split there was one share

outstanding after the reverse stock split.

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

split figures.

On October 27, 2025, our shares began trading on the NASDAQ Global Select Market under the new CUSIP # 40251W507.

On November 4, 2025, the Company received a delist

determination letter from Nasdaq staff stating that the Company had not regained compliance with the minimum bid price requirement by

the November 3, 2025, deadline and that its securities would be scheduled for delisting from The Nasdaq Capital Market on November

The Company subsequently effected a one-for-ten reverse stock split on October 27, 2025, and filed an appeal with the

Nasdaq Hearings Panel on November 7, 2025, and expects that these actions will enable it to regain compliance with Listing Rule 5550(a)(2)

and continue trading on The Nasdaq Capital Market under the symbol “GURE” .

On November 12, 2025, the Company issued

a press release providing certain updates on its hearing 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 Monday, November 10, 2025, the Company’s common stock

had maintained a closing bid price at or above $1.00 for more than ten consecutive trading days.

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.

On December 1, 2025, the Company received a letter

from The Nasdaq Stock Market, LLC stating that the Company had regained compliance with the minimum bid price requirement for continued

listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2).

Consequently, the hearing before the Hearings Panel

scheduled to take place on December 9, 2025, has been cancelled.

The Company’s securities will continue to be listed and

traded on The Nasdaq Stock Market.

On December 2, 2025, the Company issued

a press release announcing that it has regained compliance with the minimum bid price requirement for continued listing on The

Nasdaq Capital Market.

December 10, 2025, Shouguang City Haoyuan Chemical Company Limited (the “Seller”), a company incorporated in the PRC and

an indirect wholly owned subsidiary of the Company, entered into an equity transfer agreement (the “SPA”) with Shandong Rongyuan

Pharmaceutical Co., Ltd.

(the “Purchaser”) and Shouguang Yuxin Chemical Industry Co., Limited (the “Target Company”).Pursuant

to the SPA, the Seller agreed to sell, and the Purchaser agreed to purchase, 100% of the equity interests in the Target Company for an

aggregate consideration of RMB 21.2 million (payable in instalments through 2028), subject to the terms and conditions set forth in the

SPA (“Sale”).

The Company’s board of directors (“Board”) reviewed the terms of the SPA, including the consideration,

conditions and payment arrangements.

The Board affirmed the Seller’s entry into the SPA and affirmed that the SPA and the transaction

thereunder are fair to, and in the best interests of, the Company and its shareholders as a whole.

On December 18, 2025, the Company announced that

it had received the notification from the Shouguang Municipal People’s Government Office (the “Government of Shouguang City”)

dated on December 15, 2025.

To comply with the notice issued by the Government of Shouguang City, the Company expects

to temporarily suspend the relevant operations in Shouguang City during the aforementioned period.

On March 2, 2026, the

Company announced that its relevant operations in Shouguang City had been resumed in compliance with the Notice.

On January 9, 2026, the Company filed a registration

statement on Form S-8 (the “Registration Statement”) is filed by the Registrant for the purpose of registering (i) 103,378

common stocks of the Company, par value 0.0005 per share (the “Common Stocks”) issued under the Company’s 2019 Stock

Incentive Plan (the “2019 Plan”), after giving effect of the 10-to-1 reserve stock split as previously announced on Form 8-K

filed with SEC on October 22, 2025 and (ii) 200,000 Common Stocks issuable pursuant to the Company’s 2025 Stock incentive plan (the

“2025 Plan”).

Pursuant to Rule 416(a) under the Securities Act of 1933, as amended (the “Securities Act”),

this registration statement also covers an indeterminate number of additional shares which may be offered and issued to prevent dilution

from share splits, share dividends or similar transactions as provided in the Plan.

Any common stocks covered by an award granted under

the Plan (or portion of an award) that terminates, expires, lapses or repurchased for any reason will be deemed not to have been issued

for purposes of determining the maximum aggregate number of common stocks that may be issued under the Plan.

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 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”).

The Company received

a notification from the Shouguang City Government in February 2019 informing the Company that Factory No.

passed inspection and were approved to resume operation

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).

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

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.

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 December 31, 2025.

25 - SUBSEQUENT EVENT

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

26, 2025 until February 24, 2026.

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 2026.

January 9, 2026, the Company filed a registration statement on Form S-8 (the “Registration Statement”) is filed by the

Registrant for the purpose of registering (i) 103,378 common

stocks of the Company, par value 0.0005 per

share (the “Common Stocks”) issued under the Company’s 2019 Stock Incentive Plan (the “2019 Plan”),

after giving effect of the 10-to-1 reserve stock split as previously announced on Form 8-K filed with SEC on October 22, 2025 and

(ii) 200,000 Common

Stocks issuable pursuant to the Company’s 2025 Stock incentive plan (the “2025 Plan”).

Pursuant to Rule 416(a)

under the Securities Act of 1933, as amended (the “Securities Act”), this registration statement also covers an

indeterminate number of additional shares which may be offered and issued to prevent dilution from share splits, share dividends or

similar transactions as provided in the Plan.

Any common stocks covered by an award granted under the Plan (or portion of an award)

that terminates, expires, lapses or repurchased for any reason will be deemed not to have been issued for purposes of determining

the maximum aggregate number of common stocks that may be issued under the Plan.

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 Agreement”;

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 Market.

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

22 unchanged sentences

that the Company will be successful in regaining compliance with the Nasdaq Requirements within the planned period.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

NOTE 26 – RESTATEMENT

As Previously Reported

The Company restates its

previously released audited consolidated financial statements for the year ending December 31, 2023, and 2024, and incorporate them into

Company restates its previously released audited consolidated financial statements for the year ending 2024, and incorporate them into

the 2024 Annual Report “10-K Form Report” (the “Restatement”).

3 unchanged sentences

to 2024 have been accumulated and presented as an initial balance adjustment item for the retained earnings as of December 31, 2023.

As the Company does not have property ownership certificates, the

acquisition of the 20-year usage rights for this land, buildings, and salt pan conforms to the definition of a lease as stated in

The Company revised the financial statements and accounted for these usage rights as leases in accordance with the

provisions of ASC 842.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

effects of the restatement on the consolidated balance sheet as of December 31, 2023, are summarized in the following table:

Restatement -

Schedule of Condensed Balance Sheet

December 31, 2023

As Previously Reported

Current Assets

Accounts receivable, net

Inventories, net

Prepayments and deposits

Other receivables

Total current assets

Non-Current Assets

Property, plant and equipment, net

( 9,960,511 )

Finance lease right-of use assets

Operating lease right-of-use assets

Prepaid land leases, net of current portion

Deferred tax assets, net

Total non-current assets

Liabilities and Stockholders’ Equity

Current Liabilities

Accounts payable and accrued expenses

Taxes payable-current

Advance from customer

Amount due to related parties

Finance lease liability, current portion

Operating lease liabilities, current portion

Total current liabilities

Non-Current Liabilities

Finance lease liability, net of current portion

Operating lease liabilities, net of current portion

Total non-current liabilities

Total Liabilities

Commitment and Contingencies

Stockholders’ Equity

PREFERRED STOCK;

$ 0.001 par value;

1,000,000 shares authorized;

none outstanding

COMMON STOCK;

shares authorized;

shares issued;

and 1,091,562

shares outstanding as of December 31, 2023(1)

Treasury stock;

28,583 shares as of December 31, 2023 at cost

( 1,372,673 )

Additional paid-in capital

Retained earnings unappropriated

Retained earnings appropriated

Accumulated other comprehensive loss

( 18,053,269 )

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

$ 226,671,708

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

the Company does not have property ownership certificates, the acquisition of the 20 -year usage rights for this land, buildings, and

salt pan conforms to the definition of a lease as stated in ASC 842.

The Company revised the financial statements and accounted for these

usage rights as leases in accordance with the provisions of ASC 842.

effects of the restatement on the consolidated balance sheet as of December 31, 2024, are summarized in the following table:

December 31, 2024

As Previously Reported

OF CONSOLIDATED BALANCE SHEET

Current Assets

22 unchanged sentences

Finance lease liability, current portion

Operating lease liabilities, current portion

Operating lease liabilities,

current portion

Total current liabilities

2 unchanged sentences

Finance lease liability, net of current portion

Operating lease liabilities, net of current portion

Operating lease liabilities,

net of current portion

Total non-current liabilities

3 unchanged sentences

PREFERRED STOCK;

$ 0.001 par value;

1,000,000 shares authorized;

1,000,000 shares

none outstanding

COMMON STOCK;

shares authorized;

shares issued;

and 1,091,562

shares outstanding as of December 31, 2024, and 2023

80,000,000 shares

1,120,145 shares

and 1,091,562 shares

outstanding as of December 31, 2024, and 2023

Treasury stock;

6 unchanged sentences

Retained earnings appropriated

Accumulated other comprehensive loss

Accumulated other comprehensive

( 20,854,143 )

( 20,783,318 )

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

Total Stockholders’

Total Liabilities and

Stockholders’ Equity

$ 169,455,995

1 unchanged sentence

$ 167,822,288

The following

descriptions of the restatement adjustments to the balance sheet excludes a description of adjustments

previously identified and concluded as immaterial that were also corrected as part

of the restatement.

(a) The change in common stock and additional paid-in capital is due to

the company's 1-for-10 reverse stock split on October 27, 2025.

(b) As of December 31, 2023, in the fixed assets, the original value of the buildings subject to reclassification amounted to $29,863,200.

The Company reclassified them based on their acquisition methods.

The self-built portion was reclassified as "leasehold improvements"

in the property, plant and equipment, with an original value of $3,563,053.

The leased portion was reclassified as finance lease right-of

use assets, with an original value of $26,300,149, accumulated amortization of $16,339,638, and a net value of $9,960,511.

As of December 31, 2024, in the fixed assets, the original value of the buildings subject to reclassification amounted to $68,476,868,

The Company reclassified them based on their acquisition methods.

The self-built portion was reclassified as "leasehold improvements"

in the property, plant and equipment, with an original value of $3,507,367.

The leased portion was reclassified as finance lease right-of

use assets, with an original value of $64,189,590, accumulated amortization of $19,111,170, and a net value of $45,078,720.

payable and accrued expenses was reclassified as finance lease liability relating to the salt pans.

following descriptions of the restatement adjustments to the balance sheet excludes a description of adjustments previously identified

and concluded as immaterial that were also corrected as part of the restatement.

(a) The change in common

stock and additional paid-in capital is due to the company’s 1-for-10 reverse stock split on October 27, 2025.

(b) As of December

31, 2024, in the fixed assets, the original value of the buildings subject to reclassification amounted to $ 68,476,868 , The Company reclassified

them based on their acquisition methods.

The self-built portion was reclassified as “leasehold improvements” in the property,

plant and equipment, with an original value of $ 3,507,367 .

The leased portion was reclassified as finance lease right-of use assets,

with an original value of $ 64,189,590 , accumulated amortization of $ 19,111,170 , and a net value of $ 45,078,420 .

in accounts payable and accrued expenses was reclassified as finance lease liability relating to the salt pans.

The finance lease liabilities

including the current portion of $ 3,124,550 and the non-current portion of $ 4,014,019 .

(d) Regarding the decrease in retained

earnings unappropriated, the main reason was that general and administrative expenses increased by $964,920.

The increase in general and

administrative expenses was due to the reclassification of finance lease right-of-use asset.

Previously, depreciation was calculated after

deducting 5% residual value from the fixed assets, but now there is no residual value for amortization of finance lease right-of-use asset

(e) The change in the accumulated other

comprehensive loss represents the foreign currency translation differences in the financial statements.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

effects of the restatement on the consolidated statement of operations income (loss) for the year ended December 31, 2023, are summarized

in the following table:

- Schedule of statement of operations income (loss)

December 31, 2023

As Previously Reported

OPERATING COSTS AND EXPENSE

Cost of revenues

( 28,089,953 )

Sales and marketing expenses

Direct labor and factory overheads incurred during plant shutdown

( 9,544,675 )

General and administrative expenses

( 4,240,832 )

TOTAL OPERATING COSTS AND EXPENSE

( 41,934,515 )

LOSS FROM OPERATIONS

( 11,890,725 )

OTHER INCOME (EXPENSE)

Interest expense

Interest income

Expenditure on water pollution treatment

( 46,510,856 )

LOSS BEFORE INCOME TAXES

( 58,256,662 )

INCOME TAX EXPENSE

( 3,538,617 )

$ ( 61,795,279 )

COMPREHENSIVE LOSS:

$ ( 61,795,279 )

OTHER COMPREHENSIVE (LOSS) INCOME

- Foreign currency translation adjustments

( 5,025,980 )

TOTAL COMPREHENSIVE LOSS

$ ( 66,821,259 )

BASIC AND DILUTED LOSS PER SHARE

BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF SHARES:

( 9,373,499 )

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

effects of the restatement on the consolidated statement of operations income (loss) for the year ended December 31, 2024, are summarized

in the following table:

December 31, 2024

As Previously Reported

(d) Regarding the decrease

in retained earnings unappropriated, the main reason was that general and administrative expenses increased by $ 964,920 .

in general and administrative expenses was due to the reclassification of finance lease right-of-use asset.

Previously, depreciation

was calculated after deducting 5% residual value from the fixed assets, but now there is no residual value for amortization of finance

lease right-of-use asset calculation.

(e) The change in the

accumulated other comprehensive loss represents the foreign currency translation differences in the financial statements.

The effects of the restatement on the consolidated statement of operations

income (loss) for the year ended December 31, 2024, are summarized in the following table:

OF STATEMENT OF OPERATIONS

OPERATING COSTS AND EXPENSE

3 unchanged sentences

Sales and marketing expenses

Direct labor and factory overheads incurred during plant shutdown

Direct labor and factory overheads incurred

during plant shutdown

( 8,880,643 )

General and administrative expenses

General and administrative

( 5,271,011 )

13 unchanged sentences

( 29,169,008 )

Impairment of property, plant and equipment

Impairment of property,

plant and equipment

( 6,772,500 )

12 unchanged sentences

OTHER COMPREHENSIVE (LOSS) INCOME

- Foreign currency translation adjustments

- Foreign currency translation

( 2,800,874 )

( 2,730,049 )

TOTAL COMPREHENSIVE LOSS

TOTAL COMPREHENSIVE

$ ( 61,736,326 )

3 unchanged sentences

( 9,635,362 )

The following descriptions of the restatement adjustments to the statement

of operations exclude a description of adjustments previously identified and concluded as immaterial

they were also corrected as part of the restatement.

The increase of $964,920 in general and administrative expenses was due to the reclassification of finance lease right-of-use asset.

Previously, depreciation was calculated after deducting 5% residual value from the fixed assets, but now there is no residual value for

amortization of finance lease right-of-use asset calculation.

(b) The change in the accumulated other

comprehensive loss represents the foreign currency translation differences in the financial statements.

The change in basic and diluted loss per share is due to the company's 1-for-10 reverse stock split on October 27, 2025.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

effects of the restatement on the consolidated statement of stockholders' deficit

for the year ended December 31, 2023 are summarized in the following table:

Restatement - Schedule

of consolidated statement of stockholders'

comprehensive

unappropriated

YEAR ENDED DECEMBER 31, 2023 (As Previously Reported)

BALANCE AT JANUARY 1, 2023

$ ( 1,372,673 )

$ 101,237,059

$ 158,089,535

$ ( 13,027,289 )

$ 271,618,205

Restricted shares to be issued for service

Currency translation adjustment

( 5,025,980 )

Net loss for year ended December 31, 2023

( 61,795,279 )

$ ( 1,372,673 )

$ 101,688,262

$ ( 18,053,269 )

$ 205,248,296

YEAR ENDED DECEMBER 31, 2023 (Restatement Impact)

BALANCE AT JANUARY 1, 2023

( 9,627,109 )

( 9,369,862 )

Restricted shares to be issued for service

Currency translation adjustment

Net loss for year ended December 31, 2023

( 9,892,609 )

( 9,635,362 )

YEAR ENDED DECEMBER 31, 2023 (As Restated)

BALANCE AT JANUARY 1, 2023

$ ( 1,372,673 )

$ 101,260,990

$ 158,089,535

$ ( 13,027,289 )

$ 271,618,205

Restricted shares to be issued for service

Currency translation adjustment

( 5,025,980 )

Net loss for year ended December 31, 2023

( 61,795,279 )

$ ( 1,372,673 )

$ 101,712,325

$ ( 18,053,269 )

$ 205,248,296

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

The effects of the restatement

on the consolidated statement of stockholders' deficit for the year ended December 31, 2024 are summarized

following descriptions of the restatement adjustments to the statement of operations exclude a description of adjustments previously

identified and concluded as immaterial they were also corrected as part of the restatement.

(a) The increase of

$ 964,920 in general and administrative expenses was due to the reclassification of finance lease right-of-use asset.

Previously, depreciation

was calculated after deducting 5% residual value from the fixed assets, but now there is no residual value for amortization of finance

lease right-of-use asset calculation.

(b) The change in the

accumulated other comprehensive loss represents the foreign currency translation differences in the financial statements.

and diluted loss per share is due to the company’s 1-for-10 reverse stock split on October 27, 2025.

The effects of the restatement on the consolidated statement of stockholders’ deficit for the year ended December 31, 2024 are summarized

in the following table:

comprehensive

OF CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

unappropriated

YEAR ENDED DECEMBER 31, 2024 (As Previously Reported)

other comprehensive

unappropriated

ENDED DECEMBER 31, 2024 (As Previously Reported)

BALANCE AT JANUARY 1, 2024

3 unchanged sentences

$ 205,248,296

Restricted shares to be issued

Currency translation adjustment

shares to be issued for service

translation adjustment

( 2,800,874 )

Net loss for year ended

December 31, 2024

loss for year ended December 31, 2024

( 58,935,452 )

AT DECEMBER 31, 2024

$ ( 1,372,673 )

3 unchanged sentences

ENDED DECEMBER 31, 2024 (Restatement Impact)

BALANCE AT JANUARY 1, 2024

AT JANUARY 1, 2024

( 9,892,609 )

( 9,635,362 )

Restricted shares to be issued

Currency translation adjustment

Net loss for year ended

December 31, 2024

shares to be issued for service

translation adjustment

loss for year ended December 31, 2024

AT DECEMBER 31, 2024

( 9,892,609 )

3 unchanged sentences

ENDED DECEMBER 31, 2024 (As Restated)

BALANCE AT JANUARY 1, 2024

$ ( 1,372,673 )

$ 101,712,325

$ ( 18,053,269 )

$ 205,248,296

Restricted shares to be issued

Currency translation adjustment

( 2,730,049 )

Net loss for year ended

December 31, 2024

( 59,900,372 )

$ ( 1,372,673 )

$ 101,712,325

$ ( 20,783,318 )

AT JANUARY 1, 2024

$ ( 1,372,673 )

following descriptions of the restatement adjustments to the consolidated statement of stockholders' deficit excludes a description of

adjustments previously identified and concluded as immaterial the were also corrected as part of the restatement.

(a) The change in common stock and additional paid-in capital is due to

the company's 1-for-10 reverse stock split on October 27, 2025.

(b) Regarding

the decrease in retained earnings unappropriated, the main reason was that general and administrative expenses increased by

The increase of general and administrative expenses was due to the reclassification of finance lease right-of-use asset.

Previously, depreciation was calculated after deducting 5% residual value from the fixed assets, but now there is no residual value

for amortization of finance lease right-of-use asset calculation.

other comprehensive loss represents the foreign currency translation differences in the financial statements.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

effects of the restatement on the consolidated statement of cash flows for the year ended December 31, 2023, are summarized in the following

- Schedule of consolidated statement of cash flows

December 31, 2023

As Previously Reported

CASH FLOWS FROM OPERATING ACTIVITIES

$ 101,712,325

$ ( 18,053,269 )

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

Amortization on capital lease

Depreciation and amortization

$ 205,248,296

Deferred tax asset

Stock-based compensation expense

Bad debt expense

Impairment of inventory

Amortization of operating lease right-of-use asset

Amortization of finance lease right-of-use asset

Loss on disposal of property, plant and equipment

Changes in assets and liabilities

Accounts receivable

Prepayment and deposits

shares to be issued for service

translation adjustment

( 2,730,049 )

Advance from customers

Other receivables

Accounts and Other payable and accrued expenses

Taxes payable

Lease liabilities

Net cash used in operating activities

loss for year ended December 31, 2024

( 59,900,372 )

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment

Interest-free loan lent to related parties

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of finance leases obligation

Proceeds from interest-free loan from a related party

Net cash used in financing activities

EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

AT DECEMBER 31, 2024

$ ( 1,372,673 )

$ 101,712,325

NET DECREASE IN CASH AND CASH EQUIVALENTS

$ ( 20,783,318 )

$ 142,812,575

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS - END OF YEAR

December 31, 2023

As Previously

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the year for:

Paid for taxes

Interest on finance lease obligation

Paid for Flood Prevention Project

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

following descriptions of the restatement adjustments to the consolidated statement of stockholders’ deficit excludes a description

of adjustments previously identified and concluded as immaterial the were also corrected as part of the restatement.

(a) The change in common

stock and additional paid-in capital is due to the company’s 1-for-10 reverse stock split on October 27, 2025.

(b) Regarding the decrease

in retained earnings unappropriated, the main reason was that general and administrative expenses increased by $ 964,920 .

of general and administrative expenses was due to the reclassification of finance lease right-of-use asset.

Previously, depreciation

was calculated after deducting 5% residual value from the fixed assets, but now there is no residual value for amortization of finance

lease right-of-use asset calculation.

accumulated other comprehensive loss represents the foreign currency translation differences in the financial statements.

effects of the restatement on the consolidated statement of cash flows for the year ended December 31, 2024, are summarized in the following

As Previously Reported

OF CONSOLIDATED STATEMENT OF CASH FLOWS

CASH FLOWS FROM OPERATING ACTIVITIES

1 unchanged sentence

$ ( 59,900,372 )

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

Adjustments to reconcile net income to net

cash provided by (used in) operating activities:

Amortization on capital lease

6 unchanged sentences

Impairment of property plant and equipment

Amortization of operating lease right-of-use asset

Amortization of finance lease right-of-use asset

Amortization of operating lease right-of-use

Amortization of finance lease right-of-use

Loss on disposal of property, plant and equipment

9 unchanged sentences

Lease liabilities

Net cash provided by operating activities

cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

2 unchanged sentences

( 28,923,642 )

Interest-free loan lent to related parties

Net cash used in investing activities

Interest-free loan lent

to related parties

cash used in investing activities

( 60,551,488 )

4 unchanged sentences

( 31,866,665 )

Proceeds from interest-free loan from a related party

Net cash used in financing activities

Proceeds from interest-free

loan from a related party

cash used in financing activities

( 31,602,571 )

( 31,851,811 )

EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

EFFECTS OF EXCHANGE

RATE CHANGES ON CASH AND CASH EQUIVALENTS

( 2,023,072 )

( 2,023,830 )

NET DECREASE IN CASH AND CASH EQUIVALENTS

NET DECREASE IN CASH AND CASH

( 62,148,732 )

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS - END OF YEAR

December 31, 2024

As Previously Reported

CASH AND CASH EQUIVALENTS

- BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS

- END OF YEAR

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

2 unchanged sentences

Interest on finance lease obligation

Paid for Flood Prevention Project

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

The following descriptions of the restatement adjustments to the statement

of cash flows excludes a description of adjustments previously identified and concluded as immaterial

that were also corrected as part of the restatement.

restatement is due to the reclassification of buildings without property ownership certificates in fixed assets.

reclassified them based on their acquisition methods.

The self-built portion was reclassified as "leasehold improvements" in the

property, plant and equipment.

DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

following descriptions of the restatement adjustments to the statement of cash flows excludes a description of adjustments previously

identified and concluded as immaterial that were also corrected as part of the restatement.

(a) This restatement

is due to the reclassification of buildings without property ownership certificates in fixed assets.

The Company reclassified them based

on their acquisition methods.

The self-built portion was reclassified as “leasehold improvements” in the property, plant

and equipment.

The leased portion was reclassified as finance lease right-of-use assets.

(b) Regarding the increase in net loss, the main reason was that general

and administrative expenses increased by $964,920.

The increase in general and administrative expenses was due to the reclassification

of finance lease right-of-use asset.

Previously, depreciation was calculated after deducting 5% residual value from the fixed assets,

but now there is no residual value for amortization of finance lease right-of-use asset calculation.

reclassified as finance lease right-of use assets, resulting in an amount of $31,602,571.

(d) The change in the accumulated

other comprehensive loss represents the foreign currency translation differences in the financial statements.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

effects of the restatement on the parent company only balance sheet as of December 31, 2023, are summarized in the following table:

Restatement - Schedule of

Condensed Balance Sheet

December 31, 2023

As Previously

Current Assets

Prepayments and deposits

Total Current Assets

Non-Current Assets

Interests in subsidiaries

Amounts due from group companies

Deferred tax assets, net

Total non-current assets

$ 207,038,150

Liabilities and Stockholders’ Equity

Current Liabilities

Other payables and accrued expenses

Amounts due to related parties

Amounts due to group companies

Total Current Liabilities

Total Liabilities

Stockholders’ Equity

PREFERRED STOCK;

$ 0.001 par value;

1,000,000 shares authorized;

none outstanding

COMMON STOCK;

$ 0.0005 par value;

80,000,000 shares authorized;

1,120,145 shares issued;

and 1,091,562 shares outstanding as of December 31, 2023

Treasury stock;

28,583 shares as of December 31, 2023 at cost

( 1,372,673 )

Additional paid-in capital

Share to be issued

Retained earnings unappropriated

Retained earnings appropriated

Accumulated other comprehensive loss

( 18,053,269 )

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

$ 207,038,150

(a) The change in common stock and

additional paid-in capital is due to the company's 1-for-10 reverse stock split on October 27, 2025.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

The effects of the restatement on the parent company only balance

sheet as of December 31, 2024, are summarized in the following table:

December 31, 2024

As Previously

(b) Regarding the increase

in net loss, the main reason was that general and administrative expenses increased by $ 964,920 .

The increase in general and administrative

expenses was due to the reclassification of finance lease right-of-use asset.

Previously, depreciation was calculated after deducting

5% residual value from the fixed assets, but now there is no residual value for amortization of finance lease right-of-use asset calculation.

property ownership certificates have been reclassified as finance lease right-of use assets, resulting in an amount of $ 31,602,571 .

(d) The change in the

accumulated other comprehensive loss represents the foreign currency translation differences in the financial statements.

effects of the restatement on the parent company only balance sheet as of December 31, 2024, are summarized in the following

OF RESTATEMENT OF PARENT COMPANY BALANCE SHEET

Current Assets

9 unchanged sentences

( 8,772,276 )

$ 144,804,555

Liabilities and Stockholders’ Equity

12 unchanged sentences

shares authorized;

none outstanding

COMMON STOCK;

$ 0.0005 par value;

80,000,000 shares authorized;

1,120,145 shares issued;

and 1,091,562 shares outstanding as of December 31, 2024

80,000,000 shares

1,120,145 shares

and 1,091,562 shares

outstanding as of December 31, 2024

Treasury stock;

28,583 shares as of December 31, 2024 and December 31, 2023 at cost

28,583 shares as of December

31, 2024 and December 31, 2023 at

( 1,372,673 )

4 unchanged sentences

Retained earnings appropriated

Accumulated other comprehensive loss

Accumulated other comprehensive

( 20,854,143 )

( 20,783,318 )

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

Total Stockholders’

Total Liabilities and

Stockholders’ Equity

$ 153,576,831

1 unchanged sentence

$ 144,804,555

(a) The amount of $7,878,181 in accounts payable and accrued expenses was reclassified as finance lease liability relating to salt pans.

finance lease liabilities including the current portion of $3,124,550 and the non-current portion of $4,014,019.

(b) The change in common stock and additional paid-in capital is

due to the company's 1-for-10 reverse stock split on October 27, 2025.

unappropriated, the main reason was that general and administrative expenses increased by $964,920.

The increase of general and

administrative expenses was due to the reclassification of finance lease right-of-use asset.

Previously, depreciation was calculated

after deducting 5% residual value from the fixed assets, but now there is no residual value for amortization of finance lease

right-of-use asset calculation.

(d) The change in the accumulated other comprehensive loss

represents the foreign currency translation differences in the financial statements.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

(a) The amount of $ 7,878,181

in accounts payable and accrued expenses was reclassified as finance lease liability relating to salt pans.

The finance lease liabilities

including the current portion of $ 3,124,550 and the non-current portion of $ 4,014,019 .

(b) The change in common

stock and additional paid-in capital is due to the company’s 1-for-10 reverse stock split on October 27, 2025.

in retained earnings unappropriated, the main reason was that general and administrative expenses increased by $ 964,920 .

of general and administrative expenses was due to the reclassification of finance lease right- of-use asset.

Previously, depreciation

was calculated after deducting 5% residual value from the fixed assets, but now there is no residual value for amortization of finance

lease right-of-use asset calculation.

(d) The change in the

accumulated other comprehensive loss represents the foreign currency translation differences in the financial statements.

effects of the restatement on the parent company only statement of comprehensive income (loss) for the year ended December 31, 2024,

are summarized in the following table:

- Schedule of statement of operations income (loss)

December 31, 2024

As Previously

OF RESTATEMENT OF PARENT COMPANY STATEMENT OF COMPREHENSIVE INCOME (LOSS)

OPERATING EXPENSES

General and administrative expenses

administrative expenses

$ ( 742,480 )

5 unchanged sentences

TOTAL EXPENSES

Equity in net loss of subsidiaries

Equity in net loss of

( 58,192,972 )

6 unchanged sentences

(a) The increase of

$964,920 in equity in net loss of subsidiaries relating to general and administrative expenses was due to the reclassification of

finance lease right-of-use asset.

Previously, depreciation was calculated after deducting 5% residual value from the fixed assets,

but now there is no residual value for amortization of finance lease right-of-use asset calculation.

$ 964,920 in equity in net loss of subsidiaries relating to general and administrative expenses was due to the reclassification of finance

lease right-of- use asset.

Previously, depreciation was calculated after deducting 5% residual value from the fixed assets, but now there

is no residual value for amortization of finance lease right-of-use asset calculation.

effects of the restatement on the parent company only statement of cash flows for the year ended December 31, 2024, are summarized in

the following table:

Restatement - Schedule of consolidated statement of cash flows

December 31, 2024

As Previously

OF RESTATEMENT OF PARENT COMPANY STATEMENT OF CASH FLOWS

CASH FLOWS FROM OPERATING ACTIVITIES

1 unchanged sentence

$ ( 59,900,372 )

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

Adjustments to reconcile net loss to net

cash provided by (used in) operating

Equity loss in unconsolidated subsidiaries

2 unchanged sentences

Changes in assets and liabilities:

Other payables and accrued expenses

Net cash used in operating activities

Other payables and accrued

Net cash used in operating

CASH FLOWS FROM FINANCING ACTIVITIES

Advances from group companies

Net cash provided by financing activities

Net cash provided by financing

NET INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS - END OF YEAR

CASH AND CASH EQUIVALENTS

- END OF YEAR

(a) The increase of

$ 964,920 in general and administrative expenses was due to the reclassification of finance lease right-of-use asset.

depreciation was calculated after deducting 5% residual value from the fixed assets, but now there is no residual value for

amortization of finance lease right-of-use asset calculation.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL

DECEMBER 31, 2024

(Expressed in U.S.

SCHEDULE I – PARENT ONLY FINANCIAL INFORMATION

The following presents condensed parent company only financial

information of Gulf Resources, Inc.

Condensed Balance Sheets

Parent Company

As of December 31,

Current Assets

Previously, depreciation

was calculated after deducting 5% residual value from the fixed assets, but now there is no residual value for amortization of finance

lease right-of-use asset calculation.

RESOURCES, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

I – PARENT ONLY FINANCIAL INFORMATION

following presents condensed parent company only financial information of Gulf Resources, Inc.

Balance Sheets

SCHEDULE OF CONDENSED PARENT COMPANY BALANCE SHEETS

of December 31,

Prepayments and deposits

5 unchanged sentences

Total non-current assets

$ 144,804,555

$ 207,038,150

Liabilities and Stockholders’ Equity

11 unchanged sentences

COMMON STOCK;

$ 0.0005 par value;

shares authorized;

shares issued;

and 1,091,562

shares outstanding as of December 31, 2024 and December 31, 2023(1)

1,568,114 and 1,120,145 shares issued;

1,539,531 and 1,091,562 shares outstanding as of December 31, 2025

and December 31, 2024

Treasury stock;

28,583 shares as of December 31, 2024, and December 31, 2023, at cost

28,583 shares as of December 31, 2025 and December 31,

( 1,372,673 )

3 unchanged sentences

Retained earnings unappropriated

( 7,526,347 )

Retained earnings appropriated

Accumulated other comprehensive loss

Currency translation adjustment

( 12,218,081 )

( 20,783,318 )

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

Total Stockholders’

Total Liabilities and

Stockholders’ Equity

$ 113,582,709

$ 144,804,555

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

to reflect the stock split.

Condensed Statements of Comprehensive Loss

Years Ended December 31,

Statements of Loss

OF CONDENSED PARENT COMPANY STATEMENT OF LOSS

Ended December 31,

OPERATING EXPENSES

General and administrative expenses

and administrative expenses

$ ( 1,443,957 )

1 unchanged sentence

TOTAL OPERATING EXPENSES

( 1,443,957 )

OTHER EXPENSES

2 unchanged sentences

TOTAL EXPENSES

Equity in net loss of subsidiaries

( 1,443,957 )

Equity in net loss of

( 42,476,274 )

( 59,157,892 )

LOSS BEFORE INCOME TAXES

3 unchanged sentences

$ ( 59,900,372 )

Condensed Statements of Cash Flows

Years Ended December 31,

Statements of Cash Flows

OF CONDENSED PARENT COMPANY CONDENSED STATEMENT OF CASH FLOWS

Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES

1 unchanged sentence

$ ( 59,900,372 )

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

Equity loss in unconsolidated subsidiaries

Stock-based compensation expense-options

Shares issued from treasury stock for services

Adjustments to reconcile net loss to net cash

provided by (used in) operating activities:

Equity loss in unconsolidated

Stock-based compensation

expense-options

Shares issued from treasury

stock for services

Changes in assets and liabilities:

Other payables and accrued expenses

Net cash used in operating activities

Other payables and accrued

Net cash used in operating

( 1,188,448 )

CASH FLOWS FROM FINANCING ACTIVITIES

Advances from group companies

Net cash provided by financing activities

Net cash provided by financing

NET INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS - END OF YEAR

(i) Basis of presentation

In the condensed parent-company-only

financial statements, the Company’s investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries

since the date of acquisition.

The Company’s share of net loss of its subsidiaries is included in condensed statements of comprehensive

loss using the equity method.

These condensed parent- company-only financial statements should be read in connection with the consolidated

financial statements and notes thereto.

As of December 31, 2024, the

Company itself has no purchase commitment, capital commitment and operating lease commitment.

(ii) Restricted Net Assets

Schedule I of Rule 5-04 of Regulation

S-X requires the condensed financial information of registrant shall be filed when the restricted net assets of consolidated subsidiaries

exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year.

For purposes of the above test,

restricted net assets of consolidated subsidiaries shall mean that amount of the registrant’s proportionate share of net assets

of consolidated subsidiaries (after intercompany eliminations) which as of the end of the most recent fiscal year may not be transferred

to the parent company by subsidiaries in the form of loans, advances or cash dividends without the consent of a third party (i.e., lender,

regulatory agency, foreign government, etc.).

The condensed parent company

financial statements have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X as the restricted net assets of the

subsidiaries of Gulf Resources, Inc.

CASH AND CASH EQUIVALENTS

- END OF YEAR

of presentation

the condensed parent-company-only financial statements, the Company’s investment in subsidiaries is stated at cost plus equity

in undistributed earnings of subsidiaries since the date of acquisition.

The Company’s share of net loss of its subsidiaries is

included in condensed statements of comprehensive loss using the equity method.

These condensed parent- company-only financial statements

should be read in connection with the consolidated financial statements and notes thereto.

of December 31, 2025, the Company itself has no purchase commitment, capital commitment and operating lease commitment.

(ii) Restricted

I of Rule 5-04 of Regulation S-X requires the condensed financial information of registrant shall be filed when the restricted net assets

of consolidated subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year.

purposes of the above test, restricted net assets of consolidated subsidiaries shall mean that amount of the registrant’s proportionate

share of net assets of consolidated subsidiaries (after intercompany eliminations) which as of the end of the most recent fiscal year

may not be transferred to the parent company by subsidiaries in the form of loans, advances or cash dividends without the consent of

a third party (i.e., lender, regulatory agency, foreign government, etc.).

condensed parent company financial statements have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X as the restricted

net assets of the subsidiaries of Gulf Resources, Inc.

exceed 25% of the consolidated net assets of Gulf Resources, Inc.

The ability of the Company’s

Chinese operating subsidiaries to pay dividends may be restricted due to the foreign exchange control policies and availability of cash

balances of the Chinese operating subsidiaries.

Because a significant portion of the Company’s operations and revenues are conducted

and generated in China, a significant portion of the revenues being earned and currency received are denominated in RMB.

RMB is subject

to the exchange control regulation in China, and, as a result, the Company may be unable to distribute any dividends outside of China

due to PRC exchange control regulations that restrict the Company’s ability to convert RMB into US Dollars.

of the Company’s Chinese operating subsidiaries to pay dividends may be restricted due to the foreign exchange control policies

and availability of cash balances of the Chinese operating subsidiaries.

Because a significant portion of the Company’s operations

and revenues are conducted and generated in China, a significant portion of the revenues being earned and currency received are denominated

RMB is subject to the exchange control regulation in China, and, as a result, the Company may be unable to distribute any dividends

outside of China due to PRC exchange control regulations that restrict the Company’s ability to convert RMB into US Dollars.

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 8. Financial Statements and Supplementary Data