GULF RESOURCES, INC. 10-Q/A

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Cautionary Note Regarding Forward-Looking Statements The discussion below contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act. We have used words such as “believes,” “intends,” “anticipates,” “expects” and similar expressions to identify forward-looking statements. These statements are based on information currently available to us and are subject to a number of risks and uncertainties that may cause our actual results of operations, financial condition, cash flows, performance, business prospects and opportunities and the timing of certain events to differ materially from those expressed in, or implied by, these statements. Except as expressly required by the federal securities laws, we undertake no obligation to update such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances, or for any other reason. Overview We are a Nevada holding company which conducts operations through our wholly-owned China-based subsidiaries. Our business is conducted and reported in four segments, namely, bromine, crude salt, chemical products and natural gas. Through our wholly-owned subsidiary, SCHC, we produce and trade bromine and SHSI for crude salt production and trading. We are one of the largest producers of bromine in China, as measured by production output. Elemental bromine is used to manufacture a wide variety of bromine compounds used in industry and agriculture. Bromine also is used to form intermediary chemical compounds such as Tetramethylbenzidine. Bromine is commonly used in brominated flame retardants, fumigants, water purification compounds, dyes, medicines and disinfectants. Crude salt is the principal material in alkali production as well as chlorine alkali production and is widely used in the chemical, food and beverage, and other industries. Through our wholly-owned subsidiary, SYCI, we manufacture and sell chemical products used in oil and gas field exploration, oil and gas distribution, oil field drilling, papermaking chemical agents, inorganic chemicals and materials that are used for human and animal antibiotics. Our wholly-owned subsidiary, DCHC, was established to explore and develop natural gas and brine resources (including bromine and crude salt) in Sichuan Province, China. As disclosed in the Company’s Current Report on Form 8-K filed on September 8, 2017, the Company received, on September 1, 2017, letters from the Yangkou County, Shouguang City government addressed to each of its subsidiaries, SCHC and SYCI, which stated that in an effort to improve the safety and environmental protection management level of chemical enterprises, the plants are requested to immediately stop production and perform rectification and improvements in accordance with the country’s new safety and environmental protection requirements. In the Company’s press release of August 11, 2017 and on its conference call of August 14, 2017, the Company addressed concerns that increased government enforcement of stringent environmental rules that were adopted in early 2017 to insure corporations bring their facilities up to necessary standards so that pollution and other negative environmental issues are limited and remediated, could have an impact on our business in both the short and long-term. The Company also expressed that although it believed its facilities were fully compliant at the time, the Company did not know how its facilities would fare under the new rules. Teams of inspectors from the government were sent to many provinces to inspect all mining and manufacturing facilities. The local government requested that facilities be closed, so that the facilities could undergo the inspection and analysis in the most efficient manner by inspectors’ team. As a result, our facilities were closed on September 1, 2017. The Company believes that this is another step by the government to improve the environment. It further believes the goal of the government is not to close all plants, but rather to codify the regulations related to project approval, land use, planning approval and environmental protection assessment approval so that illegal plants are not able to open in the future and so that plants close to population centers do not cause serious environmental damage. In addition, the Company believes that the Shandong provincial government wants to assure that each of its regional and county governments has applied the Notice in a consistent manner. The Shouguang City Bromine Association, on behalf of all the bromine plants in Shouguang, started discussions with the local government agencies. The local governmental agencies confirmed the facts that their initial requirements for the bromine industry did not include the project approval, the planning approval and the land use rights approval and that those three additional approvals were new requirements of the provincial government. The Company understood from the local government that it has been coordinating with several government agencies to solve these three outstanding approval issues in a timely manner and that all the affected bromine plants willnot be allowed to commence production prior to obtaining those approvals. In February 2019, the Company received a notification from the local government of Yangkou County that its Factory No. 1, No. 4, No. 7 and No. 9 had passed inspection and could resume operations. In April 2019, Factory No. 1 and No. 7 resumed operations. On February 28, 2020, the Company announced that it received an approval from the government to resume bromine production after winter temporary closure. Subsequently, it received another approval from the Shouguang Yangkou People’s Government dated on March 5, 2020 to resume production at its bromine factories No. 1, No. 4, No. 7 and No. 9 in order to meet the needs of bromide products for epidemic prevention and control. With these two approvals, the Company was allowed to resume production at all four bromine factories. The Company received an oral notification from the government for its Factory No. 8, which permitted Factory No.8 to resume production in August 2022. Factory No.8 started to contribute revenue in the fourth quarter 2022. 42 Pursuant to the notification from the government of Shouguang City, all bromine facilities in Shouguang City were temporarily closed from December 10, 2022 until February 1, 2023 8:00 AM China Time. To comply with such notification, the Company had temporarily stopped production at its bromine facilities during the aforesaid period and reopened the operating bromine and crude salt factories in February, 2023 as planned. The Company is still waiting for governmental approval for factories No. 2 and No. 10. To its knowledge, the government is currently completing its planning process for all mining areas including that for prevention of flood. As a result, the Company may be required to make some modifications to our current wells and aqueducts prior to commencement of operations of these factories in order to satisfy the local government’s requirements. On November 24, 2017, Gulf Resources received a letter from the People’s Government of Yangkou County, Shouguang City notifying the Company that due to the new standards and regulations relating to safety production and environmental pollution, from certain local governmental departments, such as the municipal environmental protection department, the security supervision department and the fire department, its chemical enterprises would have to be relocated to a new industrial park called Bohai Marine Fine Chemical Industry Park. Although our chemical companies were in compliance with regulations, they were also close to a residential area. As a result, the government determined we should relocate to the Bohai park. Chemical companies that are not being asked to move into the park are being permanently closed. Since our factories closed, the Company has secured from the government the land use rights for its chemical plant. On January 6, 2020, the Company received the environmental protection approval by the government of Shouguang City, Shandong Province for the proposed Yuxin Chemical factory. The Company began the construction on its new chemical facilities located at Bohai Marine Fine Chemical Industrial Park in June 2020. The construction was expected to take approximately one year and an additional six months to complete the equipment installation and testing, however due to the COVID epidemic and electrical restrictions, the opening of the chemical factory has been delayed. [The Company has received the refrigeration and air compressor units. On July 26, 2023, the Company announced that the delivery of the remaining equipment for its Yuxin chemical factory has been temporarily delayed and to review its chemical products strategy. In January 2017, the Company completed the first brine water and natural gas well field construction in Daying located in Sichuan Province and commenced trial production in January 2019. On May 29, 2019, the Company received a verbal notice from the government of Tianbao Town ,Daying County, Sichuan Province, whereby the Company is required to obtain project approval for its well located in Daying, including the whole natural gas and brine water project, and approvals for safety production inspection, environmental protection assessment, and to solve the related land issue. Until these approvals have been received, the Company has to temporarily halt trial production at its natural gas well in Daying. In compliance with the Chinese government new policies, the Company is also required to obtain an exploration license and a mining license for bromine and natural gas, respectively. Pursuant to the Opinions of the Ministry of Natural Resources on Several Issues in Promoting the Reform of Mineral Resources Management (Trial) promulgated by the Ministry of Natural Resources of PRC on January 9, 2020, which came into effect on May 1, 2020, privately owned enterprises are allowed to participate in the natural gas production. The Company plans to proceed with its applications for the natural gas and brine project approvals with related government departments until after the governmental planning has been finalized the land and resource planning for Sichuan Province. In April 2022, Shouguang Hengde Salt Industry Co. Ltd (“SHSI”), our subsidiary, was incorporated in Shandong Province, China, for crude salt production and trading. On January 28, 2020 we completed a 1-for-5 reverse stock split of our common stock, such that for each five shares outstanding prior to the stock split there was one share outstanding after the reverse stock split. All shares of common stock referenced in this report have been adjusted to reflect the stock split figures. Recent Developments Acquisition Agreements In June 2024, a wholly owned subsidiary of the Company, Shouguang Hengde Salt Industry Co. Ltd ( “SHSI”) entered into crude salt field acquisition agreements with Shouguang Qingshuibo Farm Co., LTD. (“Seller A”), Shouguang city Yangkou town Dingjia Zhuangzi village stock economic cooperative (“Seller B”), Shouguang city Yangkou town Shanjia Zhuangzi village stock economic cooperative (“Seller C”), Shouguang City Yangkou town Zhengjia Zhuangzi village stock economic cooperative (“Seller D”), and Shouguang city Yangkou town Renjia Zhuangzi village stock economic cooperative (“Seller E”), respectively, as amended in December 2024. A summary of these agreements are set forth below: On June 26, 2024, SHSI entered into an acquisition agreement with Seller A, pursuant to which Seller A agrees to transfer to SHSI, and SHSI agrees to purchase, 2,380,000 square meters of crude salt field (including the land lease fee) for RMB54.40 per square meter, with the total transfer price of RMB129,472,000. The term of transfer is from June 29, 2024 to June 28, 2044. 80% of the transfer price shall be paid upon the execution of the agreement, and the remaining 20% shall be paid in shares of common stock of the Company within three months from the date of the agreement after SHSI has inspected the and accepted the crude salt field in writing. Subsequently, on December 17, 2024, the parties entered into an amendment to the agreement, pursuant to which the Article 2.2 of the agreement has been amended as follows: eighty percent (80%) of the total amount, equaling RMB103,577,600 had been paid on the date of signing the contract by both parties. The remaining RMB25,894,400 shall be paid in a combination of common stock of the Company and cash as follows: (1) RMB10,357,800 shall be paid in shares, calculated on a per share price of US$1.5, using the exchange rate RMB/US$:7.27. These shares shall be issued by the Company to Seller A or Seller A’s designated parties within three months after SHSI has inspected and accepted the crude salt field in writing; (2) the balance shall be paid in cash before December 31, 2028. 43 On June 27, 2024, SHSI entered into an acquisition agreement with each Seller B, Seller C, Seller D and Seller E, respectively, pursuant to which the sellers agreed to transfer to SHSI, and SHSI agrees to purchase from the sellers, 750,000, 804,000, 385,000, and 822,000 square meters of crude salt field (including the land lease fee) for RMB54.10, RMB54.90, RMB54.00, and RMB55.70 per square meter, respectively, with the total transfer price of RMB40,575,000, RMB44,139,600, RMB20,790,000, and RMB45,785,400, respectively. The term of transfers is from June 29, 2024 to June 28, 2044. 80% of the transfer price shall be paid upon the execution of the agreements, and the remaining 20% shall be paid in shares of common stock of the Company within three months from the date of the agreements after SHSI has inspected the and accepted the crude salt fields in writing. On December 17, 2024, SHSI entered into an amendment to the acquisition agreement with Seller B, pursuant to which the Article 2.2 of the agreement has been amended as follows: (80%) of the total amount, equaling RMB32,460,000 had been paid on the date of signing the contract by both parties. The remaining RMB8,115,000 shall be paid in a combination of common stock of the Company and cash as follows: (1) RMB3,246,000 shall be paid in shares, calculated on a per share price of US$1.5, using the exchange rate RMB/US$:7.27. These shares shall be issued by the Company to Seller B or Seller B’s designated parties within three months after SHSI has inspected and accepted the crude salt field in writing; (2) the balance shall be paid in cash before December 31, 2028. On December 17, 2024, SHSI entered into an amendment to the acquisition agreement with Seller C, pursuant to which the Article 2.2 of the agreement has been amended as follows: Eighty percent (80%) of the total amount, equaling RMB35,311,680 had been paid on the date of signing the contract by both parties. The remaining RMB8,827,920 shall be paid in a combination of common stock of the Company and cash as follows: (1) RMB3,531,168 shall be paid in shares, calculated on a per share price of US$1.5 per, using the exchange rate RMB/US$:7.27. These shares shall be issued by the Company to Seller C or Seller C’s designated parties within three months after SHSI has inspected and accepted the crude salt field in writing; (2) the balance shall be paid in cash before December 31, 2028. On December 17, 2024, SHSI entered into an amendment to the acquisition agreement with Seller D, pursuant to which the Article 2.2 of the agreement has been amended as follows: Eighty percent (80%) of the total amount, equaling RMB 16,632,000 had been paid on the date of signing the contract by both parties. The remaining RMB 4,158,000 shall be paid in a combination of common stock of the Company and cash as follows: (1) RMB1,663,200 shall be paid in shares, calculated on a per share price ofUS$1.5, using the exchange rate RMB/US$:7.27. These shares shall be issued by the Company to Seller D or Seller D’s designated parties within three months after SHSI has inspected and accepted the crude salt field in writing; (2) the balance shall be paid in cash before December 31, 2028. On December 17, 2024, SHSI entered into an amendment to the acquisition agreement with Seller E, pursuant to which the Article 2.2 of the agreement has been amended as follows: Eighty percent (80%) of the total amount, equaling RMB36,628,320 had been paid on the date of signing the contract by both parties. The remaining RMB9,157,080 shall be paid in a combination of common stock of the Company and cash as follows: (1) RMB3,662,832 shall be paid in shares, calculated on a per share price of US$1.5, using the exchange rate RMB/US$:7.27. These shares shall be issued by the Company to Seller E or Seller E’s designated party within three months after SHSI has inspected and accepted the crude salt field in writing; (2) the balance shall be paid in cash by SHSI to Seller E before December 31, 2028. 44 In accordance to each amendment, the parties also acknowledged and agreed that, in compliance with the Nasdaq Listing Rule 5635, the issuance of shares pursuant to the agreement may not exceed 19.9% of the total outstanding shares of common stock of the Company prior to the issuance of the shares (the “19.9% Threshold”), unless such issuance is approved by the shareholders of the Company in accordance with the Nasdaq rules and regulations. SHSI shall cause the Company to take all necessary steps to obtain such shareholder approval if the issuance of shares under the agreement exceeds the 19.9% Threshold. On December 30, 2024, SHSI and each of the sellers mutually acknowledged and confirmed that the salt land provided by each seller meets the acquisition criteria, is in the anticipated usable condition, and has been accepted and handed over to SHSI. On February 28, 2025, the transactions as contemplated by the acquisition agreements were closed. On the closing date, the Company issued a total of 2,059,694 shares of the Company’s common stock at a price of $1.50 per share, to five individuals, who are citizens residing in the People’s Republic of China, designated by each seller. Nasdaq Compliance On May 6, 2025, the Company was notified by the Listing Qualifications Staff (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) that the Staff granted the Company’s request to transfer the listing of its common stock, par value $0.0005 per share (the “Common Stocks”), from The Nasdaq Global Select Market tier to The Nasdaq Capital Market tier, and that the Staff granted the Company’s request for a second 180-calendar day period, or until November 3, 2025 (the “Second Compliance Period”), to regain compliance with the $1.00 bid price requirement, as set forth in Nasdaq Listing Rule 5550(a)(2). To regain compliance with such minimum price requirement, the Company must evidence a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days. The transfer of the listing of the Common Stocks from The Nasdaq Global Select Market to The Nasdaq Capital Market took effect with the open of business on May 8, 2025. The transfer is not expected to impact trading in the Common Stocks, which will continue to trade on Nasdaq under the symbol “GURE.” As previously announced, on November 5, 2024, the Staff notified the Company that the bid price for the Common Stocks had closed below $1.00 per share for 30 consecutive business days and, as a result, the Company no longer satisfied Nasdaq Listing Rule 5450(a) (1), the minimum bid price requirement applicable to The Nasdaq Global Select Market issuers. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company was afforded an initial 180-calendar day grace period, through May 5, 2025, to regain compliance with the minimum bid price requirement. Issuers listed on The Nasdaq Global Select Market are not eligible for a second 180-day grace period under the Nasdaq Listing Rules. However, based upon the Company’s compliance with the various criteria required under Nasdaq Listing Rule 5810(c)(3)(A)(ii) to obtain a second 180-day grace period applicable to issuers listed on The Nasdaq Capital Market, the Company applied to transfer the listing of its Common Stocks to The Nasdaq Capital Market. As noted above, the Staff approved the Company’s transfer application on May 6, 2025. The Company intends to closely monitor the closing bid price for its Common Stocks and consider all available options to timely remedy the bid price deficiency. If at any time during the Second Compliance Period, the closing bid price of the Common S tock s is at least $1.00 per share for a minimum of 10 consecutive business days, the Staff will provide the Company with written confirmation of compliance and the matter will be closed, unless the Staff exercises its discretion to extend this ten-day period pursuant to Nasdaq Listing Rule 5810(c)(3)(H). The Company can give no assurance that it will regain or demonstrate compliance during the Second Compliance Period. If the Company is not able to demonstrate compliance with the minimum bid price requirement by November 3, 2025, or the Company does not comply with the terms of the extension, the Staff will provide written notification to the Company that the Common Stocks will be delisted. At that time, the Company may appeal the Staff’s determination to the Nasdaq Hearings Panel (the “Panel”). The Company’s appeal request would stay any delisting action by the Staff at least pending a hearing before the Panel and the expiration of any extension that may be granted by the Panel to the Company following the hearing. The Company has provided written notice to Nasdaq of its intention to cure the deficiency during the Second Compliance Period by effecting a reverse stock split, if necessary. 45 Our current corporate structure chart is set forth in the following diagram: As a result of our acquisitions of SCHC and SYCI, our historical financial statements and the information presented below reflects the accounts of SCHC, SYCI, SHSI and DCHC. The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere in this report. 46 RESULTS OF OPERATIONS The following table presents certain information derived from the condensed consolidated statements of operations, cash flows and stockholders’ equity for the three-month and six-month periods ended June 30, 2025 and 2024. Comparison of the Three-Month Periods Ended June 30, 2025 and 2024 Three-Month Period Ended June 30, 2025 (Restated) Three-Month Period Ended June 30, 2024 Percent Change Increase/ (Decrease) Net revenue $ 8,343,785 $ 2,383,169 250 % Cost of revenue (7,366,702 ) (5,112,058 ) 44 % Gross profit (loss) 977,083 (2,728,889 ) 136 % Sales and marketing expenses (14,802 ) (13,633 ) 9 % Direct labor and factory overheads incurred during plant shutdown (727,774 ) (1,714,503 ) (58 )% General and administrative expenses (1,025,780 ) (689,972 ) 49 % Loss from operations (791,273 ) (5,146,997 ) (85 )% Interest expense (21,674 ) (24,814 ) (13 )% Interest income 1,795 34,791 (95 )% Other expense, net (3,212 ) — — Loss on disposal of property, plant and equipment — (29,169,008 ) (100 )% Loss before taxes (814,364 ) (34,306,028 ) (98 )% Income tax benefit — 1,208,110 (100 )% Net Loss $ (814,364 ) $ (33,097,918 ) (98 )% Net Loss of $814,364 for the three-month periods ended June 30, 2025 was mainly attributable to increased general and administrative expenses. Net Loss of $33,097,918 for the three-month periods ended June 30, 2024 was mainly attributable to decreased sales and reduced margins. The company also suffered a loss of $29,169,008 on retirement of fixed assets. Net Revenue. The table below shows the changes in net revenue in the respective segment of the Company for the three-month period ended June 30, 2025 as compared to the same period in 2024: Net Revenue by Segment Percent Change Three-Month Period Ended June 30, 2025 Three-Month Period Ended June 30, 2024 of Increase Net Revenue Segment % of total % of total Bromine $ 7,676,374 92 % $ 1,859,234 78 % 313 % Crude Salt 667,411 8 % 523,935 22 % 27 % Chemical Products — — — — — Natural Gas — — — — — Total sales $ 8,343,785 100 % $ 2,383,169 100 % 250 % Three-Month Period Ended Percentage Change Increase Bromine and crude salt segments product sold in tonnes June 30, 2025 June 30, 2024 (Decrease) Bromine 1,972 782 152 % Crude Salt 25,934 24,852 4 % 47 Bromine segment For the three-month periods ended June 30, 2025 and 2024, the net revenue for the bromine segment was $7,676,374 and $1,859,234, respectively. The increase of the net revenue of bromine was due to a increase in selling prices and tonnes sold of bromine in the second quarter of 2025. The sale price of bromine in the second quarter of 2025 was 64% higher than in the second quarter of 2024, and the quantity sold was 152% higher than in the second quarter of 2024. Crude salt segment For the three-month periods ended June 30, 2025 and 2024, the net revenue for the crude salt segment was $667,411 and $523,935, respectively. The increase of net revenue of crude salt was mainly due to 22% increase in average selling price of crude salt for the three-month period ended June 30, 2025. Chemical products segment For the three-month periods ended June 30, 2025 and 2024, the net revenue for the chemical products segment was $0 due to the closure of our chemical factories since September 1, 2017. Natural g as segment For the three-month periods ended June 30, 2025 and 2024, the net revenue for the natural gas segment was $0. Cost of Revenue Cost of Revenue by Segment Percent Change of Three-Month Period Ended Three-Month Period Ended Cost of June 30, 2025 (Restated) June 30, 2024 Revenue Segment % of total % of total Bromine $ 7,017,116 95 % $ 4,729,059 93 % 48 % Crude Salt 349,586 5 % 382,999 7 % (9 )% Chemical Products — — — — — Natural Gas — — — — — Total $ 7,366,702 100 % $ 5,112,058 100 % 44 % Cost of revenue reflects mainly the raw materials consumed and the direct salaries and benefits of staff engaged in the production process, electricity, depreciation and amortization of manufacturing plant and machinery and other manufacturing costs. Our cost of revenue was $7,366,702 for the three-month period ended June 30, 2025, an increase of $2,254,644 (or 44%) as compared to the same period in 2024 due to the increase of net revenue by 250% for the three-month period ended June 30, 2025 as compared to the same period in 2024 . 48 Bromine production capacity and utilization of our factories The table below represents the annual capacity and utilization ratios for all of our bromine producing properties: Annual Production Capacity (in tonnes) Utilization Ratio (i) Three-month period ended June 30, 2024 31,506 9 % Three-month period ended June 30, 2025 31,506 26 % Variance of the three-month periods ended June 30, 2025 and 2024 — 17 % (i) Utilization ratio is calculated based on the annualized actual production volume in tonnes for the periods divided by the annual production capacity in tonnes. Bromine segment For the three-month period ended June 30, 2025, the cost of revenue for the bromine segment was $7,017,116. For the three-month period ended June 30, 2024, the cost of revenue for the bromine segment was $4,729,059. The increase in costs is mainly due to the increase in sales volume. Crude salt segment For the three-month period ended June 30, 2025 the cost of revenue for the crude salt segment was $349,586. For the three-month period ended June 30, 2024 the cost of revenue for the crude salt segment was $382,999. The decrease in costs is mainly due to the lower average unit issue cost of raw salt. Chemical products segment Cost of revenue for our chemical products segment for the three-month periods ended June 30, 2025 and 2024 was $0. Natural g as segment Cost of revenue for our natural gas segment for the three-month periods ended June 30, 2025 and 2024 was $0. Gross Profit (Loss). Gross profit was $977,083, or 12%, of net revenue for the three-month period ended June 30, 2025, representing a increase of $3,705,972, as compared to a gross loss of $2,728,889, or 115%, of net revenue for the same period in 2024. Gross Profit (Loss) by Segment % Point Change Three-Month Period Ended Three-Month Period Ended of Gross June 30, 2025 (Restated) June 30, 2024 Profit (Loss) Margin Segment Gross Profit (Loss) Margin Gross Profit (Loss) Margin Bromine $ 659,258 9 % $ (2,869,825 ) (154 )% 163 % Crude Salt 317,825 48 % 140,936 27 % 21 % Chemical Products — — — — — Natural Gas — — — — — Total Gross Profit $ 977,083 12 % $ (2,728,889 ) (115 )% 126 % Bromine segment For the three-month period ended June 30, 2025, the gross profit margin for our bromine segment was 9%, compared to gross loss margin of 154% in the three-month period ended June 30, 2024. The increase in gross profit margin was primarily attributable to the higher average selling price of bromine of $3,892 per ton in the three-month period ended June 30, 2025 compared to $2,379 per ton in the three-month period ended June 30, 2024 and the number of sales was up 152% from the second quarter of 2024. 49 Crude salt segment For the three-month period ended June 30, 2025, the gross profit margin for our crude salt segment was 48%. For the three-month period ended June 30, 2024, the gross profit margin for our crude salt segment was 27%. For the three-month period ended June 30, 2025, the increase in the gross profit of crude salt was mainly due to a 22% increase in the average selling price of crude salt compared to the same period in 2024. Sales and Marketing Expenses. Sales and marketing expenses were $14,802 for the three-month period ended June 30, 2025, a increase of $1,169 (or 9%) as compared to $5,053 for the same period in 2024. Direct labor and factory overheads incurred during plant shutdown. On September 1, 2017, the Company received notification from the government of Yangkou County, Shouguang City of PRC that stated that production at all its bromine and crude salt and chemical factories should be halted with immediate effect in order for the Company to perform rectification and improvement in accordance with the county’s new safety and environmental protection requirements. On November 24, 2017, the Company received a letter from the Government of Yangkou County, Shouguang City notifying the Company to relocate its two chemical production plants located in the second living area of the Qinghe Oil Extraction Plant to Bohai Park. As a result, direct labor and factory overhead costs (including depreciation of plant and machinery) in the amount of $727,774 and $1,714,503 incurred for the three-month periods ended June 30, 2025 and 2024, respectively, for the factories that have not resumed production were presented as part of the operating expenses. General and Administrative Expenses. General and administrative expenses were $1,025,780 for the three-month period ended June 30, 2025, representing an increase of $335,808 as compared to $689,972 for the same period in 2024. Loss from Operations. Loss from operations was $791,273 for the three-month period ended June 30, 2025, compared to loss from operations of $5,146,997 in the same period in 2024. Income (loss) from Operations by Segment Three-Month Period Ended June 30, 2025 (Restated) Three-Month Period Ended June 30, 2024 Segment: % of total % of total Bromine $ (134,041 ) 19 % $ (4,662,586 ) 94 % Crude Salt (181,160 ) 26 % 130,024 (3 %) Chemical Products (348,203 ) 49 % (339,254 ) 7 % Natural Gas (43,255 ) 6 % (73,773 ) 2 % loss from operations before corporate costs (706,659 ) 100 % (4,945,589 ) 100 % Corporate costs (84,614 ) (201,408 ) Loss from operations $ (791,273 ) $ (5,146,997 ) Bromine segment Loss from operations from our bromine segment was $134,041 for the three-month period ended June 30, 2025, compared to loss from operations of $4,662,586 in the same period in 2024. This decrease was due to a 152% increase in tonnes sold and a 64% increase in average selling price. Crude salt segment Loss from operations from our crude salt segment was $181,160 for the three-month period ended June 30, 2025, compared to income from operations of $130,024 in the same period in 2024. This is mainly due to the increase in amortization of salt pans. 50 Chemical products segment Loss from operations from our chemical products segment was $348,203 for the three-month period ended June 30, 2025, compared to loss from operations of $339,254 in the same period in 2024. Natural g as segment Loss from operations from our natural gas segment was $43,225 for the three -month period ended June 30, 2025, compared to a loss from operations of $73,773 in the same period in 2024. Interest Expenses. Interest expenses of $21,674 represented interest on finance lease for the three-month period ended June 30, 2025, a decrease of $3,140 as compared to the same period in 2024. Interest Income. Interest income of $1,795 mainly represented interest income from bank interest income for the three-month period ended June 30, 2025, a decrease of $32,996 as compared to the same period in 2024. Other Expense, net. For the three-month period ended June 30, 2025, other expense, net increased from $0 to $3,212 compared with the same period of 2024. Loss on disposal of property, plant and equipment. Loss on disposal of property, plant and equipment was $29,169,008 in the fiscal year 2024. In June 2024, considered the bromide well and transmission channel have been in use for many years, the Company conducted a site inspection and found that some wells and channels were seriously damaged by water seepage which in turn required write-off or new construction, and the write-off amount is $29,169,008. Net Loss. Net loss was $814,364 for the three-month period ended June 30, 2025, compared to a net loss of $33,097,918 in the same period in 2024. Comparison of the Six-Month Periods Ended June 30, 2025 and 2024 Six-Month Period Ended June 30, 2025 (Restated) Six-Month Period Ended June 30, 2024 Percent Change Increase/ (Decrease) Net revenue $ 9,948,232 $ 3,690,231 170 % Cost of revenue (8,964,166 ) (7,231,903 ) 24 % Gross profit (loss) 984,066 (3,541,672 ) 128 % Sales and marketing expenses (19,855 ) (18,124 ) 10 % Direct labor and factory overheads incurred during plant shutdown (3,953,582 ) (5,449,192 ) (27 )% General and administrative expenses (2,452,789 ) (1,407,428 ) 74 % Loss from operations (5,442,160 ) (10,416,416 ) (48 )% Interest expense (43,396 ) (49,644 ) (13 )% Interest income 4,224 70,851 (94 )% Other expense, net (3,212 ) (4,003 ) (20 )% Loss on disposal of property, plant and equipment — (29,169,008 ) (100 )% Loss before taxes (5,484,544 ) (39,568,220 ) (86 )% Income tax benefit — 2,478,170 (100 )% Net Loss $ (5,484,544 ) $ (37,090,050 ) (85 )% Net loss of $5,484,544 for the six-month periods ended June 30, 2025 was mainly attributable to increased general and administrative expenses. Net loss of $37,090,050 for the six-month periods ended June 30, 2024 was mainly attributable to decreased sales and reduced margins. The company also suffered a loss of $29,169,008 on retirement of fixed assets . 51 Net Revenue. The table below shows the changes in net revenue in the respective segment of the Company for the six-month period ended June 30, 2025 as compared to the same period in 2024: Net Revenue by Segment Percent Increase Six-Month Period Ended Six-Month Period Ended of Net June 30, 2025 June 30, 2024 Revenue Segment % of total % of total Bromine $ 9,158,243 92 % $ 3,005,431 81 % 205 % Crude Salt 789,989 8 % 640,606 18 % 23 % Chemical Products — — — — — Natural Gas — — 44,194 1 % (100 )% Total sales $ 9,948,232 100 % $ 3,690,231 100 % 170 % Six-Month Period Ended Percentage Change Bromine and crude salt segments product sold in tonnes June 30, 2025 June 30, 2024 Increase Bromine (excluding volume sold to SYCI) 2,375 1,233 93 % Crude Salt 30,667 28,924 6 % Bromine segment Net revenue from our bromine segment increased to $9,158,243 for the six-month period ended June 30, 2025 compared to $3,005,431 for the same period in 2024 due to the higher selling price of bromine and tonnes sold of bromine. Crude salt segment Net revenue from our crude salt segment increased to $789,989 for the six-month period ended June 30, 2025 compared $640,606 for the same period in 2024 due to the higher selling tonnes of crude salt. Chemical products segment For the six-month periods ended June 30, 2025 and 2024, the net revenue for the chemical products segment was $0 due to the closure of our chemical factories since September 1, 2017. Natural g as segment For the six-month periods ended June 30, 2025 and 2024, the net revenue for the natural gas segment was $0 and $44,194, respectively. The 100% decrease in revenue was primarily due to the expiration of contracts. Cost of Revenue Cost of Revenue by Segment % Change Six-Month Period Ended Six-Month Period Ended of Cost of June 30, 2025 (Restated) June 30, 2024 Revenue Segment % of total % of total Bromine $ 8,550,340 95 % $ 6,801,811 94 % 26 % Crude Salt 413,826 5 % 429,893 6 % (4 )% Chemical Products — — — — — Natural Gas — — 199 0 % (100 )% Total $ 8,964,166 100 % $ 7,231,903 100 % 24 % Cost of revenue reflects mainly the raw materials consumed-direct salaries and benefits of staff engaged in the production process, electricity, depreciation and amortization of manufacturing plant and machinery and other manufacturing costs. Our cost of revenue was $8,964,166 for six-month period ended June 30, 2025, representing a $1,732,263 (or 24%) increase compared to the six-month period ended June 30, 2024. The increase in costs was mainly due to a significant increase in sales volume. 52 Bromine production capacity and utilization of our factories The table below represents the annual capacity and utilization ratios for all of our bromine producing properties: Annual Production Capacity (in tonnes) Utilization Ratio (i) Six-month period ended June 30, 2024 31,506 4 % Six-month period ended June 30, 2025 31,506 15 % Variance of the six-month periods ended June 30, 2025 and 2024 — 11 % (i) Utilization ratio is calculated based on the annualized actual production volume in tonnes for the periods divided by the annual production capacity in tonnes. Bromine segment For the six-month period ended June 30, 2025, the cost of revenue for the bromine segment was $8,550,340. For the six-month period ended June 30, 2024, the cost of revenue for the bromine segment was $6,801,811. The increase in costs is mainly due to the increase in sales volume. Crude salt segment For the six-month period ended June 30, 2025, the cost of revenue for the crude salt segment was $413,826. For the six-month period ended June 30, 2024, the cost of revenue for the crude salt segment was $429,893. The decrease in costs is mainly due to the lower average unit issue cost of raw salt. Chemical products segment Cost of revenue for our chemical products segment for the six-month periods ended June 30, 2025 and 2024 was $0. Natural g as segment Cost of revenue for our natural gas segment for the six-month periods ended June 30, 2025 and 2024 was $0 and $199, respectively. Gross Profit (Loss). Gross profit was $984,066, or 10%, of net revenue for six-month period ended June 30, 2025 compared to a loss of $3,541,672, or 96%, of net revenue for the same period in 2024. Gross Profit (Loss) by Segment % Point Change Six-Month Period Ended Six-Month Period Ended of Gross June 30, 2025 (Restated) June 30, 2024 Profit Margin Segment Gross Profit (Loss) Margin Gross Profit (Loss) Margin Bromine $ 607,903 7 % $ (3,796,380 ) (126 )% 133 % Crude Salt 376,163 48 % 210,713 33 % 15 % Chemical Products — — — — — Natural Gas — — 43,995 100 % — Total Gross Profit (Loss) $ 984,066 10 % $ (3,541,672 ) (96 )% 106 % Bromine segment For the six-month period ended June 30, 2025, the gross profit margin for our bromine segment was 7%, compared to gross loss margin of 126% in the six-month period ended June 30, 2024. The increase in gross profit margin was primarily attributable to the higher average selling price of bromine of $3,857 per ton in the six-month period ended June 30, 2025 compared to $2,438 per ton in the six-month period ended June 30, 2024. 53 Crude salt segment For the six-month period ended June 30, 2025, the gross profit margin for our crude salt segment was 48%. For the six-month period ended June 30, 2024 the gross profit margin for our crude salt segment was 33%. For the six-month period ended June 30, 2025, the increase in the gross profit of crude salt compared to the six-month period ended June 30, 2024, was mainly due to a 6% increase in the sales volume of crude salt and an increase in its unit selling price. Chemical products segment For the six-month period ended June 30, 2025, the gross profit margin for our chemical segment was 0% due to the closure of our plant and factories to perform rectification and improvement. As a result, there were no chemical products for sale for the six-month period ended June 30, 2025. Natural g as segment Gross profit for our natural gas segment for the six-month periods ended June 30, 2025 and 2024 was $0 and $43,995 respectively. Sales and Marketing Expenses . Sales and marketing expenses were $19,855 for the six-month period ended June 30, 2025, an increase of $1,731 (or 10%) as compared to $18,124 for the same period in 2024. Direct labor and factory overheads incurred during plant shutdown On September 1, 2017, the Company received notification from the government of Yangkou County, Shouguang City of PRC that stated that production at all its bromine and crude salt and chemical factories should be halted with immediate effect in order for the Company to perform rectification and improvement in accordance with the county’s new safety and environmental protection requirements. On November 24, 2017, the Company received a letter from the Government of Yangkou County, Shouguang City notifying the Company to relocate its two chemical production plants located in the second living area of the Qinghe Oil Extraction Plant to Bohai Park. As a result, direct labor and factory overhead costs (including depreciation of plant and machinery) in the amount of $3,953,582 and $5,449,192 incurred for the six-month periods ended June 30, 2025 and 2024, respectively, for the factories that have not resumed production were presented as part of the operating expense. General and Administrative Expenses. General and administrative expenses were $2,452,789 for the six-month period ended June 30, 2025, a increase of $1,045,361 (or 74%) as compared to $1,407,428 for the same period in 2024. Loss from Operations. Loss from operations was $5,442,160 for the six-month period ended June 30, 2025, compared to loss from operations of $10,416,416 in the same period in 2024. Loss from Operations by Segment Six-Month Period Ended June 30, 2025 (Restated) Six-Month Period Ended June 30, 2024 Segment: % of total % of total Bromine $ (3,508,547 ) 69 % $ (9,445,401 ) 93 % Crude Salt (768,969 ) 15 % 54,932 (1 %) Chemical Products (710,095 ) 14 % (654,078 ) 7 % Natural Gas (88,099 ) 2 % (101,482 ) 1 % Loss from operations before corporate costs (5,075,710 ) 100 % (10,146,029 ) 100 % Corporate costs (366,450 ) (270,387 ) Loss from operations before taxes $ (5,442,160 ) $ (10,416,416 ) Bromine segment Loss from operations from our bromine segment was $3,508,547 for the six-month period ended June 30, 2025, compared to an loss from operations of $9,445,401 in the same period in 2024. This decrease was due to a 93% increase in tonnes sold and a 58% increase in average selling price. Crude salt segment Loss from operations from our crude salt segment was $768,969 for the six-month period ended June 30, 2025, compared to an income from operations of $54,932 in the same period in 2024. The increase in operating losses was mainly due to the depreciation resulting from the new acquisition of crude salt assets in 2024. 54 Chemical products segment Loss from operations from our chemical products segment was $710,095 for the six-month period ended June 30, 2025, compared to a loss from operations of $654,078 in the same period in 2024. Natural g as segment Loss from operations from our natural gas segment was $88,099 for the six-month period ended June 30, 2025, compared to a loss from operations of $101,482 in the same period in 2024. Interest Expenses. Interest expenses of $43,396 represented and interest on finance lease for the six-month period ended June 30, 2025, a decrease of $6,248 as compared to the same period in 2024. Interest Income. Interest income of $4,224 mainly represented bank interest income for the six -month period ended June 30, 2025, a decrease of $66,627 as compared to the same period in 2024. Other Expense, net. For the six-month period ended June 30, 2025, other expense, net decreased from $4,003 to $3,212 compared with the same period of 2024. Loss on disposal of property, plant and equipment. Loss on disposal of property, plant and equipment was $29,169,008 in the fiscal year 2024. In June 2024, considered the bromide well and transmission channel have been in use for many years, the Company conducted a site inspection and found that some wells and channels were seriously damaged by water seepage which in turn required write-off or new construction, and the write-off amount is $29,169,008. Net Loss. Net loss was $5,484,544 for the six-month period ended June 30, 2025, compared to a net loss of $37,090,050 in the same period in 2024. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2025, cash and cash equivalents were $7,736,081 as compared to $10,075,162 as of December 31, 2024. The components of this decrease of $2,339,081 are reflected below. Statement of Cash Flows Six-Month Period Ended June 30, 2025 2024 Net cash used in operating activities $ (2,139,734 ) $ (812,141 ) Net cash used in investing activities — (28,923,642 ) Net cash used in financing activities (260,997 ) (31,866,665 ) Effects of exchange rate changes on cash and cash equivalents 61,650 (253,907 ) Net increase (decrease) in cash and cash equivalents $ (2,339,081 ) $ (61,856,355 ) For the six-month period ended June 30, 2025, we met our working capital and capital investment requirements by using cash on hand. Net Cash used in Operating Activities During the six-month period ended June 30, 2025, cash flow used in operating activities of approximately $2.14 million was mainly due to a net loss of $5.48 million, an increase in accounts receivable of $2.57 million, an increases in prepayment and deposits of $2.33 million and offset by a non-cash adjustment related to depreciation and amortization of $6.45 million and amortization of finance lease right-of-use asset of 1.55 million. During the six-month period ended June 30, 2024, cash flow used in operating activities of approximately $0.8 million was mainly due to a net loss of $37.09 million, offset by depreciation and amortization expenses of $8.84 million and loss on disposal of equipment of $29.17 million. 55 Accounts receivable Cash collections on our accounts receivable had a major impact on our overall liquidity. The following table presents the aging analysis of our accounts receivable as of June 30, 2025 and December 31, 2024. June 30, 2025 December 31, 2024 % of total % of total Aged 1-30 days $ 3,150,850 100 % $ 419,581 74 % Aged 31-60 days — — 144,942 26 % Aged 61-90 days — — — — Aged 91-120 days — — — — Aged 121-150 days — — — — Aged 151-180 days — — — — Aged 181-210 days — — — — Aged 211-240 days — — — — Total $ 3,150,850 100 % $ 564,523 100 % The overall accounts receivable balance as of June 30, 2025 increased by $2,586,327, as compared to those of December 31, 2024. We have policies in place to ensure that sales are made to customers with an appropriate credit history. We perform ongoing credit evaluations on the financial condition of our customers. Inventories Our inventory consists of the following: June 30, 2025 December 31, 2024 % of total % of total Raw materials $ 37,545 7 % $ 10,610 3 % Finished goods 477,468 93 % 304,761 97 % Total $ 515,013 100 % $ 315,371 100 % The net inventory level as of June 30, 2025 increased by $199,642 (or 63%), as compared to the net inventory level as of December 31, 2024. The increase in inventory is due to the growth in current sales volume. 56 Raw materials increased by $26,935 as of June 30, 2025 as compared to December 31, 2024. Our finished goods increased by $172,707 as of June 30, 2025 as compared to December 31, 2024. Net Cash Used in Investing Activities We have no investing activities for the six-month period ended June 30, 2025 . During the six months ended June 30, 2024, we used approximately $28.92 million for purchase of fixed assets. Net Cash Used in Financing Activities. For the six-month period ended June 30, 2025, we used $0.3 million to fulfil finance lease obligations. For the six-month period ended June 30, 2024, net cash used in financing activities was $31.87 million, which was used for the principal payment for obligations under finance leases. We believe that our available funds and cash flow generated from operations will be sufficient to meet our anticipated ongoing operating needs and our obligations as they fall due in the next twelve (12) months. We had available cash of approximately $7.74 million on June 30, 2025, all which is in highly liquid current deposits earning no or little interest. We do not anticipate paying cash dividends in the foreseeable future. We intend to continue to focus our efforts on the activities of SCHC, SYCI, SHSI and DCHC as these segments continue to expand within the Chinese market. We may not be able to identify, successfully integrate or profitably manage any business or business segment we may acquire, or any expansion of our business. An expansion may involve a number of risks, including possible adverse effects on our operating results, diversion of management’s attention, inability to retain key personnel, risks associated with unanticipated events, and the financial statement effect of potential impairment of acquired intangible assets, any of which could have a materially adverse effect on our condition and results of operations. In addition, if competition for acquisition candidates or operations were to increase, the cost of acquiring businesses could increase materially. We may effect an acquisition with a target business which may be financially unstable, under-managed, or in its early stages of development or growth. Our inability to implement and manage our expansion strategy successfully may have a material adverse effect on our business and future prospects. Contractual Obligations and Commitments We have no significant contractual obligations not fully recorded on our consolidated balance sheets or fully disclosed in the notes to our consolidated financial statements. Additional information regarding our contractual obligations and commitments on June 30, 2025 is provided in the notes to our consolidated financial statements. See “Notes to Condensed Consolidated Financial Statements.” Material Off-Balance Sheet Arrangements We do not currently have any off-balance sheet arrangements falling within the definition of Item 303(a) of Regulation S-K. Critical Accounting Policies and Estimates Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and this requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We base its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions. We have identified the following critical accounting policies and estimates used by us in the preparation of our financial statements: accounts receivable and allowance for doubtful accounts, inventories and allowance for obsolescence, assets retirement obligation, property, plant and equipment, recoverability of long-lived assets, mineral rights, leases, revenue recognition, income taxes, and loss contingencies. These policies and estimates are described in the Company’s Form 10-Q for the six months ended June 30, 2025. Item 3. Quantitative and Qualitative Disclosures About Market Risk Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1). 57