What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2026-09-30 compared with 2026-08-28 · 1504 added, 1243 removed, 222 unchanged (93% of the section changed)

Financial Statements

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE

(Expressed in U.S.

2026 (Unaudited)

RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

Current Assets

3 unchanged sentences

Amounts due from related parties

Other receivables

Total current assets

current assets

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

Property, plant and equipment,

Finance lease right-of-use

Operating lease right-of-use

Prepaid land leases, net of

current portion

tax assets, net

non-current assets

Liabilities and Stockholders’

Current Liabilities

Short-term bank borrowing

Accounts payable and accrued expenses

Accounts payable and accrued

Accrued liabilities

1 unchanged sentence

Amount due to related parties

Finance lease liability, current portion

Operating lease liabilities, current portion

Total current liabilities

Finance lease liabilities,

current portion

lease liabilities, current portion

current liabilities

Non-Current Liabilities

Finance lease liability, net of current portion

Operating lease liabilities, net of current portion

Long-term bank borrowing

Total non-current liabilities

Total Liabilities

Finance lease liabilities,

net of current portion

Operating lease liabilities,

net of current portion

bank borrowing

non-current liabilities

Stockholders’ Equity

PREFERRED STOCK;

$ 0.001 par value;

1,000,000 shares authorized;

1 unchanged sentence

COMMON STOCK;

$ 0.0005 par value;

80,000,000 shares authorized;

1,842,114 and 1,568,114 shares issued;

and 1,683,531

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

December 31, 2025, respectively

and 1,813,531 and 1,539,531 shares outstanding as of June

30, 2026 and December 31, 2025, respectively

Treasury stock;

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

28,583 shares

as of June 30, 2026 and December 31, 2025 at cost

( 1,372,673 )

5 unchanged sentences

Retained earnings appropriated

Accumulated other comprehensive loss

other comprehensive loss

( 8,541,138 )

( 12,218,081 )

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

Stockholders’ Equity

Liabilities and Stockholders’ Equity

$ 136,775,235

$ 133,731,810

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

See accompanying notes to the

condensed consolidated financial statements.

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS

OF COMPREHENSIVE INCOME (LOSS)

(Expressed in U.S.

Three-Month Period Ended March 31,

2026 (Unaudited)

2025 (Unaudited)

accompanying notes to the condensed consolidated financial statements.

RESOURCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

OPERATING COSTS AND EXPENSE

2 unchanged sentences

( 7,366,702 )

( 12,919,096 )

( 8,964,166 )

Sales and marketing expenses

Direct labor and factory overheads incurred during plant shutdown

Direct labor and factory overheads

incurred during plant shutdown

( 3,196,211 )

( 3,953,582 )

General and administrative expenses

and administrative expenses

( 1,025,780 )

( 1,921,104 )

TOTAL OPERATING COSTS AND EXPENSE

( 2,452,789 )

TOTAL OPERATING COSTS AND

( 11,634,810 )

( 9,135,058 )

( 18,060,033 )

( 15,390,392 )

(LOSS) FROM OPERATIONS

4 unchanged sentences

Interest income

LOSS BEFORE INCOME TAXES

expenses, net

TOTAL OTHER INCOME, NET

INCOME (LOSS) BEFORE INCOME

( 2,783,188 )

( 5,484,544 )

INCOME TAX EXPENSE

INCOME (LOSS)

$ ( 814,364 )

$ ( 2,783,188 )

$ ( 5,484,544 )

COMPREHENSIVE INCOME (LOSS)

NET INCOME (LOSS)

$ ( 814,364 )

$ ( 2,783,188 )

$ ( 5,484,544 )

OTHER COMPREHENSIVE INCOME

- Foreign currency translation adjustments

TOTAL COMPREHENSIVE LOSS

currency translation adjustments

COMPREHENSIVE INCOME (LOSS)

$ ( 426,314 )

$ ( 4,847,573 )

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.

See accompanying

notes to the condensed consolidated financial statements.

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’

THREE-MONTH PERIOD ENDED MARCH 31, 2026

(Expressed in U.S.

Number of shares issued

Number of shares outstanding

Number of treasury stock

Treasury stock

Additional paid-in capital

Retained earnings unappropriated

Retained earnings appropriated

Accumulated other comprehensive

BALANCE AT DECEMBER 31, 2025 (Audited)

BASIC AND DILUTED EARNINGS

(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.

accompanying notes to the condensed consolidated financial statements.

RESOURCES, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

PERIOD ENDED JUNE 30, 2026

paid-in capital

earnings unappropriated

earnings appropriated

other comprehensive

paid-in capital

earnings unappropriated

earnings appropriated

other comprehensive

BALANCE AT MARCH

31, 2026 (Unaudited)

$ ( 1,372,673 ) -

3 unchanged sentences

$ 109,946,159

Restricted shares issued for services

Currency translation adjustment

Issuance of Private Placement Units

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

Issuance of private placement

for three- month period ended June 30, 2026

AT JUNE 30, 2026 (Unaudited)

$ ( 1,372,673 ) -

$ 106,962,885

BALANCE AT MARCH 31, 2026 (Unaudited)

$ ( 10,309,535 )

1 unchanged sentence

$ 113,407,557

outstanding(1)

paid-in capital (1)

earnings unappropriated

earnings appropriated

other comprehensive

outstanding(1)

paid-in capital(1)

earnings unappropriated

earnings appropriated

other comprehensive

BALANCE AT MARCH

31, 2025 (Unaudited)(Restated)

$ ( 1,372,673 ) -

$ 105,192,535

Number of shares issued (1)

Number of shares outstanding (1)

Number of treasury stock (1)

Treasury stock

Additional paid-in capital (1)

Retained earnings unappropriated

Retained earnings appropriated

Accumulated other comprehensive

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

$ ( 20,534,397 )

$ 141,676,957

Currency translation adjustment

for three- month period ended June 30, 2025

AT JUNE 30, 2025 (Unaudited)(Restated)

$ ( 1,372,673 ) -

$ 105,192,535

Restricted shares issued for services

$ ( 20,146,347 )

$ 141,250,643

paid-in capital

earnings unappropriated

earnings appropriated

other comprehensive

paid-in capital

earnings unappropriated

earnings appropriated

other comprehensive

AT DECEMBER 31, 2025 (Audited)

$ ( 1,372,673 ) -

$ 105,927,142

$ ( 7,526,347 )

$ ( 12,218,081 )

$ 111,477,922

Currency translation adjustment

Issuance of Private Placement

Net loss for six- month

period ended June 30, 2026

( 2,783,188 )

AT JUNE 30, 2026 (Unaudited)

$ ( 1,372,673 ) -

$ 106,962,885

$ ( 10,309,535 )

$ ( 8,541,138 )

$ 113,407,557

outstanding(1)

paid-in capital (1)

earnings unappropriated

earnings appropriated

other comprehensive

outstanding(1)

paid-in capital(1)

earnings unappropriated

earnings appropriated

other comprehensive

BALANCE AT DECEMBER

31,2024 (Audited)(Restated)

$ ( 1,372,673 )

$ 101,712,325

$ ( 20,783,318 )

$ 142,812,575

Restricted shares issued for

Acquisition of assets

Currency translation adjustment

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

Net loss for six- month period

ended June 30, 2025

( 5,484,544 )

BALANCE AT MARCH 31, 2025 (Unaudited)

Income (loss)

( 5,484,544 )

AT JUNE 30, 2025 (Unaudited)(Restated)

$ ( 1,372,673 )

$ 105,192,535

Treasury Stock

Additional Paid-In Capital

Retained Earnings Unappropriated

Accumulated Other Comprehensive Income (Loss)

Share to be Issued

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

to reflect the stock split.

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

to reflect the stock split.

See accompanying notes to the condensed consolidated financial statements.

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S.

Three-Month Period Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

$ ( 20,146,347 )

$ 141,250,643

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

Amortization on capital lease

Depreciation and amortization

Amortization of operating lease right-of-use assets

Amortization of finance lease right-of-use asset

Stock-based compensation expense

Bad debt expense

Accrued interest receivable

Changes in assets and liabilities:

Accounts receivable

(1) The shares and

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

accompanying notes to the condensed consolidated financial statements.

RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

2025(Restated)

FLOWS FROM OPERATING ACTIVITIES

$ ( 2,783,188 )

Prepayments and deposits

Other receivables

Accounts and other payable and accrued expenses

Taxes payable

Lease liabilities

Net cash provided by (used in) operating activities

$ ( 5,484,544 )

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment

Repayments for loans to third parties

Net cash provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from sale of private placement units

Proceeds from interest-free loan from a related party

Net cash provided by financing activities

EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

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

on capital lease

and amortization

of operating lease right-of-use assets

of finance lease right-of-use assets

compensation expense

in assets and liabilities:

( 12,017,123 )

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS - END OF PERIOD

Periods Ended March 31,

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

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

Paid for taxes

Interest paid

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

See accompanying notes to the condensed consolidated financial statements.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF

SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation and Consolidation

The accompanying unaudited consolidated

financial statements have been prepared by Gulf Resources, Inc.

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

(collectively, the “Company”).

The consolidated financial

statements include the accounts of Gulf Resources, Inc.

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

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

Kong (“HKJI”).

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

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.

On December 22, 2025, SYCI was sold.

(b) Nature of Business

The Company manufactures and

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

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

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

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

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

DCHC was established to further explore

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

DCHC’s business commenced trial operation

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

(i) Bromine and Crude Salt Segments

In February 2019, the Company

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

9 passed inspection and

could resume operations.

( 2,574,907 )

( 2,331,871 )

and other payable and accrued expenses

cash used in operating activities

( 4,241,827 )

( 2,139,734 )

FLOWS FROM INVESTING ACTIVITIES

of property, plant and equipment

( 1,699,835 )

for loans to third parties

Interest-free

loan repaid by related parties

cash provided by investing activities

FLOWS FROM FINANCING ACTIVITIES

of finance leases obligation

from sale of private placement units

cash provided by (used in) financing activities

OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

( 2,339,081 )

AND CASH EQUIVALENTS - BEGINNING OF PERIOD

AND CASH EQUIVALENTS - END OF PERIOD

Periods Ended

2025 (Restated)

DISCLOSURE OF CASH FLOW INFORMATION

paid during the six-month period ended June 30, for:

DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

accompanying notes to the condensed consolidated financial statements.

RESOURCES, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of Presentation and Consolidation

accompanying unaudited consolidated financial statements have been prepared by Gulf Resources, Inc.

(“Gulf Resources”), a

Nevada 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.

December 22, 2025, SYCI was sold.

Company manufactures and trades bromine through its wholly-owned subsidiary, 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, 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.

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 (b)(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 10,

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

commencement of production.

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 No.

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.

Company received verbal notification from the government regarding Factory No.

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.

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

This subsidiary was created in response

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

The creation of this subsidiary

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

However, the establishment of this subsidiary has

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

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(ii) Chemical Segment

On November 24, 2017, the Company

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

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

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

environment of the residents.

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

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

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

to shut down.

In December 2017, the Company

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

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

In January 2020, the Company

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

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

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

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

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

beginning trial production at the chemical factory had been delayed.

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

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

Accordingly, the Company has contacted its

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

and trial production.

The Company believes this relocation process

will cost approximately $ 69 million in total.

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

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

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

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

On December 10, 2025, SCHC entered

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

Pursuant to the agreement, Shandong Rongyuan

Pharmaceutical Co., Ltd.

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

8 began contributing revenue

in the fourth quarter of 2022.

Company is awaiting governmental approval for Factories No.

To our knowledge, the government is finalizing plans for all

mining areas, including flood prevention measures.

As a result, we may be required to make certain modifications to our existing wells

and aqueducts prior to commencement of operations of these factories in order to satisfy the local government’s requirements.

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, SHSI, 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.

RESOURCES, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026

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

(ii) Chemical

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 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 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 June 30, 2026 and December 31, 2025.

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 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

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

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

license for bromine and natural gas, respectively.

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

Promoting the Reform of Mineral Resources Management (Trial) promulgated by the Ministry of Natural Resources of PRC on January 9, 2020,

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

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

planning has been finalized.

The Company’s consolidated

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

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

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

The Company bases its

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

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

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

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

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

of share based payments.

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

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(d) Cash and Cash Equivalents

Cash and cash equivalents consist

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

Because of short maturity of these

investments, the carrying amounts approximate their fair values.

(e) Accounts receivable and Allowance for Doubtful Accounts

Accounts receivable is stated

at cost, net of allowance for doubtful accounts.

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

reviews all receivables that exceed the term.

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

of the collectability of trade and other receivables.

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

and the Company considers the historical level of credit losses.

The Company makes judgments about the credit worthiness of each customer

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

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

an allowance may be required.

As of March 31, 2026 and December

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

The reversal for doubtful accounts in the consolidated

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

(f) Concentration of Credit Risk

The Company is exposed to credit

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

Substantially all of the

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

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

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

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

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

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

Concentrations of credit risk

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

(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 CONDENSED 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 terms provided, an allowance may be required.

of June 30, 2026 and December 31, 2025, the provision for doubtful debts was $ 77,765 and $ 16,430 , respectively.

The provision for doubtful

accounts in the consolidated statements of comprehensive income (loss) for the period ended June 30, 2026 was $ 60,086 .

(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 $ 9,189,231 and $ 3,793 with

these institutions as of June 30, 2026 and December 31, 2025, respectively.

The Company has not experienced any losses in such accounts

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.

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

1 unchanged sentence

(g) Inventories

Inventories are stated at the

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

Costs of work-in-progress and finished goods comprise

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

Net realizable value is based on estimated selling

price less costs to complete and selling expenses.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(h) Advances to suppliers, net

Advances to suppliers are stated at

the original amount less an allowance for doubtful account.

Advances to suppliers primarily

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

The Company reviews its advances to suppliers

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

against receive of products.

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

(i) Property, Plant and Equipment

Property, plant and equipment

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

Expenditures for new facilities or equipment, and major expenditures

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

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

All other ordinary repair

and maintenance costs are expensed as incurred.

Mineral rights are recorded at

cost less accumulated depreciation and any impairment losses.

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

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

Construction in process primarily

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

Costs incurred are capitalized and transferred to property,

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

The Company’s depreciation

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

Basis of Presentation and Summary of

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

Useful life (in years)

Mineral rights

Leasehold Improvements Leasehold Improvements

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

Motor vehicles 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.

(j) Asset Retirement Obligation

The Company follows Financial

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

for estimated reclamation and abandonment costs.

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

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

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

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

related asset.

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

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

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Currently, there are no reclamation

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

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

(k) Recoverability of Long-lived Assets

In accordance with Financial

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

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

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

no longer appropriate.

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

The Company determines the existence

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

the carrying amount of the assets.

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

asset exceeds the discounted estimated future cash flows.

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

fair value of such assets less costs to sell.

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

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

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

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

For the three-month period ended March

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

(l) Retirement Benefits

Pursuant to the relevant laws and regulations

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.

The required contributions

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

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

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

(m) Mineral Rights

The Company follows FASB ASC 805

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

for based on their substance.

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

The Company reviews

its advances to suppliers on a periodic basis and determines the adequacy of provision when outstanding amounts 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

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

fixtures and equipment

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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026

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 six-month periods ended June 30, 2026 and 2025, the Company recognized impairment of long-lived assets of nil .

(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 $ 63,233 and $ 123,099 for the three-month periods ended

June 30, 2026 and 2025, respectively, and totaled $ 170,890 and $ 296,584 for the six-month periods ended June 30, 2026 and 2025, respectively.

RESOURCES, INC.

TO CONDENSED 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 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.

The Company has elected not to recognize

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

Finance leases are initially

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

Finance leases

generally have one of these five attributes:

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

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

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

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

lessor after the lease term.

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

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.

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 separately on the Consolidated Balance Sheets.

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

Basic earnings per common stock

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

Diluted earnings per share are computed using

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

Potential common stocks

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

the exercise prices of the

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

Anti-dilutive common stock equivalents which were excluded

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

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

(p) Reporting Currency and Translation

The financial statements of the

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

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

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

As such, the Company uses the

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

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

balance sheet date.

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 stock.

Anti-dilutive common stock

equivalents which were excluded from the calculation of number of dilutive common stock equivalents amounted to 0 share for the six-month

periods ended June 30, 2026 and 2025.

These awards could be diluted 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026

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 expense.

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

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

(q) Revenue Recognition

Net revenue is net of discount and value added

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

Revenue is recognized at a point in time when the control

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

receive from the customers in exchange for those goods.

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

the product is deemed to be transferred.

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.

revenue is net of discount and value added tax and comprises the sale of bromine, crude salt and chemical products.

Revenue is recognized

at a point in time when the control of the promised goods is transferred to the customers in an amount that reflects the consideration

that the Company expects to receive from the customers in exchange for those goods.

The acknowledgement of receipt of goods by the customers

is when control of the product is deemed to be transferred.

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

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

Customers typically pay after the Company delivers and

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

Revenue from contracts with customers is

disaggregated in Note 20.

(r) Income Taxes

The Company accounts for income

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

income taxes.

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

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

Deferred tax assets and liabilities are

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

to be realized or settled.

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

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

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

A tax benefit from an

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

its technical merits.

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

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

(s) Exploration Costs

Exploration costs, which included

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

resources, are charged to the income statement as incurred.

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

costs are capitalized.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 1 – BASIS OF PRESENTATION

AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

For oil and gas properties, the

successful efforts method of accounting is adopted.

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

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

and the economic and operating viability of the project.

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

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

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

periodically for impairment.

(t) Fair Value Measurement

The Company applies Accounting

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

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

ASC Topic 820 defines fair value

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

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

ASC Topic 820 specifies a hierarchy

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

The hierarchy

is as follows:

Level 1 inputs to the valuation methodology are quoted prices

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

Level 2 inputs to the valuation

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

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

Level 3 inputs to the valuation methodology are unobservable

and significant to the fair value.

The carrying amounts of the Company’s

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

The Company’s financial instruments

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

accounts payable and other current payables.

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

2026 and December 31, 2025.

(u) Loss Contingencies

The Company accrues for loss

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

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

Such estimates may be based on advice from

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

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

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

to the likelihood or amount of loss.

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

(v) Stock-based Compensation

The Company accounts for stock-based

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

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

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

The value of the portion of

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

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

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).

(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.

RESOURCES, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026

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

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

June 30, 2026 and December 31, 2025.

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.

RESOURCES, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2026

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

(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.

(w) New Accounting Pronouncements

Recent accounting pronouncements adopted

There was no recent accounting pronouncements adopted for the three

months ended March 31, 2026.

Recently Issued Accounting Pronouncements Not Yet Adopted

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

There was no recent accounting pronouncements adopted for the

six months ended June 30, 2026.

Issued Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU No.

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

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

The objective of ASU 2024-03 is to

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

in commonly presented expense

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

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

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

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

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

income statement that includes any of the following natural expenses:

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

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

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

The tabular disclosure would also include certain other

expenses, when applicable.

2024-03, Income Statement – Reporting

Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40), which requires disaggregated disclosure of income

statement expenses for public business entities.

The objective of ASU 2024-03 is to “address requests from investors for more detailed

information about the types of expenses .

in commonly presented expense captions (such as cost of sales, selling, general, and administrative

expenses, and research and development).” Investors advised the FASB that “disclosure of disaggregated information about

expenses is critically important in understanding an entity’s performance, assessing an entity’s prospects for future cash

flows, and comparing an entity’s performance over time and with that of other entities.” ASU 2024-03 adds ASC 220-40 to require

a footnote disclosure about specific expenses by requiring public entities to disaggregate, in a tabular presentation, each relevant

expense caption on the face of the income statement that includes any of the following natural expenses:

(1) purchases of inventory,

(2) employee compensation, (3) depreciation, (4) intangible asset amortization, and (5) depreciation, depletion, and amortization (DD&A)

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

The tabular disclosure would also include

certain other expenses, when applicable.

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

however, it may affect where

that information appears in the footnotes to the financial statements.

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

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

Early adoption

is permitted.

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.

adoption is permitted.

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

In July 2025, the FASB issued

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

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

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

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

those annual reporting periods.

July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326) Measurement of Credit Losses for Accounts

Receivable and Contract Assets.

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

Losses, to current accounts receivable and current contract assets arising from transactions accounted for under Topic 606, Revenue from

Contracts with Customers.

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

reporting periods within those annual reporting periods.

Early adoption is permitted.

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

the Company’s consolidated financial statements.

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 2 – ACCOUNTS RECEIVABLE, NET

Accounts receivable net consist of:

The Company is in the process of assessing the

impact of the amendments on the Company’s consolidated financial statements.

RESOURCES, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2 – ACCOUNTS RECEIVABLE, NET

Schedule of Accounts Receivable

Accounts receivable

Allowance for doubtful debt

The overall accounts receivable balance as of

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

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

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

We perform ongoing credit

evaluation on the financial condition of our customer.

NOTE 3 – INVENTORIES

Inventories consist of:

Inventories - Schedule of Inventories, Current

Raw materials

Finished goods

receivable net consist of:

OF ACCOUNTS RECEIVABLE, NET

for doubtful debt

receivable, net

overall accounts receivable balance as of June 30, 2026 increased by $ 12,205,707 , as compared to those of December 31, 2025.

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 evaluations on the financial condition of our customer.

3 – INVENTORIES, NET

The Company recorded impairment charges for slow moving inventory

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

NOTE 4 – PREPAYMENTS AND DEPOSITS, NET

Prepayments and deposits consisted of the following:

Prepayments and

Deposits, Net - Schedule of Prepayments and Deposits, Net

OF INVENTORIES

Company recorded impairment charges for slow moving inventory in the amounts of nil for the six months ended June 30, 2026 and 2025.

4 – PREPAYMENTS AND DEPOSITS

Provision for impairment

and deposits consisted of the following:

OF PREPAYMENTS AND DEPOSITS, NET

for impairment

( 1,685,900 )

Prepayments and deposits, net

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

provision of nil for the prepayments and deposits.

NOTE 5 – OTHER RECEIVABLES, NET

Other receivables consisted of the following:

Other Receivable, Net - Schedule of Other Receivable

Loan receivable (1)

Proceeds receivable from sale of subsidiary (2)

Other receivables, net

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

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

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

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

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

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

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 6 – PROPERTY, PLANT AND EQUIPMENT, NET

and deposits, net

the six months ended June 30, 2026 and 2025, the Company recognized provision of nil for the prepayments and deposits.

5 – OTHER RECEIVABLES

receivables consisted of the following:

SCHEDULE OF OTHER RECEIVABLE

receivable (1)

receivable from sale of subsidiary (2)

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 June 30, 2026, all of the above borrowings, including the related accrued interest,

had been fully repaid.

amount represents the receivable from the sale of SYCI, which is due in December 2026 from

Shandong Rongyuan Pharmaceutical Co., Ltd.

6 – PROPERTY, PLANT AND EQUIPMENT, NET

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

Furniture, fixtures and office equipment

Motor vehicles

Construction in process

SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT

and machinery

fixtures and office equipment

Accumulated depreciation and amortization

1 unchanged sentence

( 79,598,798 )

Net book value

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

Property, Plant and

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

of Brine Well (a)

Remodel of Chlorine Gas

Mineral rights

Leasehold Improvements

Plant and machinery

Furniture, fixtures and office equipment

Motor vehicles

Construction in progress

Accumulated depreciation and amortization

RESOURCES, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6 – PROPERTY, PLANT AND EQUIPMENT, NET – Continued

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

SCHEDULE OF ROLLFORWARD OF PROPERTY, PLANT AND EQUIPMENT

of Production Equipment(c)

Depreciation(d)

and machinery

and office equipment

Accumulated depreciation and

( 79,598,798 )

2 unchanged sentences

( 88,686,124 )

Net book value

( 6,788,877 )

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

which remained incomplete as of March 31, 2026.

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

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

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

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

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

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

NOTE 7 – FINANCE LEASE RIGHT-OF-USE ASSETS

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

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

Plant and Equipment Under Finance Leases

Company had undergone renovation and upgrade work on the brine well, which covered bromine

plant production and the automation platform upgrade.

In the first quarter of 2026,

the Company transferred the original cost of $ 337,295 and related accumulated depreciation

of 320,430 to construction in progress, and additional project costs amounted to $ 117,217 .

The upgrade was completed and capitalized in April 2026.

the first quarter of 2026, the Company completed the renovation and upgrade project for the

chlorine gas shed and finished liquid pond, at a total cost of $ 552,718 .

the second quarter of 2026, the Company upgraded Plant No.

2 and No.10, involving chlorine

shed renovation, installation of a liquid-chlorine leak absorption unit, sulfur furnace replacement,

and distillation building reinforcement and replacement.

The total cost was $ 1,125,167 , and

the project was finalized and captitalized in April 2026.

the three and six months period ended June 30, 2026, depreciation and amortization expense totaled $ 3,432,091

and $ 6,788,877 , respectively, which

was recorded in direct labor and factory overheads incurred during plant shutdown, cost of revenue, and general & administrative

the three and six months period ended June 30, 2025, depreciation and amortization expense totaled $ 3,217,980

and $ 6,444,107 , respectively, which was recorded in direct

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

7 – FINANCE LEASE RIGHT-OF-USE ASSETS

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

OF PROPERTY PLANT AND EQUIPMENT

Accumulated depreciation and amortization

1 unchanged sentence

( 19,390,837 )

Net book value

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 land.

During the three months ended March 31, 2026,

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

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

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 8 – OPERATING LEASE RIGHT–OF USE ASSETS

The Company has the rights to use certain parcels

of land located in Shouguang, 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 34.93 square kilometers at March 31, 2026.

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

was $ 5,621,918 .

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

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

NOTE 9– BORROWINGS

The company entered into a loan agreement

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

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

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

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

Television Group Col, Ltd.

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

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

The Company entered into a loan agreement

with Shandong Shouguang Rural Commercial Bank Co., Ltd.

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

a maturity date of March 26, 2027 .

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

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

Shouguang Hongye Economic and Trade Co., Ltd.

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

NOTE 10 – PAYABLE AND ACCRUED EXPENSES

Payables and accrued expenses consist of the following:

Payable and Accrued

Expenses - Schedule of Accounts Payable and Accrued Liabilities

Accounts payable

Salary payable

Social security insurance contribution payable

Accrued expense for construction

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 three and six months period ended June 30, 2026, depreciation and amortization expense totaled $ 744,710 and

$ 1,478,008 , respectively,

which was recorded in direct labor and factory overheads incurred during plant shutdown, cost of revenue, and general &

administrative expenses.

the three and six months period ended June 30, 2025, depreciation and amortization expense totaled $ 773,537

and $ 1,549,239 , respectively,

which was recorded in direct labor and factory overheads incurred during plant shutdown, cost of revenue, and general &

administrative expenses.

RESOURCES, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8 – OPERATING LEASE RIGHT–OF–USE ASSETS

Company has the rights to use certain parcels of land located in Shouguang, 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 June 30, 2026, the total operating lease right-of-use assets was $ 5,570,840 .

total operating lease cost for the six-month periods ended June 30, 2026 and 2025 was $ 447,905 and $ 435,102 , respectively.

9– BORROWINGS

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

for a principal amount of

$ 2,936,383 ,

bearing interest at 6.375 %

per annum, with a maturity date of December

The borrowing was guaranteed by Ming Yang, Wenxiang Yu, and Shouguang Broadcasting and Television Group Col, Ltd.

borrowing was also secured by land and buildings owned by Shandong Shouguang Vegetable Seed Industry Group Co., Ltd.

paid interest on a monthly basis, however, the principal balance became past due and remained unpaid as of June 30, 2026 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 $ 2,419,580 ,

bearing interest at 6.35 %

per annum, with a maturity date of March

The borrowing was guaranteed by Ming Yang and Wenxiang Yu 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.

10 – PAYABLE AND ACCRUED EXPENSES

and accrued expenses consist of the following:

OF PAYABLE AND ACCRUED EXPENSES

security insurance contribution payable

expense for construction

expense-others (1)

(1) Accrued expense-others

(1) Accrued expense-others mainly included

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

Shouguang Industrial and Commercial Bank Co., Ltd.

Accrued expense-others mainly included

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

Shouguang Industrial and Commercial Bank Co., Ltd.

NOTE 11– RELATED PARTY TRANSACTIONS

Name of related parties

Chief Executive Officer

Chief Financial Officer

Chief Operating Officer

Chengdu Dianjinshi Culture media Co., LTD

Affiliated with company officers

Amount due to related parties:

Amount due from related parties:

Chengdu Dianjinshi Culture media Co., LTD

NOTE 12– TAXES PAYABLE

Value added tax and other taxes payable

Of the remaining balance as of

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

The overdue amount was attributable to certain

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

deductions in the tax authorities' system.

NOTE 13 – LEASE LIABILITIES - FINANCE AND OPERATING LEASE

The components of finance lease liabilities were as follows:

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

Total finance lease liability

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.

11– RELATED PARTY TRANSACTIONS

of related parties

Executive Officer

Financial Officer

Operating Officer

Dianjinshi Culture media Co., LTD

with company officers

OF RELATED PARTY TRANSACTIONS

due to related parties:

due to related parties

due from related parties:

Dianjinshi Culture media Co., LTD

12– TAXES PAYABLE

OF TAXES PAYABLE

added tax and other taxes payable

the remaining balance as of June 30, 2026, $ 267,459 was overdue, as notified by the Tax Bureau in a Tax Matters Notice.

The overdue amount

was attributable to certain value-added tax invoices issued by the Company’s upstream suppliers during 2018 and 2019 that were

subsequently identified as abnormal deductions in the tax authorities’ system.

RESOURCES, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13 – LEASE LIABILITIES - FINANCE AND OPERATING LEASE

components of finance lease liabilities were as follows:

OF FINANCE LEASE LIABILITIES

finance lease liabilities

Current portion

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 contract expires.

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

the market operation situation upon the expiration.

The components of operating lease liabilities are as follows:

Lease Liabilities - Finance and Operating Lease - Schedule of

lease liabilities, net of current portion

financing leases include one contract with a lease term from January 1, 2011 to December 31, 2030, and five contracts with the lease

term from June 29, 2024 to June 28, 2044.

All contracts have a non-cancellable lease period of 20 years, and the Company has the right

to preferentially renew the lease contract under the same conditions upon the contract expires.

However, the Company will decide whether

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

components of operating lease liabilities are as follows:

OF OPERATING LEASE LIABILITIES

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

Three-Month Period Ended March 31,

Finance lease cost:

lease liabilities, net of current portion

components of lease cost were as follows:

OF LEASE COST

Amortization of right-of-use assets

Interest on lease liabilities

Operating lease cost

Total lease cost

Maturities of lease liabilities were as follows:

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

Finance Lease

Operating Lease

the next 12 months

the next 13 to 24 months

the next 25 to 36 months

the next 37 to 48 months

the next 49 to 60 months

of lease liabilities were as follows:

OF MATURITIES OF FINANCE AND OPERATING LEASE LIABILITIES

next 12 months

next 13 to 24 months

next 25 to 36 months

next 37 to 48 months

next 49 to 60 months

Amount representing interest

( 4,719,976 )

Present value of net minimum lease payments

A summary of supplemental information related to leases is listed as

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

Three-Month Period Ended March 31,

Weighted average remaining lease term:

Finance leases

Operating leases

Weighted average discount rate:

Finance leases

Operating lease

Supplemental cash flow information related to leases were as follows:

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

Three-Month Period Ended March 31,

Cash paid for amounts included in measurement of lease liabilities :

-Operating cash flows from operating leases

-Financing cash flows from finance leases

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

-Finance leases

-Operating leases

GULF RESOURCES, INC.

value of net minimum lease payments

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

OF SUPPLEMENTAL INFORMATION RELATED TO LEASES

average remaining lease term:

average discount rate:

cash flow information related to leases were as follows:

OF SUPPLEMENTAL CASH FLOW INFORMATION

paid for amounts included in measurement of lease liabilities:

cash flows from operating leases

cash flows from finance leases

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

RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 14 –– 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.

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.

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.

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

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

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

The restricted shares award was granted under the 2019 Omnibus

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

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

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

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

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

as compensation for services rendered.

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

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

in full during the year ended December 31, 2025.

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

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

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

The fair value of the award

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

Retained Earnings - Appropriated

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

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

Statutory Reserve

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

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

reaches 50% of the registered share capital.

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

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

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

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Stock 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.

Restricted 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

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 16) 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,

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

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

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 June 30, 2026, the Company’s statutory provident

fund stood at $26.67 million.

Issued For The Private Equity Financing

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

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

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

Placement Purchaser”;

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

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

of the Company as of December 31, 2025.

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

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

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

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

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

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

share for aggregate proceeds of $ 246,330 ,

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

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

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

per share for aggregate proceeds of $ 267,750 ,

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

NOTE 15 – TREASURY

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

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

NOTE 16 – STOCK-BASED

Pursuant to the Company’s

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

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

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

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

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

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

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

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

The fair value of each option

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

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

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

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

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

comprehensive income (loss) were nil.

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

ended March 31, 2026 and 2025.

The following table summarizes all Company stock option transactions

between January 1, 2026 and March 31, 2026.

Stock-Based Compensation - Schedule of Stock

Option Activity

Number of Option and Warrants Outstanding and exercisable

Weighted- Average Exercise price of Option and Warrants

Range of Exercise Price per Common Share

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.

February 10, 2026, the Company issued 69,000 shares of its common stock to one individual investor at an agreed price of $ 3.57 per share

for aggregate proceeds of $ 246,330 , pursuant to the private placement agreement dated on January 26, 2026.

March 24, 2026, the Company issued 75,000 shares of its common stock to one individual investor at an agreed price of $ 3.57 per share

for aggregate proceeds of $ 267,750 , pursuant to the private placement agreement dated on March 5, 2026.

RESOURCES, INC.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

April 8, 2026, the Company issued 70,000 shares of its common stock to one individual investor at an agreed price of $ 3.94 per share

for aggregate proceeds of $ 275,800 , pursuant to the private placement agreement dated on March 19, 2026.

April 14, 2026, the Company issued 60,000 shares of its common stock to one individual investor at an agreed price of $ 4.1 per share

for aggregate proceeds of $ 246,000 , pursuant to the private placement agreement dated on March 28, 2026.

15 – TREASURY STOCK

of June 30, 2026 and December 31, 2025, the number of treasury stock of the Company was 28,583 and 28,583 , respectively.

16 – STOCK-BASED COMPENSATION

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

Plan are limited in the aggregate to 2,000,000 shares of our common stock, inclusive of the awards that were previously issued and outstanding

under the Company’s 2019 Omnibus Equity Incentive Plan,, as amended (the “2019 Plan”).

Upon adoption and approval of

the 2025 Plan, the 2019 Plan was frozen, no new awards will be granted under the 2019 Plan, and outstanding awards under the 2019 Plan

will continue to be governed by the terms and condition of the 2019 Plan and applicable award agreement.

As of June 30, 2026, the number

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

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 six months ended June 30, 2026 and 2025, total compensation costs for options issued recorded in the consolidated statement of comprehensive

income (loss) were nil .

There were no related tax benefits as a full valuation allowance was recorded in the six-months ended June 30,

2026 and 2025.

following table summarizes all Company stock option transactions between January 1, 2026 and June 30, 2026.

OF STOCK OPTION ACTIVITY

Number of Option

Outstanding and

Weighted- Average

Exercise price of

Range of Exercise

Price per Common

Balance, January 1, 2026

2 unchanged sentences

Expired during the period

Balance, March 31, 2026

Stock Options and Warrants Outstanding and Exercisable

Outstanding at

March 31, 2026

Exercise Prices

Weighted Average Remaining Contractual Life

Balance, June 30, 2026

Stock Options and Warrants Outstanding and

June 30, 2026

Weighted Average

Outstanding and exercisable

All options exercisable and outstanding as at

March 31, 2026 are fully vested.

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

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

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

options exercised.

GULF RESOURCES, INC.

options exercisable and outstanding as at June 30, 2026 are fully vested.

As of June 30, 2026 there was no unrecognized compensation

cost related to outstanding stock options.

aggregate intrinsic value of options outstanding and exercisable as of June 30, 2026, was nil .

During the six months ended June 30,

2026 and 2025, there were no options exercised.

RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 17 – ACCRUED LIABILITIES

Settled Litigation

On September 18, 2023, Shandong Shouguang Vegetable

Industry Group Co., Ltd.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

17 – ACCRUED LIABILITIES

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

and Shandong Shouguang Vegetable Seed Group Co., Ltd.

entered into loan agreements with Shandong Deepin City

Emergency Loan Fund Co., Ltd..

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

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 RMB $1,402,700 to Shandong Deepin City Emergency Loan Fund Co., Ltd., respectively.

Mediated by the Local Arbitration Commission and

documented in mediation documents No.

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

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.

and Shandong Shouguang

Vegetable Seed Group Co., Ltd.

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

respectively.

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.

Shandong Deepin City Emergency Loan Fund Co.,

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

1358 and 1357, Shandong Shouguang Vegetable Industry

Group Co., Ltd.

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

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

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.

The 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.

The court engaged a third-party valuer for evaluation

of the land at Xiangjiang road, Yangkou town, Shouguang city and its attached properties.

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 .

$ 4,580,892 .

The Company recognized an impairment loss of $ 29,782,912 accordingly.

The court imposed a forced auction of the land

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

A second auction was held on August 15, 2025.

The land and its

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

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

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

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

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

NOTE 18 – INCOME TAXES

The Company utilizes the asset and liability method

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

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

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

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

A second auction

was held on August 15, 2025.

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

As the selling price was lower than the fair

value, the Company recognized a loss on disposal of long-lived assets of $ 2,008,853 .

of June 30, 2026, as SCHC were liable for a sum of principal and interests of $ 515,666 , net of auction proceeds, the Company recognized

accrued liabilities of $ 515,666 accordingly.

18 – 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.

(a) United States (“US”)

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

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 six-month periods ended June 30, 2026 and 2025, and management believes

that its earnings are permanently invested in the PRC.

(b) British Virgin Islands (“BVI”)

Upper Class Group Limited, a subsidiary of Gulf

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

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

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 six- month

periods ended June 30, 2026 and 2025.

HKJI, a subsidiary of Upper Class Group Limited,

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

from Hong Kong.

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

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

There is no dividend

withholding tax in Hong Kong.

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

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

incorporated in the PRC.

They are subject to the PRC Local Income Tax Law.

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

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

five years for other companies.

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

The Company’s income tax returns are subject

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

2016 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.

For the years 2012 through

2019, HKJI did not report any taxable income.

It did not file any income tax returns during these years except for 2014 and 2018.

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 have been examined, and there is no Hong Kong Profits Tax was charged.

The components of the income tax benefit from continuing operations

Income Taxes - Schedule of Components of Income Tax Expense Benefit

Three-Month Period Ended March 31,

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 six-month periods ended June 30, 2026 and 2025.

The applicable statutory tax rates for the six-month periods ended June 30, 2026 and

2025 are 16.5 %.

There is no dividend withholding tax in Hong Kong.

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

SYCI, DCHC, and SHSI are a wholly foreign-owned enterprises (“FIE”) incorporated in the PRC.

They are subject to the PRC

Local Income Tax Law.

The PRC tax losses may be carried forward to be utilized against future taxable profit for ten years for High-

tech enterprises and small and medium-sized enterprises of science and technology and for five years for other companies.

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

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 2016 are currently subject to examination.

RESOURCES, INC.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 2019, 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 have been examined, and there is

no Hong Kong Profits Tax was charged.

components of the income tax benefit from continuing operations are:

SCHEDULE OF COMPONENTS OF INCOME TAX EXPENSE BENEFIT

Current taxes – PRC

1 unchanged sentence

Total Income tax (expenses) benefits

Significant components of the Company’s deferred tax assets and

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

Income Taxes - Schedule of Deferred

components of the Company’s deferred tax assets and liabilities at June 30, 2026 and December 31, 2025 are as follows:

SCHEDULE OF DEFERRED

TAX ASSETS AND LIABILITIES

11 unchanged sentences

Net deferred tax asset

Deferred tax assets consist of future reversals

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

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

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

to their continuous losses.

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

March 31, 2026 is $ 114,900 .

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

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

There were no unrecognized tax benefits and accrual

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

months ended March 31, 2026 and 2025.

GULF RESOURCES, INC.

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

deductible temporary differences.

As of June 30, 2026 and 2025, valuation allowances were mainly provided against deferred tax assets

caused by exploration costs and net operating loss where it was determined it was more likely than not that the benefits of the deferred

tax assets will not be realized due to their continuous losses.

decrease in valuation allowance for the three-month period ended June 30, 2026 is $ 136,034 .

increase in valuation allowance for the three-month period ended June 30, 2025 is $ 268,713 .

decrease in valuation allowance for the six-month period ended June 30, 2026 is $ 21,134 .

increase in valuation allowance for the six-month period ended June 30, 2025 is $ 1,352,530 .

were no unrecognized tax benefits and accrual for uncertain tax positions as of June 30, 2026 and December 31, 2025 and no amounts accrued

for penalties and interest for the six months ended June 30, 2026 and 2025.

RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 19 – BUSINESS SEGMENTS

ASC 280, Disclosures about Segments,

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

Operating segments

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

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

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

The Company’s Chief Executive

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

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

of the segments.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

19 – 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) chemical

products, (4) natural gas.

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

income statements of each of our divisions are presented below:

March 31, 2026

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

OF SEGMENT REPORTING BY SEGMENT

June 30, 2026

Operating Segment

(external customers)

Loss from operations before income

Net revenue (external customers)

Net revenue (intersegment)

Income (loss) from operations before income tax (expense) benefit

Income tax benefit (expense)

Income (loss) from operations after income tax (expense) benefit

Depreciation and amortization

Capital expenditures

Period Ended June 30, 2025

Chemical Products

Segment Total

Net revenue (external customers)

Net revenue (intersegment)

Loss from operations before income tax (expense) benefit

Income tax (expense) benefit

Loss from operations after income tax (expense) benefit

Depreciation and amortization

Capital expenditures

June 30, 2026

Net revenue (external customers)

Net revenue (intersegment)

Loss from operations before income tax (expense) benefit

( 1,658,306 )

8 unchanged sentences

Capital expenditures

Three-Month Period Ended March 31, 2025

June 30, 2025

Chemical Products

Segment Total

(external customers)

(intersegment)

Loss from operations before income expense

Net revenue (intersegment)

Loss from operations before income tax (expense) benefit

( 3,508,547 )

2 unchanged sentences

Income tax (expense) benefit

Loss from operations after income taxes (expense) benefit

Loss from operations after income tax (expense)

( 3,508,547 )

1 unchanged sentence

( 5,442,160 )

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.

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

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

segment until April 2022.

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

GULF RESOURCES, INC.

* 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.

RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

MARCH 31, 2026

(Expressed in U.S.

NOTE 19 – BUSINESS SEGMENTS – Continued

Three-Month Period Ended March 31,

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

19 – BUSINESS SEGMENTS – Continued

OF SEGMENT COST

Reconciliations

Total segment operating loss

2025 (Restated)

Three-Month Period Ended June 30,

Six-Month Period Ended June 30,

Reconciliations

2025 (Restated)

Total segment operating income (loss)

$ ( 706,659 )

$ ( 2,555,140 )

$ ( 5,075,710 )

Corporate costs

Unrealized gain (loss) on translation of intercompany balance

Loss from operations

Unrealized gain on translation of intercompany balance

Profit (loss) from operations

( 2,804,430 )

( 5,442,160 )

Interest income

Interest expense

Loss before taxes

Interest income

Other expenses, net

Income (loss) before taxes

$ ( 814,364 )

$ ( 2,783,188 )

The following table shows the major customers

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

$ ( 5,484,544 )

following table shows the major customers (10% or more) for the three-month period ended June 30, 2026.

BUSINESS SEGMENTS - SCHEDULE OF

REVENUE BY MAJOR CUSTOMERS

Chemical Products

Percentage of

Shandong Shouguang Shenruifa Marine Chemical Company Limited

Shandong Shouguang Shenrunfa Marine Chemical Company Limited

Shandong Brother Technology Limited

Shandong Morui Chemical Company Limited

Weidong Chemical Company Limited

Shouguang Weidong Chemical Company Limited

Shandong Xuruixin Materials Company Limited

The following table shows the major customers

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

Chemical Products

following table shows the major customers (10% or more) for the six-month period ended June 30, 2026.

Percentage of

Shandong Shouguang Shenrunfa Marine Chemical Company Limited

Shandong Brother Technology Limited

Shandong Morui Chemical Company Limited

Shouguang Weidong Chemical Company Limited

Shandong Xuruixin Materials Company Limited

following table shows the major customers (10% or more) for the three-month period ended June 30, 2025.

Percentage of

Shandong Morui Chemical Company Limited

Shandong Brother Technology Limited

Shouguang Weidong Chemical Company Limited

Shouguangshen Runfa Marine Chemical Company Limited

NOTE 20– CUSTOMER CONCENTRATION

Shandong Shouguangshen Runfa Marine Chemical Company Limited

following table shows the major customers (10% or more) for the six-month period ended June 30, 2025.

Percentage of

Shandong Morui Chemical Company Limited

Shandong Brother Technology Limited

Shouguang Weidong Chemical Company

Shandong Shouguangshen Runfa Marine

Chemical Company Limited

RESOURCES, INC.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

20– CUSTOMER CONCENTRATION

During the three-month period ended March

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

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

were $ 1,774,034 .

During the three-month period ended March

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

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

were $ 1,462,756 .

NOTE 21– MAJOR SUPPLIERS

Product Concentration

Cost of Goods

During the three-month period ended March

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

As of March 31, 2026, amounts due to those

suppliers were $ 434,275 .

During the three-month period ended March

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

As of March 31, 2025, amounts due

to those suppliers were $ 390,250 .

NOTE 22 – LOSS CONTINGENCIES

On or about August 3, 2018, written decisions

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

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

292, Shou Guo Tu Zi Fa

Gao Zi [2018] No.

the six-month period ended June 30, 2026, the Company sold 70.9 % of its products to its top five customers.

As of June 30, 2026, amounts

due from these customers were $ 11,438,410 .

the six-month period ended June 30, 2025, the Company sold 65.2 % of its products to its top five customers.

As of June 30, 2025, amounts

due from these customers were $ 2,207,307 .

21– MAJOR SUPPLIERS

the six-month period ended June 30, 2026, the Company purchased 100 % of its raw materials from its top four suppliers.

As of June 30,

2026, amounts due to those suppliers were $ 1,419,986 .

the six-month period ended June 30, 2025, the Company purchased 100 % of its raw materials from its top four suppliers.

As of June 30,

2025, amounts due to those suppliers were $ 380,812 .

22 – 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.

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

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

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

294, Shou Guo Tu Zi Fa Gao

Zi [2018] No.

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

296 (together, the “Written Decisions”) were served on SCHC by

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

Decisions challenged the land use of Factory nos.

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

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

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

respectively.

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

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

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

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

serving on SCHC.

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

penalty payment in a timely manner.

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

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

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

The enforcement proceedings sought court orders

to enforce the Written Decisions.

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

(2019) Lu 0783 Xing Shen No.

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

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

2, 9, 7, 4, 8 and

10 were built, respectively.

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

Decisions to its respective legal owner, restore the land to its original state, and demolish or confiscate all the buildings and

facilities thereon and pay monetary penalty of approximately RMB 1.3 million ($184,000) in the aggregate.

Each of the Written

Decisions shall be executed within 15 days upon serving on SCHC.

Additional interest penalty shall be imposed at a daily rate of 3%

in the event that SCHC does not make the monetary penalty payment in a timely manner.

Subsequently, the Bureau filed enforcement

actions to the People’s Court of Shouguang City, Shandong Province (the “Court”), naming SCHC as enforcement

respondent and alleged, among other things, that SCHC failed to perform its obligations under each of the Written Decisions within

the specified timeframe.

The enforcement proceedings sought court orders to enforce the Written Decisions.

On May 5, 2019, written

decisions of administrative ruling captioned (2019) Lu 0783 Xing Shen No.

384, (2019) Lu 0783 Xing Shen No.

385, (2019) Lu 0783 Xing

389, (2019) Lu 0783 Xing Shen No.

1 unchanged sentence

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

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

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.

In the last twenty years, to the Company’s

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

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

lease their land parcels from the village associations.

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

To the Company’s knowledge, the local government has submitted its plan to solve the issues to higher authority and are

waiting for approval from the higher authority.

The Company is in the process of resolving the

issues in connection with SCHC’s land use and planning diligently.

The Company has been in discussions closely with the local government

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

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

government authorities and may be revoked.

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

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

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.

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

RESOURCES, INC.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

the last twenty years, to the Company’s knowledge, there were no government regulations requiring bromine manufacturers to obtain

land use and planning approval document.

As such, the Company believes most of the bromine manufacturers in Shouguang City do not have

land use and planning approval documents and lease their land parcels from the village associations.

They are facing the same issues

in connection with land use and planning as the Company.

To the Company’s knowledge, the local government has submitted its plan

to solve the issues to higher authority and are waiting for approval from the higher 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 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

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.

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 measure to enforce the administrative penalties.

Based on information

known to date, the Company believes that it is remote that the Written Decisions or Court Rulings will be enforced within the expected

timeframe and a material penalty or costs and expenses against the Company will result.

However, there can be no assurance that there

will not be any further enforcement action, the occurrence of which may result in further liabilities, penalties and operational disruption.

In view of the above facts and circumstances,

the Company believes that it is not necessary to accrue for any estimated losses or impairment as of March 31, 2026.

NOTE 23 - SUBSEQUENT EVENT

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 June 30, 2026.

23 - SUBSEQUENT EVENT

Private Placement

On June 25, 2026, Company received a written notice from Nasdaq (the

“Extension Letter”) stating that it had accepted the Company’s plan to regain compliance with Nasdaq Listing Rule 5250(c)(1)

(the “Rule”).

Nasdaq granted the Company a plan period to regain compliance with the Rule.

(I) As previously reported in the

current report on Forms 8- K (the “Previous Announcements”) filed on April 27, 2026 and May 29, 2026 with the Securities Exchange

Commission by the Company, the Company announced that it received delinquency notifications from Nasdaq on April 23, 2026 and May 26,

2026 (the “Deficiency Letters”), due to the Company’s non-compliance with the Rule as a result of the Company’s

failure to timely file its annual report on Form 10-K for the period ended December 31, 2025 (the “2025 Form 10-K”) and its

quarterly report on Form 10-Q for the period ended March 31, 2026 (the “2026 Q1 Form 10-Q” and together with the “2025

Form 10- K”, the “Delinquent Reports”), respectively.

(II) The Company submitted a plan to the Nasdaq Listing Qualification

(the “Staff”) to regain compliance (the “Compliance Plan”) with the Nasdaq Requirements on June 17, 2026.

the Extension Letter, the Company is required to file its delinquent 2025 Form 10-K and 2026 Q1 Form 10-Q by the applicable extended deadline

to evidence compliance with the relevant Nasdaq requirements.The Extension Letter further provides that if the Company fails to evidence

compliance upon filing the Delinquent Reports, Staff will notify the Company that its securities will be subject to delisting.

previously received Deficiency Letters and the Extension Letter have no immediate effect on the listing or trading of the Company’s

common stock on Nasdaq, subject to the Company’s continued compliance with the other applicable listing requirements.

(IV)The Company

subsequently filed the 2025 Form 10-K on August 17, 2026 with the Securities and Exchange Commission.

On April 8,2026, the company issued

70,000 shares of its common stock to one individual investor at an agreed price of $ 3.94 per share for aggregate proceeds of $ 275,800 , pursuant

to the private placement agreement dated on March 19, 2026.

On April 14,2026, the company

issued 60,000 shares of its common stock to one individual investor at an agreed price of $ 4.1 per share for aggregate proceeds of $ 246,000 , pursuant

to the private placement agreement dated on March 28, 2026.

the Company had not filed its Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, Nasdaq notified the Company on August

28, 2026 that the Company had incurred an additional delinquency under Nasdaq Listing Rule 5250(c)(1) (the “Rule”).

28, 2026, the Company submitted an updated compliance plan to Nasdaq requesting additional time to file this Quarterly Report.

September 2, 2026, Nasdaq granted the Company an additional exception period and required the Company to file this Quarterly Report on

or before October 12, 2026.

Nasdaq stated that, if the Company failed to file this Quarterly Report by that date, Nasdaq Staff may provide

written notification that the Company’s securities are subject to delisting.

The Company may have the right to appeal a delisting

determination to a Nasdaq Hearings Panel.

were no other subsequent events requiring recognition or disclosure in these condensed consolidated financial statements.

24 – RESTATEMENT

Company restated its previously released unaudited condensed consolidated financial statements for the six months ended June 30, 2025,

and incorporate them into the 2025 Quarterly Report “10-Q Form Report” (the “Restatement”).

This restatement

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

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.

RESOURCES, INC.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

effects of the restatement on the consolidated statement of operations income (loss) for the three months ended June 30, 2025, are

summarized in the following table:

OF STATEMENT OF OPERATIONS INCOME (LOSS)

As Previously

June 30, 2025

As Previously

OPERATING COSTS AND EXPENSE

Cost of revenues

( 7,357,130 )

( 7,366,702 )

Sales and marketing expenses

Direct labor and factory overheads incurred during plant shutdown

General and administrative expenses

( 1,025,780 )

TOTAL OPERATING COSTS AND EXPENSE

( 9,094,471 )

( 9,135,058 )

LOSS FROM OPERATIONS

OTHER INCOME (EXPENSE)

Interest expense

Interest income

Other expenses, net

TOTAL OTHER INCOME, NET

LOSS BEFORE INCOME TAXES

INCOME TAX EXPENSE

$ ( 773,777 )

$ ( 814,364 )

COMPREHENSIVE LOSS:

$ ( 773,777 )

$ ( 814,364 )

OTHER COMPREHENSIVE (LOSS) INCOME

- Foreign currency translation adjustments

TOTAL COMPREHENSIVE LOSS

$ ( 370,002 )

$ ( 426,314 )

BASIC AND DILUTED LOSS PER SHARE

BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF SHARES:

( 11,993,087 )

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.

increase in cost of revenue and general and administrative expenses were due to the reclassification of finance lease right-of-use

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.

RESOURCES, INC.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

effects of the restatement on the consolidated statement of operations income (loss) for the six months ended June 30, 2025, are

summarized in the following table:

As Previously

June 30, 2025

As Previously

OPERATING COSTS AND EXPENSE

Cost of revenues

( 8,951,400 )

( 8,964,166 )

Sales and marketing expenses

Direct labor and factory overheads incurred during plant shutdown

( 3,953,582 )

General and administrative expenses

( 2,384,288 )

( 2,452,789 )

TOTAL OPERATING COSTS AND EXPENSE

( 15,309,125 )

( 15,390,392 )

LOSS FROM OPERATIONS

( 5,360,893 )

( 5,442,160 )

OTHER INCOME (EXPENSE)

Interest expense

Interest income

Other expenses, net

TOTAL OTHER INCOME, NET

LOSS BEFORE INCOME TAXES

( 5,403,277 )

( 5,484,544 )

INCOME TAX EXPENSE

$ ( 5,403,277 )

$ ( 5,484,544 )

COMPREHENSIVE LOSS:

$ ( 5,403,277 )

$ ( 5,484,544 )

OTHER COMPREHENSIVE (LOSS) INCOME

- Foreign currency translation adjustments

TOTAL COMPREHENSIVE LOSS

$ ( 4,777,486 )

$ ( 4,847,573 )

BASIC AND DILUTED LOSS PER SHARE

AND DILUTED WEIGHTED AVERAGE

NUMBER OF SHARES:

( 11,249,682 )

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 in cost of revenue and general and administrative expenses

were 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.

RESOURCES, INC.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

effects of the restatement on the consolidated statement of stockholders’ deficit for the three months ended June 30, 2025

are summarized in the following table:

OF CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

unappropriated

comprehensive

unappropriated

THREE MONTHS ENDED JUNE 30, 2025 (As Previously Reported)

BALANCE AT MARCH 31, 2025

$ ( 1,372,673 )

$ 105,167,292

$ ( 20,632,127 )

$ 142,584,827

Restricted shares to be issued for service

Currency translation adjustment

Net loss for three months ended June 30, 2025

$ ( 1,372,673 )

$ 105,167,292

$ ( 20,228,352 )

$ 142,214,825

THREE MONTHS ENDED JUNE 30, 2025(Restatement Impact)

MARCH 31, 2025

( 12,250,334 )

( 11,993,087 )

$ ( 1,005,600 )

$ ( 907,870 )

Restricted shares to be issued for service

Currency translation adjustment

Net loss for three months ended June 30, 2025

JUNE 30, 2025

( 12,250,334 )

( 11,993,087 )

$ ( 1,046,187 )

$ ( 964,182 )

THREE MONTHS ENDED JUNE 30, 2025 (As Restated)

MARCH 31, 2025

$ ( 1,372,673 )

$ 105,192,535

$ ( 20,534,397 )

$ 141,676,957

Restricted shares to be issued for service

Currency translation adjustment

Net loss for three months ended June 30, 2025

$ ( 1,372,673 )

$ 105,192,535

$ ( 20,146,347 )

$ 141,250,643

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 cost of revenue and general and administrative expenses increased.

The increase of 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.

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

RESOURCES, INC.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

effects of the restatement on the consolidated statement of stockholders’ deficit for the six months ended June 30, 2025 are

summarized in the following table:

unappropriated

comprehensive

unappropriated

MONTHS ENDED JUNE 30, 2025 (As Previously Reported)

DECEMBER 31, 2024

$ ( 1,372,673 )

$ 101,688,262

$ ( 20,854,143 )

$ 143,706,670

shares to be issued for service

Acquisition of assets

Currency translation

loss for six months ended June 30, 2025

( 5,403,277 )

$ ( 1,372,673 )

$ 105,167,292

$ ( 20,228,352 )

$ 142,214,825

SIX MONTHS ENDED JUNE 30,

2025(Restatement

DECEMBER 31, 2024

( 9,892,609 )

( 9,635,362 )

$ ( 964,920 )

$ ( 894,095 )

Restricted shares to be

issued for service

( 2,563,694 )

( 3,088,258 )

( 3,089,541 )

Acquisition of assets

Currency translation

loss for six months ended June 30, 2025

JUNE 30, 2025

( 12,250,334 )

( 11,993,087 )

$ ( 1,046,187 )

$ ( 964,182 )

MONTHS ENDED JUNE 30, 2025 (As Restated)

BALANCE AT DECEMBER 31, 2024

$ ( 1,372,673 )

$ 101,712,325

$ ( 20,783,318 )

$ 142,812,575

shares to be issued for service

Acquisition of assets

Currency translation

loss for six months ended June 30, 2025

( 5,484,544 )

$ ( 1,372,673 )

$ 105,192,535

$ ( 20,146,347 )

$ 141,250,643

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 cost of revenue and general and administrative expenses increased.

The increase of 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.

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

(d) The originally classified as restricted shares to

be issued for service was reclassified to acquisition of assets, as the shares were issued in connection with the asset acquisition.

RESOURCES, INC.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

effects of the restatement on the consolidated statement of cash flows for the six months ended June 30, 2025, are summarized in the

following table:

OF CONSOLIDATED STATEMENT OF CASH FLOWS

As Previously

June 30, 2025

As Previously

CASH FLOWS FROM OPERATING ACTIVITIES

$ ( 5,403,277 )

$ ( 5,484,544 )

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

Amortization on capital lease

Depreciation and amortization

( 1,546,829 )

Stock-based compensation expense

Amortization of operating lease right-of-use assets

Amortization of finance lease right-of-use assets

Changes in assets and liabilities

Accounts receivable

( 2,574,907 )

Prepayment and deposits

( 2,331,871 )

Other receivables

Accounts and other payable and accrued expenses

Taxes payable

Lease liabilities

Net cash used in operating activities

( 2,139,435 )

( 2,139,734 )

CASH FLOWS FROM INVESTING ACTIVITIES

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of finance leases obligation

Net cash provided by (used in) financing activities

EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

NET DECREASE IN CASH AND CASH EQUIVALENTS

( 2,339,081 )

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS - END OF YEAR

June 30, 2025

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the year for:

Paid for taxes

Interest paid

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 cost of revenue and general and administrative expenses increased .

of 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.

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

What changed 10-Q

Item 1. Financial Statements