GULF RESOURCES, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Cautionary Note Regarding Forward-Looking Statements The discussion below contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act. We have used words such as “believes,” “intends,” “anticipates,” “expects” and similar expressions to identify forward-looking statements. These statements are based on information currently available to us and are subject to a number of risks and uncertainties that may cause our actual results of operations, financial condition, cash flows, performance, business prospects and opportunities and the timing of certain events to differ materially from those expressed in, or implied by, these statements. Except as expressly required by the federal securities laws, we undertake no obligation to update such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances, or for any other reason. Overview We are a Nevada holding company which conducts operations through our wholly-owned China-based subsidiaries. Our business is conducted and reported in four segments, namely, bromine, crude salt, chemical products and natural gas. Through our wholly-owned subsidiary, SCHC, we produce and trade bromine, and through our wholly-owned subsidiary, SHSI, we produce and trade crude salt. We are one of the largest producers of bromine in China, as measured by production output. Elemental bromine is used to manufacture a wide variety of bromine compounds used in industry and agriculture. Bromine also is used to form intermediary chemical compounds such as Tetramethylbenzidine. Bromine is commonly used in brominated flame retardants, fumigants, water purification compounds, dyes, medicines and disinfectants. Crude salt is the principal material in alkali production as well as chlorine alkali production and is widely used in the chemical, food and beverage, and other industries. Through our wholly-owned subsidiary, SYCI, we manufacture and sell chemical products used in oil and gas field exploration, oil and gas distribution, oil field drilling, papermaking chemical agents, inorganic chemicals and materials that are used for human and animal antibiotics. Our wholly-owned subsidiary, DCHC, was established to explore and develop natural gas and brine resources (including bromine and crude salt) in Sichuan Province, China. Bromine and Crude Salt As disclosed in the Company’s Current Report on Form 8-K filed on September 8, 2017, the Company received, on September 1, 2017, letters from the Yangkou County, Shouguang City government addressed to each of its subsidiaries, SCHC and SYCI, which stated that in an effort to improve the safety and environmental protection management level of chemical enterprises, the plants are requested to immediately stop production and perform rectification and improvements in accordance with the country’s new safety and environmental protection requirements. In the Company’s press release of August 11, 2017 and on its conference call of August 14, 2017, the Company addressed concerns that increased government enforcement of stringent environmental rules that were adopted in early 2017 to ensure corporations bring their facilities up to necessary standards so that pollution and other negative environmental issues are limited and remediated, could have an impact on our business in both the short and long-term. The Company also expressed that although it believed its facilities were fully compliant at the time, the Company did not know how its facilities would fare under the new rules. Teams of inspectors from the government were sent to many provinces to inspect all mining and manufacturing facilities. The local government requested that facilities be closed, so that the facilities could undergo the inspection and analysis in the most efficient manner by inspectors’ team. As a result, our facilities were closed on September 1, 2017. The Company believes that this is another step by the government to improve the environment. It further believes the goal of the government is not to close all plants, but rather to codify the regulations related to project approval, land use, planning approval and environmental protection assessment approval so that illegal plants are not able to open in the future and so that plants close to population centers do not cause serious environmental damage. In addition, the Company believes that the Shandong provincial government wants to assure that each of its regional and county governments has applied the Notice in a consistent manner. The Shouguang City Bromine Association, on behalf of all the bromine producers in Shouguang, initiated negotiations with the local government agencies. The local governmental agencies acknowledged the fact that their initial requirements for the bromine industry did not include the project, the planning and the land use rights approvals, which were later introduced by the provincial government as new requirements. The Company understood from the local government that local government was coordinating with various government agencies to solve these three outstanding approval issues in a timely manner and that all impacted bromine plants will not be allowed to commence production prior to obtaining those approvals. In February 2019, the Company received a notification from the local government of Yangkou County that its Factories No. 1, No. 4, No. 7 and No. 9 passed inspection and were allowed to resume operations. In April 2019, Factory No. 1 and No. 7 resumed operations. Subsequently, the Company received approval dated February 27, 2020, issued by the local governmental authority which allows us to resume production after the winter temporary closure. Further, the Company received another approval from the Shouguang Yangkou People’s Government dated on March 5, 2020, to resume production at its bromine factories No.1, No. 4, No.7 and No. 9 in order to meet the needs of bromide products for epidemic prevention and control (the “March 2020 Approval”). The Company’s factories No.7 and No.1 started trial production in middle-March 2020, and commenced commercial production on April 3, 2020. The Company received oral notification from the government regarding Factory No. 8, allowing it to resume production in August 2022. Factory No.8 began contributing revenue in the fourth quarter of 2022. 31 The Company is awaiting governmental approval for Factories No. 2 and No. 10. 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. The Company completed its flood prevention project in December 2023. This project was implemented for safeguarding its bromine facilities. Pursuant to the notification from the government of Shouguang City, all bromine facilities in Shouguang City were temporarily closed from December 15, 2024, until February 12, 2025. In compliance with the notification, the Company ceased production at its bromine facilities during this period and resumed preparation operations at the bromine and crude salt factories as scheduled in February 2025. Chemical Products On November 24, 2017, the Company received a letter from the People’s Government of Yangkou County, Shouguang City notifying the Company that due to the new standards and regulations relating to safety production and environmental pollution, from certain local governmental departments, such as the municipal environmental protection department, the security supervision department and the fire department, its chemical enterprises would have to be relocated to a new industrial park called Bohai Marine Fine Chemical Industry Park. Although our chemical companies were in compliance with regulations, they were also close to a residential area. As a result, the government determined we should relocate to the Bohai park. Chemical companies that are not being asked to move into the park are being permanently closed. Since our factories closed, the Company has secured from the government the land use rights for its chemical plant. On January 6, 2020, the Company received the environmental protection approval by the government of Shouguang City, Shandong Province for the proposed Yuxin Chemical factory. Construction of the new chemical facilities at Bohai Marine Fine Chemical Industrial Park commenced in June 2020. Initially, the construction was projected to last around one year, with an additional six months for equipment installation and testing. However, due to the COVID epidemic and electrical restrictions, the opening of the chemical factory has been postponed. The Company has received the refrigeration and air compressor units. Additionally, the procurement of the final equipment for our chemical factory has been postponed until we have a better understanding of the potential for derivative bromine products. We anticipate proceeding with the completion of its chemical factory in due course. Natural Gas In January 2017, the Company completed the construction of the first brine water and natural gas well field in Daying County, Sichuan Province, and commenced trial production in January 2019. On May 29, 2019, the Company received verbal notice from the government of Tianbao Town, Daying County, Sichuan Province, mandating the need for project approval for its Daying well, encompassing the entire natural gas and brine water project. This also includes approvals for safety production inspection, environmental protection assessment, and to solve the related land issue. Until these approvals are obtained, the Company must temporarily suspend trial production at its natural gas well in Daying. Additionally, in compliance with the Chinese government new policies, the Company is required to obtain an exploration license for bromine and a mining license for natural gas. Pursuant to the Opinions of the Ministry of Natural Resources on Several Issues in Promoting the Reform of Mineral Resources Management (Trial) promulgated by the Ministry of Natural Resources of PRC on January 9, 2020, which came into effect on May 1, 2020, privately owned enterprises are allowed to participate in natural gas production. The Company is engaged in ongoing discussions with the government of Daying County regarding the establishment of a joint venture for the exploration and production of natural gas and brine products in Sichuan. 32 Nasdaq Compliance On April 23, 2026 and May 26, 2026, the Company received notifications from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) stating that the Company was not in compliance with the Rule, which requires the timely filing of periodic financial reports with the Securities and Exchange Commission. The April 23, 2026 notification related to the Company’s failure to timely file its Annual Report on Form 10-K for the fiscal year ended December 31, 2025, and the May 26, 2026 notification related to the Company’s failure to timely file its Quarterly Report on Form 10-Q for the quarter ended March 31, 2026. On May 26, 2026, the Company received a notice from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”), indicating that, as a result of not having timely filed its quarterly report on Form 10-Q for the quarter ended March 31, 2026 (the “Form 10-Q”), and the Company remains delinquent in filing its annual report on Form 10-K for the year ended December 31, 2025 (the “Initial Delinquent Filing”), the Company is in non-compliance with Nasdaq Listing Rule 5250(c)(1), which requires timely filing all required periodic financial reports with the Securities Exchange Commission. The Notice has no immediate effect on the listing or trading of the Company’s common stock on the Nasdaq Capital Market. As previously disclosed in the current report on Form 8-K filed by the Company on April 27, the Company must submit a plan to regain compliance with respect to these delinquent reports no later than June 22, 2026. If the plan is accepted by Nasdaq, then Nasdaq would grant the Company up to 180 calendar days from the due date of the Initial Delinquent Filing, or until October 12, 2026, to regain compliance. On May 29, 2026, the Company issued a press release announcing its receipt of the Notice. On June 1, 2026, the Company, following the Company’s ongoing dialogue with the staff of the United States Securities and Exchange Commission, concluded that the Company will amend its fiscal year 2024 Form 10-K (the “FY2024 Form 10-K”) and Form 10-Qs for the first, second and third quarters of 2025 (collectively, the “Q1, Q2 and Q3 2025 Form 10-Qs”) to restate the disclosures (Note 6, Note 7 and Note 12 included in the FY2024 Form 10-K and the Q1, Q2 and Q3 2025 Form 10-Qs) to revise the previous recognition of buildings without ownership certificates as fixed assets in the balance sheets and to reclassify such buildings as right-of-use (ROU) assets based on lease agreements and ASC 842 Leases, for each of the periods included in those filing, including fiscal years 2023 and 2024 in the FY2024 Form 10-K and each of the quarterly and year-to-date periods included in the Q1, Q2 and Q3 FY2025 Form 10-Qs (collectively, the “Prior Filings”). The Prior Filings should no longer be relied upon because of errors identified in such financial statements, as described above. On June 17, 2026, the Company submitted a plan to Nasdaq to regain compliance with the Rule. On June 25, 2026, Nasdaq accepted the Company’s compliance plan and granted the Company an exception period to file the delinquent periodic reports. The Company filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2025 on August 17, 2026, and filed its Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 on August 28, 2026. On June 25, 2026, the 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. On August 28, 2026, Nasdaq notified the Company that the Company had incurred an additional delinquency because it had not filed its Quarterly Report on Form 10-Q for the quarter ended June 30, 2026. Nasdaq requested that the Company submit an update to its compliance plan. On August 28, 2026, the Company submitted an updated compliance plan to Nasdaq requesting additional time to file its Quarterly Report on Form 10-Q for the quarter ended June 30, 2026. On September 1, 2026, the Company received a written notice from Nasdaq (the “Extension Letter”) granting the Company an additional exception to regain compliance with Nasdaq Listing Rule 5250(c)(1) (the “Rule”). On September 2, 2026, Nasdaq granted the Company an additional exception period and required the Company to file its Quarterly Report on Form 10-Q for the quarter ended June 30, 2026 on or before October 12, 2026. Nasdaq stated that, if the Company failed to file the 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. The Nasdaq notifications and exception periods do not have an 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 Nasdaq listing requirements. The Company filed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2026 on September 30, 2026. As of the date of this Quarterly Report, the Company has filed the delinquent periodic reports identified in the Nasdaq notifications and is awaiting Nasdaq’s determination regarding whether the Company has regained compliance with Nasdaq Listing Rule 5250(c)(1). There can be no assurance that Nasdaq will determine that the Company has regained compliance with the Rule, that the Company will satisfy all other applicable Nasdaq listing requirements, or that the Company’s common stock will continue to be listed on Nasdaq. Our current corporate structure chart is set forth in the following diagram: 33 As a result of our acquisition of SCHC, our historical financial statements and the information presented below reflects the accounts of SCHC, SHSI ,SYCI and DCHC. The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere in this report. On December 22, 2025 SYCI was sold. RESULTS OF OPERATIONS The following table presents certain information derived from the condensed consolidated statements of operations, cash flows and stockholders’ equity for the three-month and six-month periods ended June 30, 2026 and 2025. Comparison of the Three-Month Periods Ended June 30, 2026 and 2025 Three-Month Period Ended June 30, 2026 Three-Month Period Ended June 30, 2025 (Restated) Percent Change Increase/ (Decrease) Net revenue $ 12,886,977 $ 8,343,785 54 % Cost of revenue $ (10,565,684 ) $ (7,366,702 ) 43 % Gross profit $ 2,321,293 $ 977,083 138 % Sales and marketing expenses $ (18,174 ) $ (14,802 ) 23 % Direct labor and factory overheads incurred during plant shutdown $ (452,949 ) $ (727,774 ) (38 )% General and administrative expenses $ (598,003 ) $ (1,025,780 ) (42 )% Income (loss) from operations $ 1,252,167 $ (791,273 ) (258 )% Interest income $ 18,816 $ 1,795 948 % Interest expense $ (124,673 ) $ (21,674 ) 475 % Other expense, net $ (3,117 ) $ (3,212 ) (3 )% Income (loss) before income taxes $ 1,143,193 $ (814,364 ) (240 )% Income tax expense $ — $ — — Net income (loss) $ 1,143,193 $ (814,364 ) (240 )% Net income for the three-month period ended June 30, 2026 increased to $1,143,193 from net loss of $814,364 in the same period in 2025, mainly due to the net revenue increased to $12,886,977 for the three-month period ended June 30, 2026 as compared to $8,343,785 in the same period in 2025. Net Revenue The table below shows the changes in net revenue in the respective segments of the Company for the three-month period ended June 30, 2026 as compared to the same period in 2025: Net Revenue by Segment Three-Month Period Ended June 30, 2026 Three-Month Period Ended June 30, 2025 Percent Change Increase of Net Revenue Segment % of total % of total Bromine $ 12,244,273 95 % $ 7,676,374 92 % 60 % Crude Salt 642,704 5 % 667,411 8 % (4 )% Chemical Products — — — — — Natural Gas — — — — — Total sales $ 12,886,977 100 % $ 8,343,785 100 % 54 % Bromine and crude salt segments Three-Month Period Ended Percentage Change Increase product sold in tonnes June 30, 2026 June 30, 2025 (Decrease) Bromine 2,298 1,972 17 % Crude Salt 26,149 25,934 1 % Bromine segment For the three-month periods ended June 30, 2026 and 2025, the net revenue for the bromine segment was $12,244,273 and $7,676,374, respectively. The increase of the net revenue of bromine was due to the 17% increase in tonnes sold and the 37% increase in average selling price of bromine for the three-month period ended June 30, 2026. Crude salt segment For the three-month periods ended June 30, 2026 and 2025, the net revenue for the crude salt segment was $642,704 and $667,411, respectively. The decrease of net revenue of crude salt was mainly due to the 4% decrease in average selling price of crude salt for the three-month period ended June 30, 2026. Chemical products segment For the three-month periods ended June 30, 2026 and 2025, the net revenue for the chemical products segment was nil due to the closure of our chemical factories since September 1, 2017. Natural g as segment For the three-month periods ended June 30, 2026 and 2025, the net revenue for the natural gas segment was nil. 34 Cost of Revenue Cost of Revenue by Segment Three-Month Period Ended June 30, 2026 Three-Month Period Ended June 30, 2025 (Restated) Percent Change of Cost of of Revenue Segment % of total % of total Bromine $ 10,046,458 95 % $ 7,017,116 95 % 43 % Crude Salt 519,226 5 % 349,586 5 % 49 % Chemical Products — — — — — Natural Gas — — — — — Total $ 10,565,684 100 % $ 7,366,702 100 % 43 % Cost of revenue reflects mainly the raw materials consumed and the direct salaries and benefits of staff engaged in the production process, electricity, depreciation and amortization of manufacturing plants and machinery and other manufacturing costs. Our cost of revenue was $10,565,684 for the three-month period ended June 30, 2026, an increase of $3,198,982 (or 43%) as compared to the same period in 2025 due to the increase of net revenue by 54% for the three-month period ended June 30, 2026 as compared to the same period in 2025. Bromine production capacity and utilization of our factories The table below represents the annual capacity and utilization ratios for all of our bromine producing properties: Annual Production Capacity (in tonnes) Utilization Ratio (i) Three-month period ended June 30, 2025 31,506 26 % Three-month period ended June 30, 2026 31,506 30 % Variance of the three-month periods ended June 30, 2026 and 2025 — 4 % (i) Utilization ratio is calculated based on the annualized actual production volume in tonnes for the periods divided by the annual production capacity in tonnes. Bromine segment For the three-month periods ended June 30, 2026 and 2025, the cost of revenue for the bromine segment was $10,046,458 and $7,017,116, respectively. The increase in costs is mainly due to the increase in sales volume. Crude salt segment For the three-month periods ended June 30, 2026 and 2025, the cost of revenue for the crude salt segment was $519,226 and $349,586, respectively. The increase in costs is mainly due to the rise in amortization of the salt pans. Chemical products segment Cost of revenue for our chemical products segment for the three-month periods ended June 30, 2026 and 2025 was nil. Natural g as segment Cost of revenue for our natural gas segment for the three-month periods ended June 30, 2026 and 2025 was nil. 35 Gross Profit Gross profit was $2,321,293, or 18% of net revenue for three-month period ended June 30, 2026, representing an increase of $1,344,210, as compared to a gross profit of $977,083, or 12% of net revenue for the same period in 2025. Gross Profit by Segment % Point Change of Gross Three-Month Period Ended June 30, 2026 Three-Month Period Ended June 30, 2025 (Restated) Profit Margin Segment Gross Profit Margin Gross Profit Margin Bromine $ 2,197,815 18 % $ 659,258 9 % 9 % Crude Salt 123,478 19 % 317,825 48 % (29 )% Chemical Products — — — — — Natural Gas — — — — — Total Gross Profit $ 2,321,293 18 % $ 977,083 12 % 6 % Bromine segment For the three-month period ended June 30, 2026, the gross profit margin for our bromine segment was 18%, compared to 9% in the three-month period ended June 30, 2025. The increase in gross profit margin was primarily attributable to the higher average selling price of bromine of $5,328 per ton in the three-month period ended June 30, 2026 compared to $3,892 per ton in the three-month period ended June 30, 2025. Bromine tonnes sales also increased from 1,972 tonnes for the three-month period ended June 30, 2025 to 2,298 tonnes for the three-month period ended June 30, 2026. Crude salt segment For the three-month period ended June 30, 2026, the gross profit margin for our crude salt segment was 19%, compared to 48% in the same period in 2025. The decrease in gross profit margin was mainly attributable to the rise in amortization of the salt pans. Chemical products segment For the three-month periods ended June 30, 2026 and 2025, the gross profit margin for our chemical products segment was 0%. Natural g as segment For the three-month periods ended June 30, 2026 and 2025, the gross profit margin for our natural gas segment was 0%. Sales and Marketing Expenses Sales and marketing expenses were $18,174 for the three-month period ended June 30, 2026, an increase of $3,372 (or 23%) as compared for the same period in 2025. Direct labor and factory overheads incurred during plant shutdown On September 1, 2017, the Company received notification from the government of Yangkou County, Shouguang City of PRC that stated that production at all its bromine and crude salt and chemical factories should be halted with immediate effect in order for the Company to perform rectification and improvement in accordance with the county’s new safety and environmental protection requirements. On November 24, 2017, the Company received a letter from the Government of Yangkou County, Shouguang City notifying the Company to relocate its two chemical production plants located in the second living area of the Qinghe Oil Extraction Plant to Bohai Park. As a result, direct labor and factory overhead costs (including depreciation of plant and machinery) in the amount of $452,949 and $727,774 incurred for the three-month periods ended June 30, 2026 and 2025, respectively, of factories that have not resumed production were presented as part of the operating expense. 36 General and Administrative Expenses General and administrative expenses were $598,003 for the three-month period ended June 30, 2026, a decrease of $427,777 (or 42%) as compared to $1,025,780 for the same period in 2025. The decrease was mainly due to SYCI was sold in 2025. Income (loss) from Operations Income from operations was $1,252,167 for the three-month period ended June 30, 2026, compared to loss from operations of $791,273 in the same period in 2025. Income (loss) from Operations by Segment Three-Month Period Ended June 30, 2026 Three-Month Period Ended June 30, 2025 (Restated) Segment: % of total % of total Bromine $ 1,409,472 111 % $ (134,041 ) 19 % Crude Salt (97,230 ) (8 ) % (181,160 ) 26 % Chemical Products — — (348,203 ) 49 % Natural Gas (40,116 ) (3 ) % (43,255 ) 6 % Income (loss) from operations before corporate costs 1,272,126 100 % (706,659 ) 100 % Corporate cost (19,959 ) (84,614 ) Income (loss) from operations $ 1,252,167 $ (791,273 ) Bromine segment Income from operations from our bromine segment was $1,409,472 for the three-month period ended June 30, 2026, compared to loss from operations of $134,041 in the same period in 2025. This increase was due to the 17% increase in tonnes sold and a 37% increase in average selling price. Crude salt segment Loss from operations from our crude salt segment was $97,230 for the three-month period ended June 30, 2026, compared to loss from operations of $181,160 in the same period in 2025. Chemical products segment Loss from operations from our chemical products segment was $0 for the three-month period ended June 30, 2026, compared to loss from operations of $348,203 in the same period in 2025. The reason for the reduction was due to the sale of SYCI completed in December 2025. Natural gas segment Loss from operations from our natural gas segment was $40,116 for the three-month period ended June 30, 2026, compared to loss from operations of $43,255 in the same period in 2025. Interest Income Interest income of $18,816 mainly represented interest income from loans to third parties for the three-month period ended June 30, 2026, an increase of $17,021 as compared to the same period in 2025. Interest Expenses Interest expense of $124,673 represented bank interest expense and interest on finance lease for the three-month period ended June 30, 2026, an increase of $102,999 as compared to the same period in 2025. Other Expense, Net For the three-month period ended June 30, 2026, other expense, net decreased from $3,212 to $3,117 compared with the same period of 2025, reflecting a 3% reduction. Net Income (loss) Net income was $1,143,193 for the three-month period ended June 30, 2026, compared to a net loss of $814,364 in the same period in 2025. 37 Comparison of the Six-Month Periods Ended June 30, 2026 and 2025 Six-Month Period Ended June 30, 2026 Six-Month Period Ended June 30, 2025 (Restated) Percent Change Increase/ (Decrease) Net revenue $ 15,255,603 $ 9,948,232 53 % Cost of revenue $ (12,919,096 ) $ (8,964,166 ) 44 % Gross profit $ 2,336,507 $ 984,066 137 % Sales and marketing expenses $ (23,622 ) $ (19,855 ) 19 % Direct labor and factory overheads incurred during plant shutdown $ (3,196,211 ) $ (3,953,582 ) (19 )% General and administrative expenses $ (1,921,104 ) $ (2,452,789 ) (22 )% Loss from operations $ (2,804,430 ) $ (5,442,160 ) (48 )% Interest income $ 272,476 $ 4,224 6,351 % Interest expense $ (248,117 ) $ (43,396 ) 472 % Other expense, net $ (3,117 ) $ (3,212 ) (3 )% Loss before income taxes $ (2,783,188 ) $ (5,484,544 ) (49 )% Income tax expense $ — $ — — Net loss $ (2,783,188 ) $ (5,484,544 ) (49 )% Net loss for the six-month period ended June 30, 2026 decreased to $2,783,188 from $5,432,824 in the same period in 2025, mainly due to the net revenue increased to $15,255,603 for the six-month period ended June 30, 2026 as compared to $9,948,232 in the same period in 2025. Net Revenue The table below shows the changes in net revenue in the respective segments of the Company for the six-month period ended June 30, 2026 as compared to the same period in 2025: Net Revenue by Segment Six -Month Period Ended June 30, 2026 Six -Month Period Ended June 30, 2025 Percent Change Increase of Net Revenue Segment % of total % of total Bromine $ 14,494,223 95 % $ 9,158,243 92 % 58 % Crude Salt 761,380 5 % 789,989 8 % (4 )% Chemical Products — — — — — Natural Gas — — — — — Total sales $ 15,255,603 100 % $ 9,948,232 100 % 53 % Bromine and crude salt segments Six-Month Period Ended Percentage Change Increase product sold in tonnes June 30, 2026 June 30, 2025 (Decrease) Bromine 2,753 2,375 16 % Crude Salt 30,808 30,667 1 % Bromine segment For the six-month periods ended June 30, 2026 and 2025, the net revenue for the bromine segment was $14,494,223 and $9,158,243, respectively. The increase of the net revenue of bromine was due to the 16% increase in tonnes sold and the 37% increase in average selling price of bromine for the six-month period ended June 30, 2026. Crude salt segment For the six-month periods ended June 30, 2026 and 2025, the net revenue for the crude salt segment was $761,380 and $789,989, respectively. The decrease of net revenue of crude salt was mainly due to the 4% decrease in average selling price of crude salt for the six-month period ended June 30, 2026. Chemical products segment For the six-month periods ended June 30, 2026 and 2025, the net revenue for the chemical products segment was nil due to the closure of our chemical factories since September 1, 2017. Natural g as segment For the six-month periods ended June 30, 2026 and 2025, the net revenue for the natural gas segment was nil. 38 Cost of Revenue Cost of Revenue by Segment Six-Month Period Ended June 30, 2026 Six-Month Period Ended June 30, 2025 (Restated) Percent Change of Cost of Revenue Segment % of total % of total Bromine $ 12,329,784 95 % $ 8,550,340 95 % 44 % Crude Salt 589,312 5 % 413,826 5 % 42 % Chemical Products — — — — — Natural Gas — — — — — Total $ 12,919,096 100 % $ 8,964,166 100 % 44 % Cost of revenue reflects mainly the raw materials consumed and the direct salaries and benefits of staff engaged in the production process, electricity, depreciation and amortization of manufacturing plants and machinery and other manufacturing costs. Our cost of revenue was $12,919,096 for the six-month period ended June 30, 2026, an increase of $3,954,930 (or 44%) as compared to the same period in 2025 due to the increase of net revenue by 53% for the six-month period ended June 30, 2026 as compared to the same period in 2025. Bromine production capacity and utilization of our factories The table below represents the annual capacity and utilization ratios for all of our bromine producing properties: Annual Production Capacity (in tonnes) Utilization Ratio (i) Six-month period ended June 30, 2025 31,506 15 % Six-month period ended June 30, 2026 31,506 18 % Variance of the six-month periods ended June 30, 2026 and 2025 — 3 % (i) Utilization ratio is calculated based on the annualized actual production volume in tonnes for the periods divided by the annual production capacity in tonnes. Bromine segment For the six-month periods ended June 30, 2026 and 2025, the cost of revenue for the bromine segment was $12,329,784 and $8,550,340, respectively. The increase in costs is mainly due to the increase in sales volume. Crude salt segment For the six-month periods ended June 30, 2026 and 2025, the cost of revenue for the crude salt segment was $589,312 and $413,826, respectively. The increase in costs is mainly due to the rise in amortization of the salt pans. Chemical products segment Cost of revenue for our chemical products segment for the six-month periods ended June 30, 2026 and 2025 was nil. Natural g as segment Cost of revenue for our natural gas segment for the six-month periods ended June 30, 2026 and 2025 was nil. 39 Gross Profit Gross profit was $2,336,507, or 15% of net revenue for six-month period ended June 30, 2026, representing an increase of $1,352,441, as compared to a gross profit of $984,066, or 10% of net revenue for the same period in 2025. Gross Profit by Segment Six-Month Period Ended June 30, 2026 Six-Month Period Ended June 30, 2025 (Restated) % Point Change of Gross Profit Margin Segment Gross Profit Margin Gross Profit Margin Bromine $ 2,164,439 15 % $ 607,903 7 % 8 % Crude Salt 172,068 23 % 376,163 48 % (25 )% Chemical Products — — — — — Natural Gas — — — — — Total Gross Profit $ 2,336,507 15 % $ 984,066 10 % 5 % Bromine segment For the six-month period ended June 30, 2026, the gross profit margin for our bromine segment was 15%, compared to 7% in the six-month period ended June 30, 2025. The increase in gross profit margin was primarily attributable to the higher average selling price of bromine of $5,265 per ton in the six-month period ended June 30, 2026 compared to $3,856 per ton in the six-month period ended June 30, 2025. Bromine tonnes sales also increased from 2,375 tonnes for the six-month period ended June 30, 2025 to 2,753 tonnes for the six-month period ended June 30, 2026. 40 Crude salt segment For the six-month period ended June 30, 2026, the gross profit margin for our crude salt segment was 23%, compared to 48% in the same period in 2025. The decrease in gross profit margin was mainly attributable to a reduction in revenue and a notable increase in amortization costs related to the newly purchased salt pan, which caused the cost of sales to grow more than the revenue contraction, resulting in a lower gross margin. Chemical products segment For the six-month periods ended June 30, 2026 and 2025, the gross profit margin for our chemical products segment was 0%. Natural g as segment For the six-month periods ended June 30, 2026 and 2025, the gross profit margin for our natural gas segment was 0%. Sales and Marketing Expenses Sales and marketing expenses were $23,622 for the six-month period ended June 30, 2026, an increase of $3,767 (or 19%) as compared for the same period in 2025. Direct labor and factory overheads incurred during plant shutdown On September 1, 2017, the Company received notification from the government of Yangkou County, Shouguang City of PRC that stated that production at all its bromine and crude salt and chemical factories should be halted with immediate effect in order for the Company to perform rectification and improvement in accordance with the county’s new safety and environmental protection requirements. On November 24, 2017, the Company received a letter from the Government of Yangkou County, Shouguang City notifying the Company to relocate its two chemical production plants located in the second living area of the Qinghe Oil Extraction Plant to Bohai Park. As a result, direct labor and factory overhead costs (including depreciation of plant and machinery) in the amount of $3,196,211 and $3,953,582 incurred for the six-month periods ended June 30, 2026 and 2025, respectively, of factories that have not resumed production were presented as part of the operating expense. General and Administrative Expenses General and administrative expenses were $1,921,104 for the six-month period ended June 30, 2026, a decrease of $531,685 (or 22%) as compared to $2,452,789 for the same period in 2025. The decrease was mainly due to SYCI was sold. Loss from Operations Loss from operations was $2,804,430 for the six-month period ended June 30, 2026, compared to loss from operations of $5,442,160 in the same period in 2025. Loss from Operations by Segment Six-Month Period Ended June 30, 2026 Six-Month Period Ended June 30, 2025 (Restated) Segment: % of total % of total Bromine $ (1,658,306 ) 65 % $ (3,508,547 ) 69 % Crude Salt (824,909 ) 32 % (768,969 ) 15 % Chemical Products — — (710,095 ) 14 % Natural Gas (71,925 ) 3 % (88,099 ) 2 % Loss from operations before corporate costs (2,555,140 ) 100 % (5,075,710 ) 100 % Corporate cost (249,290 ) (366,450 ) Loss from operations $ (2,804,430 ) $ (5,442,160 ) Bromine segment Loss from operations from our bromine segment was $1,658,306 for the six-month period ended June 30, 2026, compared to loss from operations of $3,508,547 in the same period in 2025. This decrease was due to the 16% increase in tonnes sold and a 37% increase in average selling price. Crude salt segment Loss from operations from our crude salt segment was $824,909 for the six-month period ended June 30, 2026, compared to loss from operations of $768,969 in the same period in 2025. The main reason was due to the rise in amortization of the salt pans. Chemical products segment Loss from operations from our chemical products segment was $0 for the six-month period ended June 30, 2026, compared to loss from operations of $710,095 in the same period in 2025. The reason for the reduction was due to the sale of SYCI completed in December 2025. Natural gas segment Loss from operations from our natural gas segment was $71,925 for the six-month period ended June 30, 2026, compared to loss from operations of $88,099 in the same period in 2025. Interest Income Interest income of $272,476 mainly represented interest income from bank and loans to third parties for the six-month period ended June 30, 2026 an increase of $268,252 as compared to the same period in 2025. 41 Interest Expenses Interest expense of $248,117 represented bank interest expense and interest on finance lease for the six-month period ended June 30, 2026, an increase of $204,721 as compared to the same period in 2025. Other Expense, Net For the six-month period ended June 30, 2026, other expense, net decreased from $3,212 to $3,117 compared with the same period of 2025, reflecting a 3% reduction. Net Loss Net loss was $2,783,188 for the six-month period ended June 30, 2026, compared to a net loss of $5,484,544 in the same period in 2025. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2026, cash and cash equivalents were $9,189,231 as compared to $3,793 as of December 31, 2025. The components of this increase of $9,185,438 are reflected below. Statement of Cash Flows Six-Month Period Ended June 30, 2026 2025 (Restated) Net cash used in operating activities $ (4,241,827 ) $ (2,139,734 ) Net cash provided by/(used in) investing activities $ 12,749,154 $ — Net cash provided by/(used in) financing activities $ 283,894 $ (260,997 ) Effects of exchange rate changes on cash and cash equivalents $ 394,217 $ 61,650 Net increase (decrease) in cash and cash equivalents $ 9,185,438 $ (2,339,081 ) For the six-month period ended June 30, 2026, we met our working capital and capital investment requirements by using cash on hand. Net Cash Used In Operating Activities During the six-month period ended June 30, 2026, cash flow used in operating activities of approximately $4.24 million was mainly due to a net loss of $2.78 million, an increase in accounts receivable of $12.02 million, offset by a non-cash adjustment related to depreciation and amortization of property, plant and equipment of $6.80 million, amortization of finance lease right-of-use asset of $1.48 million, an increase in accounts payable and accrued expenses of $1.35 million and a decrease in prepayment and deposits of $1.08 million. During the six-month period ended June 30, 2025, cash flow used in operating activities of approximately $2.14 million was mainly due to a net loss of $5.48 million, an increase in accounts receivable of $2.58 million, an increases in prepayment and deposits of $2.33 million, and offset by a non-cash adjustment related to depreciation and amortization of property, plant and equipment of $6.45 million, amortization of finance lease right-of-use asset of $1.55 million. Accounts receivable Cash collections on our accounts receivable had a major impact on our overall liquidity. The following table presents the aging analysis of our accounts receivable as of June 30, 2026 and December 31, 2025. June 30, 2026 December 31, 2025 % of total % of total Aged 1-30 days $ 4,813,161 31 % $ 1,409,269 43 % Aged 31-60 days 4,390,534 28 % 1,860,151 57 % Aged 61-90 days 4,915,736 32 % — — Aged 91-120 days 1,355,696 9 % — — Aged 121-150 days — — — — Aged 151-180 days — — — — Aged 181-210 days — — — — Aged 211-240 days — — — — Total $ 15,475,127 100 % $ 3,269,420 100 % The overall accounts receivable balance as of June 30, 2026 increased by $12,205,707, as compared to those of December 31, 2025. 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 customers. Inventories Our inventory consists of the following: June 30, 2026 December 31, 2025 % of total % of total Raw materials $ 98,344 12 % $ 20,079 4 % Finished goods 716,577 88 % 542,738 96 % Total $ 814,921 100 % $ 562,817 100 % 42 The net inventory level as of June 30, 2026 increased by $252,104, as compared to the net inventory level as of December 31, 2025. Raw materials increased by $78,265 as of June 30, 2026 as compared to December 31, 2025. Our finished goods increased by $173,839 as of June 30, 2026 as compared to December 31, 2025. Net Cash Provided By / (Used In) Investing Activities During the six-months ended June 30, 2026, net cash provided by investing activities was $12.75 million, mainly attributable to repayments received on loans to third parties of $14.44 million, offset by purchases of fixed assets of $1.70 million. We have no investing activities for the six-month period ended June 30, 2025 . Net Cash Provided By/ (Used In) Financing Activities For the six-month period ended June 30, 2026, net cash provided by financing activities was $0.28 million, attributable to proceeds from the issuance of units pursuant to a private placement of $0.56 million, offset by $0.27 million of principal payments for obligations under finance leases. For the six-month period ended June 30, 2025, we used $0.3 million to fulfil finance lease obligations. We believe that our available funds and cash flows generated from operations will be sufficient to meet our anticipated ongoing operating needs and our obligations as they become due in the next twelve (12) months. We had available cash of approximately $9,189,231 at June 30, 2026, all of which is in highly liquid current deposits earning no or little interest. We do not anticipate paying cash dividends in the foreseeable future. We intend to continue to focus our efforts on the activities of SCHC, SHSI and DCHC as these segments continue to expand within the Chinese market. We may not be able to identify, successfully integrate or profitably manage any businesses or business segment we may acquire, or any expansion of our business. An expansion may involve a number of risks, including possible adverse effects on our operating results, diversion of management’s attention, inability to retain key personnel, risks associated with unanticipated events, risks associated with the pandemic and the financial statement effect of potential impairment of acquired intangible assets, any of which could have a materially adverse effect on our condition and results of operations. In addition, if competition for acquisition candidates or operations were to increase, the cost of acquiring businesses could increase materially. We may effect an acquisition with a target business which may be financially unstable, under-managed, or in its early stages of development or growth. Our inability to implement and manage our expansion strategy successfully may have a material adverse effect on our business and future prospects. Contractual Obligations and Commitments We have no significant contractual obligations not fully recorded on our consolidated balance sheets or fully disclosed in the notes to our consolidated financial statements. Additional information regarding our contractual obligations and commitments as at June 30, 2026 is provided in the notes to our consolidated financial statements. See “Notes to Condensed Consolidated Financial Statements”. Material Off-Balance Sheet Arrangements We do not currently have any off balance sheet arrangements falling within the definition of Item 303(a) of Regulation S-K. Critical Accounting Policies and Estimates Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and this requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We base its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions. We have identified the following critical accounting policies and estimates used by us in the preparation of our financial statements: accounts receivable and allowance for doubtful accounts, inventories and allowance for obsolescence, assets retirement obligation, property, plant and equipment, recoverability of long-lived assets, mineral rights, leases, revenue recognition, income taxes, and loss contingencies. These policies and estimates are described in the Company’s Form 10-Q for the six months ended June 30, 2026. 43 Item 3. Quantitative and Qualitative Disclosures About Market Risk Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).