GULF RESOURCES, INC. 10-Q

Item 4. Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures We maintain “disclosure controls and procedures,” as such term is defined under Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and, in reaching a reasonable level of assurance, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have carried out an evaluation, as required by Rule 13a-15(d) under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2026. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2026, our disclosure controls and procedures were not effective at the reasonable assurance level because the material weaknesses in our internal control over financial reporting described in Item 4(b) below had not been remediated as of June 30, 2026. As described in Item 4(b), those material weaknesses relate to (i) insufficient personnel with appropriate levels of accounting knowledge and experience to address complex U.S. GAAP accounting issues and to prepare and review financial statements and related disclosures under U.S. GAAP, (ii) ineffective oversight of our financial reporting and internal control by those charged with governance, and (iii) inadequate design of internal control over the preparation of the financial statements being audited. Those deficiencies affected our ability to accumulate and communicate information to our management, including our Chief Executive Officer and Chief Financial Officer, on a timely basis so as to permit timely decisions regarding required disclosure. Notwithstanding the conclusion described above, our management believes, based on the procedures described below and the additional procedures we performed in connection with the preparation of this Amendment, that the consolidated financial statements and other financial information included in our Quarterly Report on Form 10-Q for the three months period ended June 30, 2026 fairly present, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented. Since the material weaknesses described above were identified, our management has implemented, and continues to implement, the compensating measures and remediation actions described in Item 4(b) below. These measures are designed to provide additional assurance regarding the accuracy and completeness of our disclosures while the material weaknesses remain unresolved. These measures do not, and are not intended to, constitute a remediation of the material weaknesses, and management does not expect that they will prevent or detect all errors or all instances of fraud. (b) Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting refers to the process designed by, or under the supervision of, our principal executive officer and principal financial officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that: (1) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and (3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design safeguards into the process to reduce, though not eliminate, this risk. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Management has used the framework set forth in the report entitled “Internal Control — Integrated Framework” published by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), known as COSO, to evaluate the effectiveness of our internal control over financial reporting. Based on that evaluation, management has concluded that the Company’s internal control over financial reporting was not effective as of June 30, 2026, due to the material weaknesses described below. 44 In preparing our consolidated financial statements for the three months period ended June 30, 2026, our management identified material weaknesses in our internal control over financial reporting, as defined in the standards established by the Public Company Accounting Oversight Board of the United States, and other significant deficiencies. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified are as follows: (i) insufficient personnel with appropriate levels of accounting knowledge and experience to address complex U.S. GAAP accounting issues and to prepare and review financial statements and related disclosures under U.S. GAAP; (ii) ineffective oversight of our financial reporting and internal control by those charged with governance; and (iii) inadequate design of internal control over the preparation of the financial statements being audited. These material weaknesses remained as of June 30, 2026. As a result of inherent limitations, our internal control over financial reporting may not prevent or detect misstatements, errors or omissions. Remediation of Material Weaknesses. To remediate the material weaknesses identified above, we have undertaken, and will continue to undertake, steps to strengthen our internal control over financial reporting, including: (i) hiring additional qualified resources, including a financial controller equipped with relevant U.S. GAAP and SEC reporting experience and qualifications, to strengthen the financial reporting function and to establish a financial and system control framework; (ii) implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel; (iii) establishing effective oversight and clarifying reporting requirements for non-recurring and complex transactions to ensure that our consolidated financial statements and related disclosures are accurate, complete and in compliance with SEC reporting requirements; (iv) engaging external accounting advisors and consultants to review complex and non-recurring transactions on a contemporaneous basis; (v) establishing an internal audit function and reporting lines directly to the Audit Committee of our Board of Directors; and (vi) enhancing the Audit Committee’s oversight of the financial reporting process, including a defined review calendar with respect to the financial statement close process, the review of significant accounting judgments and estimates, and the review of related-party transactions. However, these measures had not been fully implemented as of June 30, 2026, and we have concluded that the material weaknesses in our internal control over financial reporting had not been remediated as of June 30, 2026.Management will consider the material weaknesses remediated only when the relevant controls have been designed and implemented, have operated for a period of time sufficient for management to conclude, through testing, that such controls are operating effectively, and when no additional material weaknesses or significant deficiencies have been identified in the relevant processes. We expect the remediation measures described above to be substantially implemented during the fiscal year ending December 31, 2026, although we can provide no assurance that these measures will be completed within that period. The Audit Committee of our Board of Directors has been, and will continue to be, actively involved in overseeing the implementation of these remediation measures and will receive regular updates on their status. (c) Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the three months period ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. (d) Attestation Report of the Registered Public Accounting Firm This Amendment does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. As a smaller reporting company, our management’s report is not subject to attestation by our registered public accounting firm. PART II—OTHER INFORMATION