UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended | |
| Or | |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from _________ to _________ |
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol (s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Indicate by check mark whether the registrant has submitted electronically,
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐
As of August 28, 2026, the registrant had outstanding shares of common stock , excluding 28,583 shares of treasury stock.
Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
GULF RESOURCES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollars)
| March 31, | December 31, | |||||||
| 2026 (Unaudited) | 2025 (Audited) | |||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Prepayments and deposits | ||||||||
| Amounts due from related parties | ||||||||
| Other receivables | ||||||||
| Total 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 | ||||||||
| Total Assets | ||||||||
| ||||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Short-term bank borrowing | $ | $ | ||||||
| Accounts payable and accrued expenses | ||||||||
| Accrued liabilities | ||||||||
| Taxes payable-current | ||||||||
| Amount due to related parties | ||||||||
| Finance lease liability, current portion | ||||||||
| Operating lease liabilities, current portion | ||||||||
| Total current liabilities | ||||||||
| Non-Current Liabilities | ||||||||
| Finance lease liability, net of current portion | ||||||||
| Operating lease liabilities, net of current portion | ||||||||
| Long-term bank borrowing | ||||||||
| Total non-current liabilities | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity | ||||||||
| PREFERRED STOCK; $ par value; shares authorized; outstanding | ||||||||
| COMMON STOCK; $ par value; shares authorized;and shares issued; and and shares outstanding as of March 31, 2026 and December 31, 2025, respectively | ||||||||
| Treasury stock; shares as of March 31, 2026 and December 31, 2025 at cost | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Retained earnings unappropriated | ( | ) | ( | ) | ||||
| Retained earnings appropriated | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
(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.
1
GULF RESOURCES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Expressed in U.S. dollars)
| Three-Month Period Ended March 31, | ||||||||
| 2026 (Unaudited) | 2025 (Unaudited) | |||||||
| NET REVENUE | $ | $ | ||||||
| OPERATING COSTS AND EXPENSE | ||||||||
| Cost of revenues | ( | ) | ( | ) | ||||
| Sales and marketing expenses | ( | ) | ( | ) | ||||
| Direct labor and factory overheads incurred during plant shutdown | ( | ) | ( | ) | ||||
| General and administrative expenses | ( | ) | ( | ) | ||||
| TOTAL OPERATING COSTS AND EXPENSE | ( | ) | ( | ) | ||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest income | ||||||||
| LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ||||
| INCOME TAX EXPENSE | ||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| COMPREHENSIVE INCOME (LOSS): | ||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| OTHER COMPREHENSIVE INCOME | ||||||||
| - Foreign currency translation adjustments | ||||||||
| TOTAL COMPREHENSIVE LOSS | $ | ( | ) | $ | ( | ) | ||
| 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.
See accompanying notes to the condensed consolidated financial statements.
2
GULF RESOURCES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
THREE-MONTH PERIOD ENDED MARCH 31, 2026
(Expressed in U.S. dollars)
| Common stock | ||||||||||||||||||||||||||||||||||||||||||||
| Number of shares issued | Number of shares outstanding | Number of treasury stock | Amount | Treasury stock |
Share to be issued | Additional paid-in capital | Retained earnings unappropriated | Retained earnings appropriated | Accumulated other comprehensive Income(loss) | Total | ||||||||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2025 (Audited) | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||
| Restricted shares issued for services | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of Private Placement Units | — | |||||||||||||||||||||||||||||||||||||||||||
| Net loss for three-month period ended March 31, 2026 | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2026 (Unaudited) | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||
| Common stock | ||||||||||||||||||||||||||||||||||||||||||||
| Number of shares issued(1) | Number of shares outstanding(1) | Number of treasury stock(1) | Amount(1) | Treasury stock |
Share to be issued | Additional paid-in capital(1) | Retained earnings unappropriated | Retained earnings appropriated | Accumulated other comprehensive Income(loss) | Total | ||||||||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2024 (Audited) (Restated) | $ | $ | ( | ) | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||
| Restricted shares issued for services | — | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Acquisition of assets | — | |||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net loss for three-month period ended March 31, 2025 | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2025 (Unaudited) | $ | $ | ( | ) | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||
(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.
3
GULF RESOURCES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. dollars)
(UNAUDITED)
| Three-Month Period Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| 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 | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Prepayments and deposits | ( | ) | ( | ) | ||||
| Other receivables | ( | ) | ( | ) | ||||
| Accounts and other payable and accrued expenses | ||||||||
| Taxes payable | ||||||||
| Lease liabilities | ( | ) | ( | ) | ||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| 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 | ( | ) | ||||||
| CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS - END OF PERIOD | $ | $ | ||||||
| Periods Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| 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.
4
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Expressed in U.S. dollars)
(UNAUDITED)
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. Ltd. (“SHSI”). 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”); manufactures and trades crude salt through its wholly owned subsidiary, SHSI; and manufactures chemical products for use in the oil industry, pesticides, paper manufacturing industry and for human and animal antibiotics through its wholly- owned subsidiary, Shouguang Yuxin Chemical Industry Co., Limited (“SYCI”) in the People’s Republic of China (“PRC”). DCHC was established to further explore and develop natural gas and brine resources (including bromine and crude salt) in the PRC. DCHC’s business commenced trial operation in January 2019 but suspended production temporarily in May 2019 as required by the government to obtain project approval (see Note 1 (b)(iii)).
| (i) | Bromine and Crude Salt Segments |
In February 2019, the Company received a notification from the local government of Yangkou County that its Factory No. 1, No. 4, No. 7 and 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. 1 and Factory No. 7, to temporarily stop production from December 16, 2019 to February 10, 2020. Subsequently, due to the coronavirus outbreak in China, the local government ordered those bromine facilities to postpone the commencement of production. Subsequently, the Company received an approval dated February 27, 2020 issued by the local governmental authority allowing the Company to resume production after the winter temporary closure. Further, the Company received another approval from the Shouguang Yangkou People’s Government dated March 5, 2020 allowing the Company to resume production at its bromine factories 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. 1 and No. 7 commenced trial production in mid-March 2020 and commercial production on April 3, 2020 and its Factories No. 4 and No. 9 commenced commercial production on May 6, 2020. The Company received verbal notification from the government regarding Factory No. 8, allowing it to recommence production in August 2022. Factory No. 8 began contributing revenue in the fourth quarter of 2022.
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.
Pursuant to the notification from the government of Shouguang City, all bromine facilities in Shouguang City were temporarily closed from December 10, 2022 until February 1, 2023 8:00 AM China Time. To comply with such notification, the Company had temporarily stopped production at its bromine facilities during the aforesaid period and reopened the operating bromine and crude salt factories in February, 2023 as planned.
In April 2022, Shouguang Hengde Salt Industry Co. Ltd, our subsidiary, was incorporated in Shandong Province, China, for crude salt production and trading. This subsidiary was created in response to a new government policy that required bromine and crude salt companies to have separate registrations. 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.
5
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Expressed in U.S. dollars)
(UNAUDITED)
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 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.
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 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.
The Company believes this relocation process
will cost approximately $
On December 10, 2025, SCHC entered
into an equity transfer agreement with Shandong Rongyuan Pharmaceutical Co., Ltd. and SYCI. Pursuant to the agreement, Shandong Rongyuan
Pharmaceutical Co., Ltd. agreed to purchase
| (iii) | Natural Gas Segment |
In January 2017, the Company completed the first brine water and natural gas well field construction in Daying located in Sichuan Province, China, and commenced trial production in January 2019. On May 29, 2019, the Company received a verbal notice from the government of Tianbao Town, Daying County, Sichuan Province, whereby the Company is required to obtain project approval for its well located in Daying, including the whole natural gas and brine water project, and approvals for safety production inspection, environmental protection assessment, and to solve the related land issue. 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.
| (c) | Use of Estimates |
The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and this requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. 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.
6
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Expressed in U.S. dollars)
(UNAUDITED)
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. The company reviews all receivables that exceed the term. The Company establishes an allowance for doubtful accounts based on management’s assessment of the collectability of trade and other receivables. A considerable amount of judgment is required in assessing the amount of allowance and the Company considers the historical level of credit losses. The Company makes judgments about the credit worthiness of each customer based on ongoing credit evaluations, and monitors current economic trends that might impact the level of credit losses in the future. If the financial condition of the customer begins to deteriorate, resulting in their inability to make payments within credit term provided, an allowance may be required.
As of March 31, 2026 and December
31, 2025, the provision for doubtful debts was $
| (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 $
Concentrations of credit risk with respect to accounts receivable exists as the Company sells a substantial portion of its products to a limited number of customers. However, such concentrations of credit risks are limited since the Company performs ongoing credit evaluations of its customers’ financial condition and extends credit terms as and when appropriate.
| (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.
7
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Expressed in U.S. dollars)
(UNAUDITED)
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 is remote.
| (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:
| Useful life (in years) | ||||
| Mineral rights | ||||
| Leasehold Improvements | ||||
| Plant and machinery (including protective shells, transmission channels and ducts) | ||||
| Motor vehicles | ||||
| Furniture, fixtures and equipment | ||||
Producing oil and gas properties are depreciated on a unit-of-production basis over the proved developed reserves. Common facilities that are built specifically to service production directly attributed to designated oil and gas properties are depreciated based on the proved developed reserves of the respective oil and gas properties on a pro-rata basis. Common facilities that are not built specifically to service identified oil and gas properties are depreciated using the straight-line method over their estimated useful lives. Costs associated with significant development projects are not depreciated until commercial production commences and the reserves related to those costs are excluded from the calculation of depreciation.
| (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. 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.
8
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Expressed in U.S. dollars)
(UNAUDITED)
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. 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 |
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 impairment.
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 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
due. The Company’s contributions totaled $
9
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Expressed in U.S. dollars)
(UNAUDITED)
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. Mineral rights are included in property, plant and equipment.
| (n) | Leases |
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. 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 share for the three-month periods ended March 31, 2026 and 2025. These awards could be dilutive in the future if the market price of the common stock increases and is greater than the exercise price of these awards.
| (p) | Reporting Currency and Translation |
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 “$”).
10
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Expressed in U.S. dollars)
(UNAUDITED)
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 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 (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. Invoicing occurs upon acknowledgement of receipt of the goods by the customers. Customers have no rights to return the goods upon acknowledgement of receipt of goods. Customers typically pay after the Company delivers and transfers the products to them in accordance 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. 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 |
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.
11
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Expressed in U.S. dollars)
(UNAUDITED)
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. 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.
| (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 estimates.
| (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. The 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. In June 2018, the FASB issued ASU No. 201807, Compensation - Stock Compensation (Topic 7I8), 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
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. 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. 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. Early adoption is permitted. The Company is in the process of assessing the impact of the amendments on the Company’s consolidated financial statements.
12
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Expressed in U.S. dollars)
(UNAUDITED)
NOTE 2 – ACCOUNTS RECEIVABLE, NET
Accounts receivable net consist of:
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Accounts receivable | $ | $ | ||||||
| Allowance for doubtful debt | ( | ) | ( | ) | ||||
| $ | $ | |||||||
The overall accounts receivable balance as of
March 31, 2026 decreased by $
NOTE 3 – INVENTORIES
Inventories consist of:
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Raw materials | $ | $ | ||||||
| Finished goods | ||||||||
| Less: impairment | ( | ) | ||||||
| Inventories, net | $ | $ | ||||||
The Company recorded impairment charges for slow moving inventory in the amounts of nil for the three months ended March 31, 2026 and 2025.
NOTE 4 – PREPAYMENTS AND DEPOSITS, NET
Prepayments and deposits consisted of the following:
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Prepayments and deposits | $ | $ | ||||||
| Provision for impairment | ( | ) | ||||||
| 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:
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Loan receivable(1) | $ | $ | ||||||
| Proceeds receivable from sale of subsidiary(2) | ||||||||
| Other | ||||||||
| 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) |
13
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Expressed in U.S. dollars)
(UNAUDITED)
NOTE 6 – PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consist of the following:
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| At cost: | ||||||||
| Mineral rights | $ | $ | ||||||
| Leasehold Improvements | ||||||||
| Plant and machinery | ||||||||
| Furniture, fixtures and office equipment | ||||||||
| Motor vehicles | ||||||||
| Construction in process | ||||||||
| Total | ||||||||
| Less: Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Less: Impairment | ( | ) | ( | ) | ||||
| Net book value | $ | $ | ||||||
The rollforward of property, plant and equipment, net were as follows:
December 31, 2025 | Remodel of Brine Well(a) | Remodel of Chlorine Gas Shed(b) | Depreciation (c) | Foreign translation | March 31, 2026 | |||||||||||||||||||
| At cost: | ||||||||||||||||||||||||
| Mineral rights | ||||||||||||||||||||||||
| Leasehold Improvements | ||||||||||||||||||||||||
| Plant and machinery | ( | ) | ||||||||||||||||||||||
| Furniture, fixtures and office equipment | ||||||||||||||||||||||||
| Motor vehicles | ||||||||||||||||||||||||
| Construction in progress | ||||||||||||||||||||||||
| Total | ( | ) | ||||||||||||||||||||||
| Less: Accumulated depreciation and amortization | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Impairment | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Net book value | ( | ) | ||||||||||||||||||||||
| (a) | ||
| (b) | ||
| (c) |
NOTE 7 –FINANCE LEASE RIGHT-OF-USE ASSETS
Property, plant and equipment under finance leases, net consist of the following:
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| At cost: | ||||||||
| Buildings | $ | $ | ||||||
| Total | ||||||||
| Less: Accumulated depreciation and amortization | ( | ( | ) | |||||
| 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 $
14
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Expressed in U.S. dollars)
(UNAUDITED)
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
As of March 31, 2026, the total operating lease right-of-use assets
was $
The total operating lease cost for the three-month period ended March
31, 2026 and 2025 was $
NOTE 9– BORROWINGS
The company entered into a loan agreement
with Shandong Shouguang Industrial and Commercial Bank Co., Ltd. for a principal amount of $
The Company entered into a loan agreement
with Shandong Shouguang Rural Commercial Bank Co., Ltd. for a principal amount of $
NOTE 10 –PAYABLE AND ACCRUED EXPENSES
Payables and accrued expenses consist of the following:
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Accounts payable | $ | $ | ||||||
| Salary payable | ||||||||
| Social security insurance contribution payable | ||||||||
| Accrued expense for construction | ||||||||
| Accrued expense-others (1) | ||||||||
| Total | $ | $ | ||||||
(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.
NOTE 11– RELATED PARTY TRANSACTIONS
a) Related parties
| Name of related parties | Position |
| Ming Yang | Shareholder |
| XiaoBin Liu | Chief Executive Officer |
| Min Li | Chief Financial Officer |
| NaiHui Miao | Chief Operating Officer |
| Chengdu Dianjinshi Culture media Co., LTD | Affiliated with company officers |
b)
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Amount due to related parties: | ||||||||
| Ming Yang | $ | $ | ||||||
| XiaoBin Liu | ||||||||
| Min Li | ||||||||
| NaiHui Miao | ||||||||
| Total | ||||||||
c)
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Amount due from related parties: | ||||||||
| Chengdu Dianjinshi Culture media Co., LTD | $ | $ | ||||||
| Total | $ | $ | ||||||
NOTE 12– TAXES PAYABLE
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Value added tax and other taxes payable | $ | $ | ||||||
| Total | $ | $ | ||||||
Of the remaining balance as of
March 31, 2026, $
NOTE 13 – LEASE LIABILITIES - FINANCE AND OPERATING LEASE
The components of finance lease liabilities were as follows:
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Total finance lease liability | $ | $ | ||||||
| Less: 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:
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Total Operating lease liabilities | $ | $ | ||||||
| Less: Current portion | ( | ) | ( | ) | ||||
| Operating lease liabilities, net of current portion | $ | $ | ||||||
The components of lease cost were as follows:
| Three-Month Period Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Finance 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:
| 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 | ||||||||
| thereafter | ||||||||
| Total | ||||||||
| Less: Amount representing interest | ( | ) | ( | ) | ||||
| Present value of net minimum lease payments | $ | $ | ||||||
A summary of supplemental information related to leases is listed as follows:
| Three-Month Period Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| 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:
| Three-Month Period Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| 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 | $ | $ | ||||||
15
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Expressed in U.S. dollars)
(UNAUDITED)
NOTE 14 ––EQUITY
Reverse Stock Split and Authorized Shares
On October 27, 2025, the Company completed a
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. The Company expenses the cost of the restricted stock awards, which is determined to be the fair market value of the shares at the date of grant, straight-line over the period during which the restrictions lapse. For these purposes, the fair market value of the restricted stock is determined based on the closing price of the Company's common stock on the grant date.
The Company granted an aggregate of (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 $ (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, (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 $ (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, 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 $ 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. Except
for the reduction of losses incurred, any other application should not result in this reserve balance falling below 25% of the registered
capital.
Stock 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 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.
On February 10, 2026, the company issued shares
of its common stock to one individual investor at an agreed price of $per
share for aggregate proceeds of $
On March 24, 2026, the company issued
shares of its common stock to one individual investor at an agreed price of $
per share for aggregate proceeds of $
NOTE 15 – TREASURY STOCK
As of March 31, 2026 and December 31, 2025, the number of treasury stock of the Company was and , respectively.
NOTE 16 – STOCK-BASED COMPENSATION
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 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 shares.
The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The risk free rate is based on the yield-to-maturity in continuous compounding of the US Government Bonds with the time-to-maturity similar to the expected tenor of the option granted, volatility is based on the annualized historical stock price volatility of the Company, and the expected life is based on the historical option exercise pattern.
For the 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.
| Number of Option and Warrants Outstanding and exercisable | Weighted- Average Exercise price of Option and Warrants | Range of Exercise Price per Common Share | ||||||||||
| Balance, January 1, 2026 | $ | |||||||||||
| Granted during the period | ||||||||||||
| Exercised during the period | ||||||||||||
| Expired during the period | $ | $ | ||||||||||
| Balance, March 31, 2026 | $ |
| Stock Options and Warrants Outstanding and Exercisable | ||||||||||||
Outstanding at March 31, 2026 | Range of Exercise Prices | Weighted Average Remaining Contractual Life (Years) | ||||||||||
| Outstanding and exercisable | — | |||||||||||
All options exercisable and outstanding as at March 31, 2026 are fully vested. As of March 31, 2026 there was unrecognized compensation cost related to outstanding stock options.
The aggregate intrinsic value of options outstanding and exercisable as of March 31, 2026, was nil .
During the three months ended March 31, 2026 and 2025, there were no options exercised.
16
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Expressed in U.S. dollars)
(UNAUDITED)
NOTE 17 – ACCRUED LIABILITIES
On 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..
Shandong Deepin City Emergency Loan Fund Co., Ltd. sought court action as Shandong Shouguang Vegetable Industry Group Co., Ltd. and Shandong Shouguang Vegetable Seed Industry Group Co., Ltd. were unable to pay principal before deadline or interests as scheduled. Pursuant to court orders (2024) Lu 07 Exec 640 and (2024) Lu 07 Exec 641, SCHC and SYCI, as guarantors, are required to repay the principal and interests. 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. The valuation report returned a fair value of
$
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 $
As of March 31, 2026, as SCHC were liable for
a sum of principal and interests of $
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.
| (a) | United States (“US”) |
Gulf Resources, Inc. may be subject to the United
States of America Tax laws at a tax rate of
| (b) | British Virgin Islands (“BVI”) |
Upper Class Group Limited, a subsidiary of Gulf Resources, Inc., was incorporated in the BVI and, under the current laws of the BVI, it is not subject to tax on income or capital gain in the BVI. Upper Class Group Limited did not generate assessable profit for the three-month period ended March 31, 2026 and 2025.
| (c) | Hong Kong |
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
and 2025. The applicable statutory tax rates for the three-month period ended March 31, 2026 and 2025 are
| (d) | PRC |
Enterprise income tax (“EIT”) for the subsidiaries in the PRC is charged at
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. 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.
The components of the income tax benefit from continuing operations are:
| Three-Month Period Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Current taxes – PRC | $ | $ | ||||||
| Deferred tax – PRC entities | ||||||||
| 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:
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Deferred tax liabilities | $ | $ | ||||||
| Deferred tax assets: | ||||||||
| Exploration costs | $ | $ | ||||||
| Allowance | ||||||||
| Impairment of long-lived assets | ||||||||
| PRC tax losses | ||||||||
| Accrued liabilities | ||||||||
| US federal net operating loss | ||||||||
| Total deferred tax assets | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| 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 $
The increase in valuation allowance for the three-month period ended
March 31, 2025 is $
There were
17
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Expressed in U.S. dollars)
(UNAUDITED)
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 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:
| Three-Month | ||||||||||||||||||||||||||||
| Period Ended | Crude | Chemical | Segment | |||||||||||||||||||||||||
March 31, 2026 | Bromine* | Salt* | Products | Natural Gas | Total | Corporate | Total | |||||||||||||||||||||
Net revenue (external customers) | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Loss from operations before income tax benefit | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Income tax benefit (expense) | ||||||||||||||||||||||||||||
| Loss from operations after income tax (expense) benefit | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Total assets | ||||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||||
| Capital expenditures | ||||||||||||||||||||||||||||
| Three-Month Period Ended March 31, 2025 | Bromine * | Crude Salt * | Chemical Products | Natural Gas | Segment Total | Corporate | Total | |||||||||||||||||||||
| Net revenue (external customers) | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Net revenue (intersegment) | ||||||||||||||||||||||||||||
| Loss from operations before income expense | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Income tax (expense) benefit | ||||||||||||||||||||||||||||
| Loss from operations after income taxes (expense) benefit | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Total assets | ||||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||||
| 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.
18
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2026
(Expressed in U.S. dollars)
(UNAUDITED)
NOTE 19 – BUSINESS SEGMENTS – Continued
| Three-Month Period Ended March 31, | ||||||||
| Reconciliations | 2026 | 2025 | ||||||
| Total segment operating loss | $ | ( | ) | $ | ( | ) | ||
| Corporate costs | ( | ) | ( | ) | ||||
| Unrealized gain (loss) on translation of intercompany balance | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Loss before taxes | $ | ( | ) | $ | ( | ) | ||
The following table shows the major customers (10% or more) for the three-month period ended March 31, 2026.
| Number | Customer | Bromine (000’s) | Crude Salt (000’s) | Chemical Products (000’s) | Total Revenue (000’s) | Percentage of Total Revenue (%) | ||||||||||||||||
| 1 | Shandong Shouguang Shenruifa Marine Chemical Company Limited | $ | $ | $ | $ | % | ||||||||||||||||
| 2 | Shandong Brother Technology Limited | % | ||||||||||||||||||||
| 3 | Shandong Morui Chemical Company Limited | % | ||||||||||||||||||||
| 4 | Shouguang Weidong Chemical Company Limited | % | ||||||||||||||||||||
| 5 | Shandong Xuruixin Materials Company Limited | $ | $ | $ | $ | % | ||||||||||||||||
The following table shows the major customers (10% or more) for the three-month period ended March 31, 2025.
| Number | Customer | Bromine (000’s) | Crude Salt (000’s) | Chemical Products (000’s) | Total Revenue (000’s) | Percentage of Total Revenue (%) | ||||||||||||||||
| 1 | Shandong Morui Chemical Company Limited | $ | $ | $ | $ | % | ||||||||||||||||
| 2 | Shandong Brother Technology Limited | % | ||||||||||||||||||||
| 3 | Shouguang Weidong Chemical Company Limited | % | ||||||||||||||||||||
| 4 | Shandong Shouguangshen Runfa Marine Chemical Company Limited | $ | $ | $ | $ | % | ||||||||||||||||
NOTE 20– CUSTOMER CONCENTRATION
During the three-month period ended March
31, 2026, the Company sold
During the three-month period ended March
31, 2025, the Company sold
NOTE 21– MAJOR SUPPLIERS
During the three-month period ended March
31, 2026 the Company purchased
During the three-month period ended March
31, 2025, the Company purchased
NOTE 22 –LOSS CONTINGENCIES
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. 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.
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. 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. 389. 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. 1, No. 4, No. 7 and 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
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. Under 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. (III)The 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
shares of its common stock to one individual investor at an agreed price of $ per share for aggregate proceeds of $
On April 14,2026, the company
issued shares of its common stock to one individual investor at an agreed price of $ per share for aggregate proceeds of $
19
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.
20
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.
21
Nasdaq Compliance
The Company received a notice (the “Initial Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) on April 18, 2024 notifying the Company that due to the Company’s failure to timely file its Annual Report on Form 10-K for the fiscal year ended December 31, 2023, with the SEC, the Company is not in compliance with Nasdaq’s continued listing requirements under Nasdaq Listing Rule 5250(c)(1) (the “Rule”), which requires the timely filing of all required periodic reports with the SEC, and the Company subsequently received a notice (the “May Notice”) from Nasdaq on May 21, 2024 due to the Company’s non-compliance with the Rule as a result of the Company’s failure to timely file its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024. The May Notice states that the Company has until June 17, 2024 to submit to Nasdaq a plan to regain compliance with the Rule.
As previously announced, on November 5, 2024, the Staff notified the Company that the bid price for the Common Shares no longer satisfied Nasdaq Listing Rule 5450(a) (1), the minimum bid price requirement applicable to The Nasdaq Global Select Market issuers. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company was afforded an initial 180-calendar day grace period, through May 5, 2025, to regain compliance with the minimum bid price requirement.
Issuers listed on The Nasdaq Global Select Market are not eligible for a second 180-day grace period under the Nasdaq Listing Rules. However, based upon the Company’s compliance with the various criteria required under Nasdaq Listing Rule 5810(c)(3)(A)(ii) to obtain a second 180-day grace period applicable to issuers listed on The Nasdaq Capital Market, the Company applied to transfer the listing of its Common Shares to The Nasdaq Capital Market.
22
On May 6, 2025, the Company was notified by the Nasdaq that the Company’s request to transfer the listing of its Common Stock, from The Nasdaq Global Select Market tier to The Nasdaq Capital Market tier has been granted, and that the Company was granted a second 180-calendar day period, or until November 3, 2025 (the “Second Compliance Period”), to regain compliance with the requisite bid price requirement, as set forth in Nasdaq Listing Rule 5550(a)(2). The transfer of the listing of the Common Shares from The Nasdaq Global Select Market to The Nasdaq Capital Market took effect with the open of business on May 8, 2025. The transfer is not expected to impact trading in the Common Shares, which will continue to trade on Nasdaq under the symbol “GURE.”
On November 12, 2025, the Company issued a press release providing certain updates on its hearing scheduling process with the Nasdaq Hearings Panel. The hearing did not take place because the Company subsequently regained compliance with the applicable Nasdaq listing requirement.
23
Our current corporate structure chart is set forth in the following diagram:
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.
24
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 period ended March 31, 2026 and 2025.
Comparison of the Three-Month Periods Ended March 31, 2026 and 2025
| Three-Month Period Ended March 31, 2026 | Three-Month Period Ended March 31, 2025 | Percent Change Increase/ (Decrease) | ||||||||||
| Net revenue | $ | 2,368,626 | $ | 1,604,447 | 48 | % | ||||||
| Cost of revenue | $ | (2,353,412 | ) | $ | (1,594,270 | ) | 48 | % | ||||
| Gross profit | $ | 15,214 | $ | 10,177 | 49 | % | ||||||
| Sales and marketing expenses | $ | (5,448 | ) | $ | (5,053 | ) | 8 | % | ||||
| Direct labor and factory overheads incurred during plant shutdown | $ | (2,743,262 | ) | (3,225,808 | ) | (15 | %) | |||||
| General and administrative expenses | $ | (1,323,101 | ) | $ | (1,389,523 | ) | (5 | %) | ||||
| Loss from operations | $ | (4,056,597 | ) | $ | (4,610,207 | ) | (12 | %) | ||||
| Interest income | $ | 253,660 | $ | 2,429 | 10343 | % | ||||||
| Interest expense | $ | (123,444 | ) | $ | (21,722 | ) | 468 | % | ||||
| Loss before income taxes | $ | (3,926,381 | ) | $ | (4,629,500 | ) | (15 | %) | ||||
| Income tax expense | $ | — | $ | — | — | |||||||
| Net loss | $ | (3,926,381 | ) | $ | (4,629,500 | ) | (15 | %) | ||||
Net Loss for the three-month period ended March 31, 2026 decreased to $3,926,381 from $4,629,500 in the same period in 2025, mainly due to the net revenue increased to $2,368,626 for the three-month period ended March 31, 2026 as compared to $1,604,447 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 March 31, 2026 as compared to the same period in 2025:
| Net Revenue by Segment | ||||||||||||||||||||
| Percent Change | ||||||||||||||||||||
| Three-Month Period Ended | Three-Month Period Ended | Increase | ||||||||||||||||||
| March 31, 2026 | March 31, 2025 | of Net Revenue | ||||||||||||||||||
| Segment | % of total | % of total | ||||||||||||||||||
| Bromine | $ | 2,249,950 | 95 | % | $ | 1,481,869 | 92 | % | 52 | % | ||||||||||
| Crude Salt | 118,676 | 5 | % | 122,578 | 8 | % | (3 | %) | ||||||||||||
| Chemical Products | — | — | — | — | — | |||||||||||||||
| Natural Gas | — | — | — | — | — | |||||||||||||||
| Total sales | $ | 2,368,626 | 100 | % | $ | 1,604,447 | 100 | % | 48 | % | ||||||||||
| Bromine and crude salt segments | Three-Month Period Ended | Percentage Change | ||||||||||
| product sold in tonnes | March 31, 2026 | March 31, 2025 | Increase (Decrease) | |||||||||
| Bromine | 455 | 402 | 13 | % | ||||||||
| Crude Salt | 4,659 | 4,733 | (2 | %) | ||||||||
Bromine segment
For the three-month periods ended March 31, 2026 and 2025, the net revenue for the bromine segment was $2,249,950 and $1,481,869, respectively. The increase of the net revenue of bromine was due to the 13% increase in tonnes sold and the 34% increase in average selling price of bromine.
Crude salt segment
For the three-month periods ended March 31, 2026 and 2025, the net revenue for the crude salt was $118,676 and $122,578, respectively. The decrease of net revenue of crude salt was mainly due to the 2% decrease in tonnes sold and the 2% decrease in average selling price of crude salt for the three-month period ended March 31, 2026.
Chemical products segment
For the three-month periods ended March 31, 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 gas segment
For the three-month periods ended March 31, 2026 and 2025, the net revenue was nil.
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Cost of Revenue
| Cost of Revenue by Segment | Percent Change | |||||||||||||||||||
| Three-Month Period Ended | Three-Month Period Ended | of Cost of | ||||||||||||||||||
| March 31, 2026 | March 31, 2025 | Revenue | ||||||||||||||||||
| Segment | % of total | % of total | ||||||||||||||||||
| Bromine | $ | 2,283,326 | 97 | % | $ | 1,533,128 | 96 | % | 49 | % | ||||||||||
| Crude Salt | 70,086 | 3 | % | 61,142 | 4 | % | 15 | % | ||||||||||||
| Chemical Products | — | — | — | — | — | |||||||||||||||
| Natural Gas | — | — | — | — | — | |||||||||||||||
| Total | $ | 2,353,412 | 100 | % | $ | 1,594,270 | 100 | % | 48 | % | ||||||||||
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 $2,353,412 for the three-month period ended March 31, 2026, an increase of $759,142 (or 48%) as compared to the same period in 2025 due to the increase of net revenue by 48% for the three-month period ended March 31, 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 | Utilization | ||||||||
| Capacity (in tonnes) | Ratio (i) | ||||||||
| Three-month period ended March 31, 2025 | 31,506 | 11 | % | ||||||
| Three-month period ended March 31, 2026 | 31,506 | 16 | % | ||||||
| Variance of the three-month periods ended March 31, 2026 and 2025 | — | 5 | % | ||||||
(i) Utilization ratio is calculated based on the annualized actual production volume in tonnes for the periods divided by the annual production capacity in tonnes.
Bromine segment
For the three-month period ended March 31, 2026 and 2025 the cost of revenue for the bromine segment was $2,283,326 and $1,533,128, respectively.
The increase in costs is mainly due to the increase in sales volume.
Crude salt segment
For the three-month period ended March 31, 2026 and 2025 the cost of revenue for the crude salt segment was $70,086 and $61,142, 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 period ended March 31, 2026 and 2025 was nil.
Natural gas segment
Cost of revenue for our natural gas segment for the three-month period ended March 31, 2026 and 2025 was nil.
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Gross Profit (Loss). Gross profit was $15,214, or 0.6% of net revenue for three-month period ended March 31, 2026, representing an increase of $5,037, as compared to a gross profit of $10,177, or 0.6% of net revenue for the same period in 2025.
| Gross Profit (Loss) by Segment | % Point Change | |||||||||||||||||||
| Three-Month Period Ended | Three-Month Period Ended | of Gross | ||||||||||||||||||
| March 31, 2026 | March 31, 2025 | Profit (Loss) Margin | ||||||||||||||||||
| Segment | Gross Profit (Loss) Margin | Gross Profit (Loss) Margin | ||||||||||||||||||
| Bromine | $ | (33,376 | ) | (1.5 | %) | $ | (51,259 | ) | (3.5 | %) | (2 | %) | ||||||||
| Crude Salt | $ | 48,590 | 41.0 | % | $ | 61,436 | 50 | % | (9 | %) | ||||||||||
| Chemical Products | $ | — | — | $ | — | — | — | |||||||||||||
| Natural Gas | $ | — | — | $ | — | — | — | |||||||||||||
| Total Gross Profit (Loss) | $ | 15,214 | 0.6 | % | $ | 10,177 | 0.6 | % | 0 | % | ||||||||||
Bromine segment
For the three-month period ended March 31, 2026, the gross loss margin for our bromine segment was 1.5%, compared to 3.5% in the three-month period ended March 31, 2025. The decrease in gross loss margin was primarily attributable to the higher average selling price of bromine of $4,948 per ton in the three-month period ended March 31, 2026 compared to $3,684 per ton in the three-month period ended March 31, 2025. Bromine tonnes sales also increased from 402 tonnes for the three-month period ended March 31, 2025 to 455 tonnes for the three-month period ended March 31, 2026.
Crude salt segment
For the three-month period ended March 31, 2026, the gross profit margin for our crude salt segment was 41%, compared to 50% in the same period in 2025, representing a 9% decrease.
Chemical products segment
For the three-month period ended March 31, 2026 and 2025, the gross profit margin for our chemical products segment was 0%.
Natural gas segment
For the three-month period ended March 31, 2026 and 2025, the gross profit margin for our natural gas segment was 0%.
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 $2,743,262 and $3,225,808 incurred for the three-month periods ended March 31, 2026 and 2025, respectively, of factories that have not resumed production were presented as part of the operating expense.
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General and Administrative Expenses General and administrative expenses were $1,323,101 for the three-month period ended March 31, 2026, a decrease of $66,422 (or 5%) as compared to $1,389,523 for the same period in 2025.
Loss from Operations Loss from operations was $4,056,597 the three-month period ended March 31, 2026, compared to loss from operations of $4,610,207 in the same period in 2025.
| Loss from Operations by Segment | ||||||||||||||||
| Three-Month Period Ended March 31, 2026 | Three-Month Period Ended March 31, 2025 | |||||||||||||||
| Segment: | % of total | % of total | ||||||||||||||
| Bromine | $ | (3,067,778 | ) | 80.2 | % | $ | (3,370,836 | ) | 77.9 | % | ||||||
| Crude Salt | (727,679 | ) | 19.0 | % | (554,062 | ) | 12.8 | % | ||||||||
| Chemical Products | — | — | (358,629 | ) | 8.3 | % | ||||||||||
| Natural Gas | (31,809 | ) | 0.8 | % | (44,844 | ) | 1 | % | ||||||||
| Loss from operations before corporate costs | (3,827,266 | ) | 100 | % | (4,328,371 | ) | 100 | % | ||||||||
| Corporate cost | (229,331 | ) | (281,836 | ) | ||||||||||||
| Loss from operations | $ | (4,056,597 | ) | $ | (4,610,207 | ) | ||||||||||
Bromine segment
Loss from operations from our bromine segment was $3,067,778 for the three-month period ended March 31, 2026, compared to loss from operations of $3,370,836 in the same period in 2025. This decrease was due to the 13% increase in tonnes sold and a 34% increase in average selling price.
Crude salt segment
Loss from operations from our crude salt segment was $727,679 for the three-month period ended March 31, 2026, compared to loss from operations of $554,062 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 three-month period ended March 31, 2026, compared to loss from operations of $358,629 in the same period in 2025. The reason for the reduction was due to the sale of SYCI completed by December, 2025.
Natural gas segment
Loss from operations from our natural gas segment was $31,809 for the three-month period ended March 31, 2026, compared to loss from operations of $44,844 in the same period in 2025.
Interest income
Interest income of $253,660 represented interest income from bank and loans made to third parties for the three-month period ended March 31, 2026, an increase of $251,231 as compared to the same period in 2025.
Interest Expenses
Interest expense of $123,444 represented bank interest expense for the three-month period ended March 31, 2026, an increase of $101,722 as compared to the same period in 2025.
Net Loss
Net loss was $3,926,381 for the three-month period ended March 31, 2026, compared to a net loss of $4,629,500 in the same period in 2025.
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LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2026, cash and cash equivalents were $6,537,505 as compared to $3,793 as of December 31, 2025. The components of this increase of $6,533,712 are reflected below.
Statement of Cash Flows
| Three-Month Period Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Net cash provided by/(used in) operating activities | $ | 1,090,974 | $ | (1,580,128 | ) | |||
| Net cash provided by investing activities | $ | 5,029,397 | $ | — | ||||
| Net cash provided by/(used in) financing activities | $ | 287,367 | $ | — | ||||
| Effects of exchange rate changes on cash and cash equivalents | $ | 125,974 | $ | 28,011 | ||||
| Net increase(decrease) in cash and cash equivalents | $ | 6,533,712 | $ | (1,552,117 | ) | |||
For the three-month period ended March 31, 2026, we met our working capital and capital investment requirements by using cash on hand.
Net Cash provided by (used in) Operating Activities
During the three-month period ended March 31, 2026, cash flow provided by operating activities of approximately $1.09 million was mainly due to a non-cash adjustment related to depreciation and amortization of property, plant and equipment of $3.36 million, amortization of finance lease right-of-use asset of $0.73 million, an increase in accounts receivable of $0.65 million, offset by a net loss of $3.93 million.
During the three-month period ended March 31, 2025, cash flow used in operating activities of approximately $1.58 million was mainly due to a net loss of $4.62 million, a decrease in accounts receivable of $1.5 million, offset by a non-cash adjustment related to depreciation and amortization of property, plant and equipment of $4 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 March 31, 2026 and December 31, 2025.
| March 31, 2026 | December 31, 2025 | |||||||||||||||
| % of total | % of total | |||||||||||||||
| Aged 1-30 days | $ | 2,674,441 | 100 | % | $ | 1,409,269 | 43 | % | ||||||||
| Aged 31-60 days | — | — | 1,860,151 | 57 | % | |||||||||||
| Aged 61-90 days | — | — | — | — | ||||||||||||
| Aged 91-120 days | — | — | — | — | ||||||||||||
| Aged 121-150 days | — | — | — | — | ||||||||||||
| Aged 151-180 days | — | — | — | — | ||||||||||||
| Aged 181-210 days | — | — | — | — | ||||||||||||
| Aged 211-240 days | — | — | — | — | ||||||||||||
| Total | $ | 2,674,441 | 100 | % | $ | 3,269,420 | 100 | % | ||||||||
The overall accounts receivable balance as of March 31, 2026 decreased by $594,979, 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.
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Inventory
Our inventory consists of the following:
| March 31, 2026 | December 31, 2025 | |||||||||||||||
| % of total | % of total | |||||||||||||||
| Raw materials | $ | 56,109 | 13 | % | $ | 20,079 | 4 | % | ||||||||
| Finished goods | 388,363 | 87 | % | 542,738 | 96 | % | ||||||||||
| Total | $ | 444,472 | 100 | % | $ | 562,817 | 100 | % | ||||||||
The net inventory level as of March 31, 2026 decreased by $118,345, as compared to the net inventory level as of December 31, 2025.
Raw materials increased by $36,030 as of March 31, 2026 as compared to December 31, 2025.
Our finished goods decreased by $136,375 as of March 31, 2026 as compared to December 31, 2025.
Net Cash Provided By Investing Activities
During the three months ended March 31, 2026, net cash provided by investing activities was $5.03 million, attributable to repayments received on loans to third parties of $5.55 million, offset by purchases of fixed assets of $0.52 million.
We did not have investing activities for the three-month periods ended March 31, 2025.
Net Cash Provided By / (Used In) Financing Activities
For the three-month period ended March 31, 2026, net cash provided by financing activities was $0.29 million, primarily due to proceeds from the issuance of units pursuant to a private placement. We did not have financing activities for the three-month periods ended March 31, 2025.
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 $6,537,505 at March 31, 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 March 31, 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 three months ended March 31, 2026.
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).
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Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules, regulations and related forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Form 10-Q.
(b) Changes in internal controls
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
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. 293, Shou Guo Tu Zi Fa Gao Zi [2018] No. 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 Shouguang City Haoyuan Chemical Company Limited (“SCHC”) by the Shouguang City Natural Resources and Planning Bureau (the “Bureau”), naming SCHC as respondent.
For more details and information related to the Written Decisions, please see “Note 22 – Loss Contingencies, Notes to Condensed Consolidated Financial Statement” contained in this quarterly report.
According to a Civil Mediation Statement (No. (2025) Lu 0783 Min Chu 2607) issued by the Shouguang People's Court of Shandong Province on March 17, 2025, Shouguang City Haoyuan Chemical Company Limited ("SCHC"), a wholly owned subsidiary of the Company, owes the plaintiff, Shouguang Chengyu Trading Co., Ltd., a total of RMB 226,825.44 for goods. SCHC is also obligated to make monthly payments of RMB 50,000 to the plaintiff by the 15th of each month, starting in April 2025, until the debt is fully paid off.
According to the mediation document No. 1358 of the Local Arbitration Commission, the applicant, Shandong Deepin City Emergency Loan Fund Co., Ltd., and the respondent, Shandong Shouguang Vegetable Industry Group Co., Ltd., confirmed that the total amount of the debt was 15,000,000 yuan, as well as the interests to be paid in the future. Shouguang Yuxin Chemical Co., Ltd. and Shouguang Haoyuan Chemical Co., Ltd. are jointly and severally liable for the above payment contents. If the payment is not made on time, the applicant has the right to apply to the court for compulsory execution. According to the mediation document No. 1357 of the Local Arbitration Commission in 2023, the applicant, Shandong Deepin City Emergency Loan Fund Co., Ltd., and the respondent, Shandong Shouguang Vegetable Seed Industry Group Co., Ltd., confirmed that the total amount of the debt was 10,000,000 yuan, as well as the interests to be paid in the future. Shouguang Yuxin Chemical Co., Ltd. and Shouguang Haoyuan Chemical Co., Ltd. are jointly and severally liable for the above payment contents. If the payment is not made on time, the applicant has the right to apply to the court for compulsory execution. Reading these two mediation, in August 2025, the court auctioned the idle land and attached properties on the ground of Shouguang Yuxin Chemical Co., Ltd.
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Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. Before you invest you should carefully review our Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in Item 2 of Part I of this Quarterly Report on Form 10-Q, our consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and our consolidated financial statements and related notes, as well as our Management’s Discussion and Analysis of Financial Condition and Results of Operations and the other information in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. Readers should carefully review risks described in other documents we file from time to time with the Securities and Exchange Commission.
If we are unable to comply with the applicable continued listing requirements or standards of Nasdaq, there is a possibility that our common stock could be delisted. At present, we are not in compliance with certain Nasdaq continued listing requirements. Should we be unable to regain compliance, our securities may be subject to delisting, which could impact the market price and liquidity of our common stock and potentially limit our access to capital.
We have received a determination from Nasdaq regarding potential delisting and, while we have effected a reverse stock split and timely appealed against such determination. While these actions reflect our commitment to maintaining our listing, there can be no assurance that we will regain or maintain compliance with Nasdaq’s continued listing requirements. A delisting could have implications for the trading and liquidity of our common stock, as well as our capital-raising efforts.
On November 4, 2025, we received a letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that we had not regained compliance with Nasdaq Listing Rule 5550(a)(2) (“Minimum Bid Price Requirement”) by the November 3, 2025 deadline. As a result, our securities would be scheduled for trading suspension. On November 7, 2025, we promptly appealed the Staff’s determination to the Nasdaq Hearings Panel (the “Panel”) a hearing before the Panel has been scheduled on December 9, 2025.
We are actively evaluating a range of available strategic and corporate actions that may assist in regaining compliance with the Minimum Bid Price Requirement. Apart from the reverse stock split which we have already implemented, we also intend to enhance investor engagement and pursue operational improvements, subject to board and shareholder approval.
While we are making every effort to address the listing requirements, there can be no assurance that the Panel will determine that we have achieved compliance with Listing Rule 5550(a)(2) within the prescribed period or that we will qualify for any additional compliance period that may be available or that we will ultimately satisfy all applicable Nasdaq listing standards. If our common stock is delisted, it could result in:
| • | limited availability of market quotations for our securities; |
| • | reduced liquidity for the Company’s securities; |
| • | a determination that the Company’s common stock is a “penny stock” which may impose additional trading restrictions; |
| • | a limited amount of news and analyst coverage; and |
| • | challenges in raising capital or issuing additional securities in the future. |
There can also be no assurance that the market price of the Company’s common stock will maintain the Minimum Bid Price Requirement.
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The Chinese government exerts substantial influence over the manner in which we must conduct our business activities. We are currently not required to obtain approval from Chinese authorities to list on U.S exchanges, however, if our holding company or subsidiaries were required to obtain approval or filing in the future and were denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange, which would materially affect the interest of the investors.
The Chinese government has exercised and can continue to exercise substantial control to intervene on virtually every sector of the Chinese economy through regulation and state ownership, and as a result, it can influence the manner in which we must conduct our business activities and effect material changes in our operations or the value of the common stock we are registering in this resale. Under the current government leadership, the government of the PRC has been pursuing reform policies which have adversely affected China-based operating companies whose securities are listed in the U.S., with significant policies changes being made from time to time without notice. There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including, but not limited to, the laws and regulations governing our business, or the enforcement and performance of our contractual arrangements with borrowers in the event of the imposition of statutory liens, death, bankruptcy or criminal proceedings. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, environmental regulations, land use rights, property and other matters. The central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.
Given recent statements by the Chinese government indicating an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, any such action could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or become worthless.
Recently, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Severely Cracking Down on Illegal Securities Activities According to Law, or the Opinions, which was made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems, will be taken to deal with the risks and incidents of China-concept overseas listed companies. As of the date hereof, we have not received any inquiry, notice, warning, or sanctions from PRC government authorities in connection with the Opinions.
On June 10, 2021, the Standing Committee of the National People’s Congress of China, or the SCNPC, promulgated the PRC Data Security Law, which took effect in September 2021. The PRC Data Security Law imposes data security and privacy obligations on entities and individuals carrying out data activities, and introduces a data classification and hierarchical protection system based on the importance of data in economic and social development, and the degree of harm it will cause to national security, public interests, or legitimate rights and interests of individuals or organizations when such data is tampered with, destroyed, leaked, illegally acquired or used. The PRC Data Security Law also provides for a national security review procedure for data activities that may affect national security and imposes export restrictions on certain data an information.
In early July 2021, regulatory authorities in China launched cybersecurity investigations with regard to several China-based companies that are listed in the United States. The Chinese cybersecurity regulator announced on July 2 that it had begun an investigation of Didi Global Inc. (NYSE: DIDI) and two days later ordered that the Company’s app be removed from smartphone app stores. On July 5, 2021, the Chinese cybersecurity regulator launched the same investigation on two other Internet platforms, China’s Full Truck Alliance of Full Truck Alliance Co. Ltd. (NYSE: YMM) and Boss of KANZHUN LIMITED (Nasdaq: BZ). On July 24, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly released the Guidelines for Further Easing the Burden of Excessive Homework and Off-campus Tutoring for Students at the Stage of Compulsory Education, pursuant to which foreign investment in such firms via mergers and acquisitions, franchise development, and variable interest entities are banned from this sector.
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On August 17, 2021, the State Council promulgated the Regulations on the Protection of the Security of Critical Information Infrastructure, or the Regulations, which took effect on September 1, 2021. The Regulations supplement and specify the provisions on the security of critical information infrastructure as stated in the Cybersecurity Review Measures. The Regulations provide, among others, that protection department of certain industry or sector shall notify the operator of the critical information infrastructure in time after the identification of certain critical information infrastructure.
On August 20, 2021, the SCNPC promulgated the Personal Information Protection Law of the PRC, or the Personal Information Protection Law, which took effect in November 2021. As the first systematic and comprehensive law specifically for the protection of personal information in the PRC, the Personal Information Protection Law provides, among others, that (i) an individual’s consent shall be obtained to use sensitive personal information, such as biometric characteristics and individual location tracking, (ii) personal information operators using sensitive personal information shall notify individuals of the necessity of such use and impact on the individual’s rights, and (iii) where personal information operators reject an individual’s request to exercise his or her rights, the individual may file a lawsuit with a People’s Court.
As such, the Company’s business segments may be subject to various government and regulatory interference in the provinces in which they operate. The Company could be subject to regulation by various political and regulatory entities, including various local and municipal agencies and government sub-divisions. The Company may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure to comply. Additionally, the governmental and regulatory interference could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
Furthermore, it is uncertain when and whether the Company will be required to obtain permission from the PRC government to list on U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied or rescinded. Although the Company is currently not required to obtain permission from any of the PRC federal or local government to obtain such permission and has not received any denial to list on the U.S. exchange, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to its business or industry.
On February 17, 2023, the CSRC promulgated Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies (the “Overseas Listing Trial Measures”) and five relevant guidelines, which became effective on March 31, 2023.According to the Overseas Listing Trial Measures, PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure with the CSRC and report relevant information. The Overseas Listing Trial Measures provides that an overseas listing or offering is explicitly prohibited, if any of the following: (1) such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (2) the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance with law; (3) the domestic company intending to make the securities offering and listing, or its controlling shareholder(s) and the actual controller, have committed relevant crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three years; (4) the domestic company intending to make the securities offering and listing is currently under investigations for suspicion of criminal offenses or major violations of laws and regulations, and no conclusion has yet been made thereof; or (5) there are material ownership disputes over equity held by the domestic company’s controlling shareholder(s) or by other shareholder(s) that are controlled by the controlling shareholder(s) and/or actual controller.
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The Overseas Listing Trial Measures also provides that if the issuer meets both the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed as indirect overseas offering by PRC domestic companies: (1) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its unaudited consolidated financial statements for the most recent fiscal year is accounted for by domestic companies; and (2) the issuer’s main business activities are conducted in China, or its main place(s) of business are located in China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in China. Where an issuer submits an application for initial public offering to competent overseas regulators, such issuer must file with the CSRC within three business days after such application is submitted. In addition, the Overseas Listing Trial Measures provide that the direct or indirect overseas listings of the assets of domestic companies through one or more acquisitions, share swaps, transfers or other transaction arrangements shall be subject to filing procedures in accordance with the Overseas Listing Trial Measures. The Overseas Listing Trial Measures also requires subsequent reports to be filed with the CSRC on material events, such as change of control or voluntary or forced delisting of the issuer(s) who have completed overseas offerings and listings.
At a press conference held for these new regulations (“Press Conference”), officials from the CSRC clarified that the domestic companies that have already been listed overseas on or before March 31, 2023 shall be deemed as existing issuers (the “Existing Issuers”). Existing Issuers are not required to complete the filling procedures immediately, and they shall be required to file with the CSRC upon occurrences of certain subsequent matters such as follow-on offerings of securities. According to the Overseas Listing Trial Measures and the Press Conference, the existing domestic companies that have completed overseas offering and listing before March 31, 2023, such as us, shall not be required to perform filing procedures for the completed overseas securities issuance and listing. However, from the effective date of the regulation, any of our subsequent securities offering in the same overseas market or subsequent securities offering and listing in other overseas markets shall be subject to the filing requirement with the CSRC within three working days after the offering is completed or after the relevant application is submitted to the relevant overseas authorities, respectively. If it is determined that any approval, filing or other administrative procedures from other PRC governmental authorities is required for any future offering or listing, we cannot assure you that we can obtain the required approval or accomplish the required filings or other regulatory procedures in a timely manner, or at all. If we fail to fulfill filing procedure as stipulated by the Trial Measures or offer and list securities in an overseas market in violation of the Trial Measures, the CSRC may order rectification, issue warnings to us, and impose a fine of between RMB1,000,000 and RMB10,000,000. Persons-in-charge and other persons that are directly liable for such failure shall be warned and each imposed a fine from RMB500,000 to RMB5,000,000. Controlling shareholders and actual controlling persons of us that organize or instruct such violations shall be imposed a fine from RMB1,000,000 and RMB10,000,000.
On February 24, 2023, the CSRC published the Provisions on Strengthening the Confidentiality and Archives Administration Related to the Overseas Securities Offering and Listing by Domestic Enterprises (the “Provisions on Confidentiality and Archives Administration”), which came into effect on March 31, 2023. The Provisions on Confidentiality and Archives Administration requires that, in the process of overseas issuance and listing of securities by domestic entities, the domestic entities, and securities companies and securities service institutions that provide relevant securities service shall strictly implement the provisions of relevant laws and regulations and the requirements of these provisions, establish and improve rules on confidentiality and archives administration. Where the domestic entities provide with or publicly disclose documents, materials or other items related to the state secrets and government work secrets to the relevant securities companies, securities service institutions, overseas regulatory authorities, or other entities or individuals, the companies shall apply for approval of competent departments with the authority of examination and approval in accordance with law and report the matter to the secrecy administrative departments at the same level for record filing. Where there is unclear or controversial whether or not the concerned materials are related to state secrets, the materials shall be reported to the relevant secrecy administrative departments for determination. However, there remain uncertainties regarding the further interpretation and implementation of the Provisions on Confidentiality and Archives Administration.
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As of the date of this report, we and our PRC subsidiaries have obtain the requisite licenses and permits from the PRC government authorities that are material for the business operations of our PRC subsidiaries. In addition, as of the date of this report, we and our PRC subsidiaries are not required to obtain approval or permission from the CSRC or the CAC or any other entity that is required to approve our PRC subsidiaries’ operations or required for us to offer securities to foreign investors under any currently effective PRC laws, regulations, and regulatory rules. If it is determined that we are subject to filing requirements imposed by the CSRC under the Overseas Listing Regulations or approvals from other PRC regulatory authorities or other procedures, including the cybersecurity review under the revised Cybersecurity Review Measures, for our future offshore offerings, it would be uncertain whether we can or how long it will take us to complete such procedures or obtain such approval and any such approval could be rescinded. Any failure to obtain or delay in completing such procedures or obtaining such approval for our offshore offerings, or a rescission of any such approval if obtained by us, would subject us to sanctions by the CSRC or other PRC regulatory authorities for failure to file with the CSRC or failure to seek approval from other government authorization for our offshore offerings. These regulatory authorities may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from our offshore offerings into China or take other actions that could materially and adversely affect our business, financial condition, results of operations, and prospects, as well as the trading price of our common stock. The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to halt our offshore offerings before settlement and delivery of the securities offered. Consequently, if investors engage in market trading or other activities in anticipation of and prior to settlement and delivery, they do so at the risk that settlement and delivery may not occur. In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for our prior offshore offerings, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our common stock.
In addition, on December 28, 2021, the CAC, the National Development and Reform Commission (“NDRC”), and several other administrations jointly issued the revised Measures for Cybersecurity Review, or the Revised Review Measures, which became effective and has replaced the existing Measures for Cybersecurity Review on February 15, 2022. According to the Revised Review Measures, if an “online platform operator” that is in possession of personal data of more than one million users intends to list in a foreign country, it must apply for a cybersecurity review. Based on a set of Q&A published on the official website of the State Cipher Code Administration in connection with the issuance of the Revised Review Measures, an official of the said administration indicated that an online platform operator should apply for a cybersecurity review prior to the submission of its listing application with non-PRC securities regulators. Given the recency of the issuance of the Revised Review Measures and their pending effectiveness, there is a general lack of guidance and substantial uncertainties exist with respect to their interpretation and implementation. For example, it is unclear whether the requirement of cybersecurity review applies to follow-on offerings by an “online platform operator” that is in possession of personal data of more than one million users where the offshore holding company of such operator is already listed overseas. Furthermore, the CAC released the draft of the Regulations on Network Data Security Management in November 2021 for public consultation, which among other things, stipulates that a data processor listed overseas must conduct an annual data security review by itself or by engaging a data security service provider and submit the annual data security review report for a given year to the municipal cybersecurity department before January 31 of the following year. If the draft Regulations on Network Data Security Management are enacted in the current form, we, as an overseas listed company, will be required to carry out an annual data security review and comply with the relevant reporting obligations.
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Because the majority of our operations are in mainland China and our auditor has been located in mainland China, a jurisdiction where the U.S. Public Company Accounting Oversight Board (“PCAOB”) is currently unable to conduct inspections without the approval of Chinese authorities, there have been concerns regarding oversight of the audits of our financial statements filed with the SEC. If the PCAOB continues to be unable to inspect our audit firm in the PRC for three consecutive years, the HFCAA requires the SEC to prohibit the trading of our securities on a national securities exchange, including Nasdaq, or on over-the-counter markets in the United States.
In addition, the U.S. Senate and U.S. House of Representatives have each passed bills, which, if enacted, would decrease the number of non-inspection years from three consecutive years to two, thus reducing the time period before our securities may be prohibited from trading on a U.S. securities exchange or delisted from Nasdaq. The foregoing could adversely affect the market price of our securities and our ability to raise capital effectively.
Auditors of companies that are registered with the SEC and traded publicly in the United States, including our independent registered public accounting firm, are required to be registered with the PCAOB and to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United States and applicable professional standards. Because our current auditor is located in mainland China, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of Chinese authorities, our auditor is not currently inspected by the PCAOB.
PCAOB inspections of auditors located outside of mainland China and Hong Kong have at times identified deficiencies in those auditors’ audit procedures and quality control procedures, which may be addressed as part of the PCAOB’s inspection process to improve future audit quality. The lack of PCAOB inspections of audit work undertaken in mainland China and Hong Kong prevents the PCAOB from regularly evaluating our auditor’s audits and its quality control procedures. As a result, investors are deprived of the benefits of PCAOB inspections, which could result in limitations or restrictions on our access to the U.S. capital markets.
Furthermore, in recent years, the U.S. Congress and regulatory authorities have continued to express concerns about challenges in their oversight of financial statement audits of U.S.-listed companies with significant operations in China. As part of this continued focus on access to audit and other information currently protected by national law, in particular under Chinese law, the United States enacted the HFCAA in December 2020. The HFCAA requires the SEC to identify issuers that have filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB has determined it is unable to inspect or investigate completely because of a restriction imposed by a non-U.S. authority in the auditor’s local jurisdiction (a “Commission-Identified Issuer”). Under the HFCAA, if the SEC conclusively identifies an issuer as a Commission-Identified Issuer for three consecutive years, the SEC is required to prohibit the trading of the issuer’s securities on a national securities exchange or through any other method that is within the jurisdiction of the SEC to regulate, including over-the counter markets in the United States. Our securities may be prohibited from trading on the Nasdaq or other U.S. stock exchanges if our auditor is not inspected by the PCAOB for three consecutive years, and this ultimately could result in our securities being delisted.
Furthermore, in June 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (“AHFCAA”),which, if enacted, would amend the HFCAA and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years (as opposed to the three years under the HFCAA). In February 2022, the U.S. House of Representatives passed the America Creating Opportunities for Manufacturing Pre-Eminence in Technology and Economic Strength (COMPETES) Act of 2022 (the “America COMPETES Act”), which similarly would amend the HFCAA to shorten the number of non-inspection years from three years to two years. The America COMPETES Act, however, includes a broader range of legislation than the AHFCA Act in response to the U.S. Innovation and Competition Act passed by the U.S. Senate in 2021. The U.S. House of Representatives and the U.S. Senate will need to agree on amendments to these respective bills to allow the legislature to pass their amended bills before the President can sign the bill into law. It is unclear if or when either of these bills will be signed into law.
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In September 2021, the PCAOB adopted PCAOB Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable Act, which provides a framework for the PCAOB to use when determining whether the PCAOB is unable to inspect or investigate completely a registered public accounting firm located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction for the purposes of the HFCAA. PCAOB Rule 6100 establishes the manner of the PCAOB’s determinations; the factors the PCAOB will evaluate and the documents and information it will consider when assessing whether a determination is warranted; the form, public availability, effective date, and duration of such determinations; and the process by which the PCAOB will reaffirm, modify or vacate any such determinations. In November 2021, the SEC announced that it had approved Rule6100. In December 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements int he HFCAA for Commission-Identified Issuers, which became effective on January 10, 2022. In addition, the PCAOB issued a Determination Report, pursuant to PCAOB Rule 6100, which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong because of positions taken by Chinese authorities in those jurisdictions. The SEC began to identify Commission- Identified Issuers for fiscal years beginning after December 18, 2020. A Commission-Identified Issuer will be required to comply with the submission and disclosure requirements in the annual report for each year in which it was so identified. If an issuer is identified as a Commission-Identified Issuer based on its annual report for the fiscal year ended December 31, 2021, the issuer will be required to comply with the submission or disclosure requirements in its annual report for the fiscal year ended December 31, 2022. If we are identified as a Commission-Identified Issuer that uses an auditor not subject to PCAOB inspection for three consecutive years, or, if the AHFCAA or the America COMPETES Act is passed, two consecutive years, our securities may be delisted from Nasdaq as a result. Delisting of our securities would force holders of our securities to sell their securities. Further, we may be prohibited from listing our securities on another U.S. securities exchange, making our shares harder to trade for the investors, potentially reducing demand and lowering our share price. The market price of our securities could be adversely affected as a result of anticipated negative impacts of such legislative or executive actions upon, as well as negative investor sentiment toward, companies with significant operations in mainland China and Hong Kong that are listed in the United States, regardless of whether such actions are implemented and regardless of our actual operating performance.
Our auditor, GGF CPA LTD., Certified Public Accountants, is a China-based accounting firm registered with the PCAOB, and is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Our auditor is headquartered in the China and is subject to inspection by the PCAOB on a regular basis. On August 26, 2022, the PCAOB signed the Protocol with the CSRC and the MOF of the People’s Republic of China, governing inspections and investigations of audit firms based in mainland China and Hong Kong. The Protocol remains unpublished and is subject to further explanation and implementation. Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB registered public accounting firms headquartered in China mainland and Hong Kong completely in 2022. The PCAOB Board vacated its previous 2021 determinations that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in China mainland and Hong Kong. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in China mainland and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s control. The PCAOB is continuing to demand complete access in China mainland and Hong Kong moving forward and was already making plans to resume regular inspections in early 2023 and beyond, as well as to continue pursuing ongoing investigations and initiate new investigations as needed. The PCAOB has indicated that it will act immediately to consider the need to issue new determinations with the HFCAA if needed. Therefore, the PCAOB in the future may determine that it is unable to inspect or investigate completely registered public accounting firms in mainland China and Hong Kong. Our auditor’s working papers related to us and our subsidiaries are located in China. If our auditor is not permitted to provide requested audit work papers located in China to the PCAOB, investors would be deprived of the benefits of PCAOB’s oversight of our auditor through such inspections which could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities may be prohibited under the HFCAA, which would result in the delisting of our securities from the Nasdaq.
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Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During our fiscal quarter ended March 31, 2026, none of our directors
or officers informed us of the
Item 6. Exhibits
| Exhibit No. | Description |
| 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002. |
| 31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002. |
| 32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 101 | The following financial statements from Gulf Resources, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2026 formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations and Other Comprehensive Income (Loss); (iii) the Consolidated Statements of Changes in Equity; (iv) the Consolidated Statement of Cash Flows; and, (v) the Notes to Consolidated Financial Statements, tagged as blocks of text. |
| 104 | Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File |
| because its XBRL tags are embedded within the Inline XBRL document. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| GULF RESOURCES, INC. | ||
| Dated: August 28, 2026 | By: | /s/ Xiaobin Liu |
| Xiaobin Liu | ||
| Chief Executive Officer | ||
| (principal executive officer) | ||
| Dated: August 28, 2026 | By: | /s/ Min Li |
| Min Li | ||
| Chief Financial Officer | ||
| (principal financial and accounting officer) | ||
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