GURE Q3 2025: revenue jumps but $41M YTD loss and going concern risk
Rhea-AI Filing Summary
Gulf Resources’ Q3 2025 results show severe losses driven by asset write-downs despite strong revenue growth. Net revenue for the quarter rose to
However, the company recorded a large impairment of long‑lived assets of
At September 30, 2025, total assets were
Positive
- None.
Negative
- Significant impairment and disposal losses: Q3 2025 includes a long‑lived asset impairment of $29.78 million and a $2.01 million loss on disposal, contributing to a quarterly net loss of $35.66 million and a nine‑month loss of $41.07 million.
- Going concern uncertainty and working capital deficit: As of September 30, 2025, current assets of $15.67 million were below current liabilities of $17.11 million, and management discloses substantial doubt about the company’s ability to continue as a going concern, highlighting reliance on future financing and cost reductions.
- Court‑ordered auction tied to guaranteed loans: Land and related assets were forcibly auctioned for $2.56 million to satisfy guaranteed third‑party borrowing, leaving $3.52 million of principal and interest exposure and $968,113 of accrued liabilities, underscoring legal and contingent liability risks.
Insights
Large impairments, litigation-related asset sale and going concern doubts weigh heavily on GURE.
Gulf Resources reported nine‑month net revenue of
These write‑downs stem from court‑ordered auction of land and related assets used as guarantees on third‑party loans, as well as fair‑value reductions of prepaid land leases and property, plant and equipment. The auction proceeds of
Liquidity is tight: as of
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.) | |
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| (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 ☐ |
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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 November 18, 2025, 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 | 1 |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 |
| Item 3. Quantitative and Qualitative Disclosures about Market Risk | 33 |
| Item 4. Controls and Procedures | 34 |
| Part II – Other Information | |
| Item 1. Legal Proceedings | 34 |
| Item 1A. Risk Factors | 35 |
| Item 2. Unregistered Sale of Equity Securities and Use of Proceeds | 42 |
| Item 3. Defaults Upon Senior Securities | 42 |
| Item 4. Mine Safety Disclosures | 42 |
| Item 5. Other Information | 42 |
| Item 6. Exhibits | 42 |
| Signatures | 43 |
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
GULF RESOURCES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollars)
(UNAUDITED)
| September 30, 2025 Unaudited | December 31, 2024 Audited | |||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable ,net | ||||||||
| Inventories, net | ||||||||
| Prepayments and deposits | ||||||||
| Amount due from related parties | ||||||||
| Other receivable | ||||||||
| 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 | ||||||||
| 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 | ||||||||
| Total Non-Current Liabilities | ||||||||
| Total Liabilities | $ | $ | ||||||
| Commitment and Loss Contingencies | $ | $ | ||||||
| Stockholders’ Equity | ||||||||
| PREFERRED STOCK; $ par value; shares authorized; outstanding | $ | $ | ||||||
| COMMON STOCK; $ par value; shares authorized; and shares issued; and and shares outstanding as of September 30, 2025 and December 31, 2024, respectively (1) | ||||||||
| Treasury stock; shares as of September 30, 2025 and December 31, 2024 at cost | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Share to be issued | ||||||||
| 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 LOSS AND COMPREHENSIVE LOSS
(Expressed in U.S. dollars)
(UNAUDITED)
| Three-Month Period Ended September 30, | Nine -Month Period Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| NET REVENUE | $ | $ | $ | $ | ||||||||||||
| OPERATING COSTS AND EXPENSES | ||||||||||||||||
| Cost of net revenue | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 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 | ||||||||||||||||
| Other expense, net | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss on disposal of long-lived assets | ( | ) | ( | ) | ( | ) | ||||||||||
| Impairment of long-lived assets | ( | ) | ( | ) | ||||||||||||
| LOSS BEFORE TAXES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| INCOME TAX BENEFIT (EXPENSE) | ||||||||||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| COMPREHENSIVE LOSS | ||||||||||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| OTHER COMPREHENSIVE (LOSS) 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 |
| NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2025 |
| (Expressed in U.S. dollars) |
| Common stock | Accumulated | |||||||||||||||||||||||||||||||||||||||
| Number | Number | Number | Additional | Retained | Retained | other | ||||||||||||||||||||||||||||||||||
| of shares | of shares | of treasury | Treasury | paid-in | earnings | earnings | comprehensive | |||||||||||||||||||||||||||||||||
| issued(1) | outstanding(1) | stock(1) | Amount(1) | stock(1) | capital(1) | unappropriated | appropriated | Income(loss) | Total | |||||||||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2025 (Unaudited) | 1,353,531 | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Translation adjustment | — | — | — | |||||||||||||||||||||||||||||||||||||
| Net loss for three-month period ended September 30, 2025 | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2025 (Unaudited) | 1,353,531 | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Common stock | Accumulated | |||||||||||||||||||||||||||||||||||||||
| Number | Number | Number | Additional | Retained | Retained | other | ||||||||||||||||||||||||||||||||||
| of shares | of shares | of treasury | Treasury | paid-in | earnings | earnings | comprehensive | |||||||||||||||||||||||||||||||||
| issued(1) | outstanding(1) | stock(1) | Amount(1) | stock(1) | capital(1) | unappropriated | appropriated | Income(loss) | Total | |||||||||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2024 (Unaudited) | 1,091,562 | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Translation adjustment | — | — | — | |||||||||||||||||||||||||||||||||||||
| Net income for three-month period ended September 30, 2024 | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2024 (Unaudited) | 1,091,562 | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Common stock | Accumulated | |||||||||||||||||||||||||||||||||||||||||||
| Number | Number | Number | Additional | Retained | Retained | other | ||||||||||||||||||||||||||||||||||||||
| of shares | of shares | of treasury | Treasury | Share to be | paid-in | earnings | earnings | comprehensive | ||||||||||||||||||||||||||||||||||||
| issued(1) | outstanding(1) | stock(1) | Amount(1) | stock(1) | issued(1) | capital(1) | unappropriated | appropriated | Income(loss) | Total | ||||||||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2024 (Audited) | 1,091,562 | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
| Restricted shares issued for services | 56,000 | — | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Acquisition of Assets | 205,969 | — | ||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net loss for nine-month period ended September 30, 2025 | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| BALANCE AT September 30, 2025(Unaudited) | 1,353,531 | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||
| Common stock | Accumulated | |||||||||||||||||||||||||||||||||||||||
| Number | Number | Number | Additional | Retained | Retained | other | ||||||||||||||||||||||||||||||||||
| of shares | of shares | of treasury | Treasury | paid-in | earnings | earnings | comprehensive | |||||||||||||||||||||||||||||||||
| issued(1) | outstanding(1) | stock(1) | Amount(1) | stock(1) | capital(1) | unappropriated | appropriated | Income(loss) | Total | |||||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2023 (Audited) | 1,091,562 | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Translation adjustment | — | — | — | |||||||||||||||||||||||||||||||||||||
| Net loss for nine-month period ended September 30, 2024 | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2024(Unaudited) | 1,091,562 | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
(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) |
| Nine-Month Period Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| 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 | ||||||||
| Deferred tax asset | ( | ) | ||||||
| Amortization of right-of-use asset | ||||||||
| Stock-based compensation expense | ||||||||
| Loss on disposal of long-lived assets | ||||||||
| Impairment of long-lived assets | ||||||||
| Accrued Liabilities | ||||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Prepayments and deposits | ||||||||
| Advance from customers | ( | ) | ||||||
| Other receivables | ( | ) | ||||||
| Accounts and Other payable and accrued expenses | ( | ) | ||||||
| Amount due to related Parties | ||||||||
| Taxes payable | ( | ) | ||||||
| Operating lease | ( | ) | ( | ) | ||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property, plant and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Repayment of finance lease obligation | ( | ) | ( | ) | ||||
| Net cash used in 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 September 30, | ||||||||
| 2025 | 2024 | |||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the nine-month period ended September 30, 2025 for: | ||||||||
| Paid for taxes | $ | $ | ||||||
| Interest on finance lease obligation | $ | $ | ||||||
| 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
SEPTEMBER 30, 2025
(Expressed in U.S. dollars)
(UNAUDITED)
NOTE 1 – BASIS OF PRESENTATION 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.
(b) Going Concern Consideration
The consolidated financial statements are prepared on the going concern basis, meaning that the enterprise is expected to realize the assets and settle the liabilities through normal business operations. However, the going concern of the enterprise relies on many factors, such as profitable operations, generating operating cash flows, obtaining financing, etc.
The company assesses its liquidity by monitoring cash and cash equivalents,
as well as operating and capital expenditure commitments. As of September 30, 2025, the Company had
current assets of $ million and current liabilities of $ million. As a result, the deficit was $
If there are significant doubts regarding the company's ability to continue operations, the company is attempting to alleviate such concerns through measures such as controlling operating expenses, shifting business focus to revenue-generating activities, obtaining authorization from domestic banks and other financial institutions, and seeking equity or debt financing. Additionally, the company will also obtain financial support commitments from related parties. However, these situations still pose significant doubts regarding the company's ability to continue operations. The financial statements do not consider the potential impact on the recoverability of assets, classification, and amounts and classification of liabilities if the company is unable to continue operations.
(c) 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 has temporarily suspended production insince 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 2022.
The Company is still waiting for governmental approval for Factories No. 2 and No. 10. To our knowledge, the government is currently completing its planning process for all mining areas including that for prevention of flood. As a result, we may be required to make some modifications to our current wells and aqueducts prior to commencement of operations of these factories to satisfy the local government's requirements.
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 resulting in a reallocation of costs between bromine and crude salt.
(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 was because the two plants were located in a residential area and their production activities impacted the living environment of the residents. This was 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 did not comply with the requirements of the safety and environmental protection regulations were ordered to shut down.
In December 2017, the Company secured from the government the land use rights for its chemical plants located at the 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 were eased. Accordingly, the Company contacted its suppliers and expect to have the remainder of the equipment produced and delivered, so the Company can complete installation and begin testing and trial production.
The Company believes the relocation process will
cost approximately $
(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.
(d) 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.
(e) 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.
(f) Allowance for Doubtful Accounts
We make estimates of the uncollectibility of accounts receivable, especially analyzing accounts receivable and historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in customer payment terms, when evaluating the adequacy of the allowance for doubtful accounts. Credit evaluations are undertaken for all major sale transactions before shipment is authorized. On a quarterly basis, we evaluate aged items in the accounts receivable aging report and provide an allowance in an amount we deem adequate for doubtful accounts. If management were to make different judgments or utilize different estimates, material differences in the amount of our reported operating expenses could result.
(g) 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, Bank of China Limited and Sichuan Rural Credit Union, 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.
5
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(Expressed in U.S. dollars)
(UNAUDITED)
NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued
(h) 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) | |
| Buildings (including salt pans) | ||
| Plant and machinery (including protective shells, transmission channels and ducts) | ||
| Motor vehicles | ||
| Furniture, fixtures and equipment |
Property, plant and equipment under the finance lease are depreciated over their expected useful lives on the same basis as owned assets, or where shorter, the term of the lease.
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 designate 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.
(i) 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 condensed consolidated statement of loss on an accrual basis when they are due. The Company’s
contributions totaled $
(j) 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 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. Revenue from contracts with customers is disaggregated in Note 18.
6
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(Expressed in U.S. dollars)
(UNAUDITED)
NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued
(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 and nine-month periods ending September 30, 2025,
the impairment of the company's long-term assets was $
Basic earnings per common share 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 shares plus dilutive common share equivalents outstanding during the period. Potential common shares that would have the effect of increasing diluted earnings per share are considered to be anti-dilutive, i.e. the exercise prices of the outstanding stock options were greater than the market price of the common stock. Anti-dilutive common stock equivalents which were excluded from the calculation of number of dilutive common stock equivalents amounted to and shares for the nine-month periods ended September 30, 2025 and 2024, respectively.
Because the Company reported a net loss for the nine-month periods ended September 30, 2025 and 2024, common stock equivalents including stock options and warrants were anti-dilutive, therefore the amounts reported for basic and diluted loss per share were the same.
7
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(Expressed in U.S. dollars)
(UNAUDITED)
NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued
(m) 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 “$”).
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 loss. The statement of loss and comprehensive 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.
(n) Foreign Operations
All of the Company’s operations and assets are located in PRC. The Company may be adversely affected by possible political or economic events in this country. The effect of these factors cannot be accurately predicted.
(o) 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.
(p) 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 does not recognize operating lease ROU assets and liabilities arising from lease arrangements with lease term of twelve months or less.
Stock-based awards issued to employees are recorded at their fair values estimated at grant date using the Black-Scholes model and the portion that is ultimately expected to vest is recognized as compensation cost over the requisite service period. Consistent with the accounting requirement for employee stock-based awards, nonemployee stock-based awards are measured at the grant-date fair value of the equity instruments that the Company 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.
(r) 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 could be reasonably estimable. Such estimates may be based on advice from third parties or on management’s judgment, as appropriate. Revisions to accruals are reflected in earnings (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.
(s) Income Tax
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 income (loss).
(t) New Accounting Pronouncements
Recent accounting pronouncements adopted
There were no recent accounting pronouncements adopted during the nine months ended September 30, 2025.
Recently Issued Accounting Pronouncements Not Yet Adopted
There were no recently issued accounting pronouncements not yet adopted during the nine months ended September 30, 2025.
(u) 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, accounts payable and other current payables. There were no material unrecognized financial assets and liabilities as of September 30, 2025 and 2024.
The Company determines the fair value with the help from independent third party professional valuation specialists, and the assumptions used in estimating fair value require significant judgment. The use of different assumptions and judgments could result in a materially different estimate of fair value. There are Base land price coefficient correction method and market comparison method for Prepaid land leases, and cost method for Property, Plant and equipment are used in the valuation, which are all classified in Level 3 of the valuation hierarchy.
The following table presents the Company’s assets measured at fair value on a non-recurring basis for the years ended September 30, 2025:
| Fair Value Measurements at Reporting Date Using | ||||||||||||||||||||||
| Description | Fair Value as of September 30,2025 US$ | Quoted Prices in Active Markets for Identical Assets (Level 1) US$ | Significant Other Observable Inputs (Level 2) US$ | Significant Unobservable Inputs (Level 3) US$ | Total Gain(Loss) for the Year Ended September 30,2025 US$ | |||||||||||||||||
| As of September 30, 2025 | Prepaid land leases | — | — | |||||||||||||||||||
| As of September 30, 2025 | Property, Plant and equipment | — | — | |||||||||||||||||||
8
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(Expressed in U.S. dollars)
(UNAUDITED)
NOTE 2 – ACCOUNTS RECEIVABLE, NET
Accounts receivable net consist of:
| September 30, 2025 | December 31, 2024 | |||||||
| Accounts receivable | $ | $ | ||||||
| Allowance for doubtful debt | ( | ) | ( | ) | ||||
| Accounts receivable, net | $ | $ | ||||||
The overall accounts receivable balance as of
September 30, 2025 increased by $
NOTE 3 – INVENTORIES
Inventories consist of:
| September 30, 2025 | December 31, 2024 | |||||||
| Raw materials | $ | $ | ||||||
| Finished goods | ||||||||
| Less: impairment | ( | ) | ||||||
| Inventory, net | $ | $ | ||||||
The Company recorded impairment charges for slow moving inventory in
the amounts of and $
NOTE 4 – PREPAYMENTS AND DEPOSITS, NET
Prepayments and deposits consisted of the following:
| September 30, 2025 | December 31, 2024 | |||||||
| Prepayments and deposits | $ | $ | ||||||
| Provision for impairment | ( | ) | ( | ) | ||||
| Prepayments and deposits, net | $ | $ | ||||||
As of September 30, 2025, the total amount of advance payments and
deposits recorded by the company, net of impairment provisions was $
NOTE 5 – PREPAID LAND LEASES
The Company has the rights to use certain parcels of land located in Shouguang, Shandong, PRC, through lease agreements signed with local townships or the government authority. The production facilities and warehouses of the Company are located on these parcels of land. The lease term ranges from to years. Some of the lease contracts were paid in one lump sum upfront and some are paid annually at the beginning of each anniversary date. These leases have no purchase option at the end of the lease term and were classified as operating leases prior to and as of January 1, 2019 when the new lease standard was adopted. Prior to January 2019, the prepaid land lease was amortized on a straight line basis. As of January 1, 2019, all the leases in which term has commenced and were in use were classified as operating lease right-of-use assets (“ROU”). See Note 8.
In December 2017, the Company paid a one lump sum upfront amount of
$
The above leased-land had done the impairment of
$
9
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(Expressed in U.S. dollars)
(UNAUDITED)
NOTE 6 – PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consist of the following:
| September 30, 2025 | December 31, 2024 | |||||||
| At cost: | ||||||||
| Mineral rights | $ | $ | ||||||
| Buildings | ||||||||
| Plant and machinery | ||||||||
| Furniture, fixtures and office equipment | ||||||||
| Motor vehicles | ||||||||
| Construction in process | ||||||||
| Total | ||||||||
| Less: Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Impairment | ( | ) | ||||||
| Net book value | $ | $ | ||||||
The Company has certain buildings and salt
pans erected on parcels of land located in Shouguang, PRC, and such parcels of land are collectively owned by local townships or the
government authority. The Company has not been able to obtain property ownership certificates over these buildings and salt pans.
The aggregate carrying values of these properties situated on parcels of the land are $
During the three-month period ended September 30, 2025, depreciation
and amortization expense totaled $
During the three-month period ended September 30, 2024,
depreciation and amortization expense totaled $
The company had done the impairment of $
For those acquired crude salt assets bought back
in year 2024. The company carried out and completed an update and renovation on them during year 2025, with a total cost of $
NOTE 7 –FINANCE LEASE RIGHT-OF-USE ASSETS
Property, plant and equipment under finance leases, net consist of the following:
| September 30, 2025 | December 31, 2024 | |||||||
| 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 and nine months period ended
September 30, 2025, depreciation and amortization expense totaled $
During the three and nine months period ended
September 30, 2024, depreciation and amortization expense totaled $
10
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(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 September 30, 2025, the total operating
lease ROU assets was $
The total operating lease cost for the nine-month
period ended September 30, 2025 and 2024 was $
NOTE 9 –PAYABLE AND ACCRUED EXPENSES
Payables and accrued expenses consist of the following:
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Accounts payable | $ | $ | ||||||
| Salary payable | ||||||||
| Social security insurance contribution payable | ||||||||
| Accrued expense for construction | ||||||||
| Accrued expense-others | ||||||||
| Total | $ | $ | ||||||
Accrued expense-others mainly include the purchase of the unpaid portion
of salt Pans of $
NOTE 10– RELATED PARTY TRANSACTIONS
On September 25, 2012, the Company purchased
five floors of a commercial building in the PRC, through SYCI, from Shandong Shouguang Vegetable Seed Industry Group Co., Ltd. (the
“Seller”) at a cost of approximately $
NOTE 10 – RELATED PARTY TRANSACTIONS – Continued
| a) | Related parties |
| Name of related parties | Position |
| Yang Ming | Former Chairman Of the Board |
| Liu Xiaobin | Chief Executive Officer and Chairman of the Board |
| Li Min | Chief Financial Officer |
| Miao Naihui | Chief Operating Officer,Director |
| Chengdu Dianjinshi Culture media Co., LTD | Affiliated with company officers |
b)
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Amount due to related parties: | ||||||||
| Yang Ming | $ | $ | ||||||
| Liu Xiaobin | ||||||||
| Li Min | ||||||||
| Miao Naihui | ||||||||
| Total | $ | $ | ||||||
c)
| September 30, 2025 | December 31, 2024 | |||||||
| Due from related party: | ||||||||
| Chengdu Dianjinshi Culture media Co., LTD | $ | $ | ||||||
| Total | $ | $ | ||||||
NOTE 11– TAXES PAYABLE
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Land use tax payable | $ | |||||||
| Value added tax and other taxes payable | ||||||||
| Total | $ | $ | ||||||
NOTE 12 –LEASE LIABILITIES-FINANCE AND OPERATING LEASE
The components of finance lease liabilities were as follows:
| Imputed | September 30, | December 31, | ||||||||||
| Interest rate | 2025 | 2024 | ||||||||||
| Total finance lease liability | $ | $ | ||||||||||
| Less: Current portion | ( |
) | ( |
) | ||||||||
| Finance lease liability, net of current portion | $ | $ | ||||||||||
Interest expenses from finance lease obligations
amounted to $
The components of operating lease liabilities as follows:
| September 30, | December 31, | |||||||||||
| Discount rate | 2025 | 2024 | ||||||||||
| Total Operating lease liabilities | $ | $ | ||||||||||
| Less: Current portion | ( |
) | ( |
) | ||||||||
| Operating lease liabilities, net of current portion | $ | $ | ||||||||||
The weighted average remaining operating lease
term at September 30, 2025 was
Maturities of lease liabilities were as follows:
| Financial lease | Operating Lease | |||||||
| Payable within: | ||||||||
| 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 | $ | $ | ||||||
11
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(Expressed in U.S. dollars)
(UNAUDITED)
NOTE 13 ––EQUITY
Reverse Stock Split and Authorized Shares
On October 27, 2025, the Company completed a 1-for-10 reverse stock split of the company’s common stock, such that for each ten shares outstanding prior to the stock split there was one share outstanding after the reverse stock split. All shares of common stock referenced in this report have been adjusted to reflect the stock split figures.
Restricted Shares
A restricted stock award (“RSA”) is an award of common shares that is subject to certain restrictions during a specified period. Restricted stock awards are independent of option grants and are generally subject to forfeiture if employment terminates prior to the release of the restrictions. The grantee cannot transfer the shares before the restricted shares vest. Shares of nonvested restricted stock have the same voting rights as common stock, are entitled to receive dividends and other distributions thereon and are considered to be currently issued and outstanding. 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 restricted shares of common stock in January 2025 to a consultant, the Company's directors, officers, and an employee as compensation for services rendered for the year ended December 31, 2024. 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 $ which was expensed in full during the year ended December 31, 2024.
During the nine months ended September 30, 2025, the Company granted in the aggregate, 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 for the current year. 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 $ which was expensed in full during the nine months period ended September 30, 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 Common Reserve Funds
SCHC, SYCI, SHSI and DCHC 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 Common Reserve
Funds until the balance reaches 50% of the registered share capital. This reserve can be used to make up any loss incurred
or to increase share capital. Except for the reduction of losses incurred, any other application should not result in this
reserve balance falling below 25% of the registered capital. As at September 30, 2025 GULF RESOURCES 'statutory provident fund stood at
$
NOTE 14 – TREASURY STOCK
As of September 30, 2025 and December 31, 2024, the number of treasury stock of the Company was and , respectively.
NOTE 15 – STOCK-BASED COMPENSATION
Pursuant to the Company’s 2019 Omnibus Equity Incentive Plan adopted and approved in 2019 (“2019 Plan”), awards under the 2019 Plan is limited in the aggregate to shares of our common stock, inclusive of the awards that were previously issued and outstanding under the Company’s 2007 Equity Incentive Plan, as amended (the “2007 Plan”). Upon adoption and approval of the 2019 Plan, the 2007 Plan was frozen, no new awards will be granted under the 2007 Plan, and outstanding awards under the 2007 Plan will continue to be governed by the terms and condition of the 2007 Plan and applicable award agreement. As of September 30, 2025, the number of shares of the Company’s common stock available for grant of awards under the 2019 Plan was 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 and nine months ended September 30, 2025 and 2024, total
compensation costs for options issued recorded in the consolidated statement of loss were $
| 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, 2025 | $ | |||||||||||
| Granted during the period | ||||||||||||
| Exercised during the period | ||||||||||||
| Expired during the period | $ | $ | ||||||||||
| Balance, September 30, 2025 | $ | |||||||||||
| Stock Options and Warrants Outstanding and Exercisable | ||||||||||||
| Weighted Average | ||||||||||||
| Remaining | ||||||||||||
| Outstanding at September 30, 2025 |
Range of Exercise Prices |
Contractual Life (Years) |
||||||||||
| Outstanding and exercisable | — | |||||||||||
All options exercisable and outstanding at September 30, 2025 are fully vested. As of September 30, 2025 there was no unrecognized compensation cost related to outstanding stock options,
The aggregate intrinsic value of options outstanding and exercisable as of September 30, 2025 was $.
During the three and nine months ended September 30, 2025 and 2024, there were no options exercised.
12
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(Expressed in U.S. dollars)
(UNAUDITED)
NOTE 16 – 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 filed. A second auction was held on August 15, 2025.
The land and its attached properties were sold at $
As of September 30, 2025, as
SCHC and SYCI were liable for a sum of principal and interests of $
NOTE 17 – 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 and nine-month periods ended September 30, 2025 and 2024.
(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 and nine-month periods
ended September 30, 2025 and 2024. The applicable statutory tax rates for the three-month and nine-month periods ended September
30, 2025 and 2024 are
(d) PRC
Enterprise income tax (“EIT”) for SCHC, SYCI, SHSI and
DCHC in the PRC is charged at
The operating subsidiaries SCHC is a wholly foreign-owned enterprises (“FIE”), SYCI, DCHC, and SHSI are incorporated in the PRC and are subject to 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.
On February 22, 2008, the Ministry of Finance (“MOF”) and the State Administration of Taxation (“SAT”) jointly issued Cai Shui [2008] Circular 1 (“Circular 1”). According to Article 4 of Circular 1, distributions of accumulated profits earned by a FIE prior to January 1, 2008 to foreign investor(s) in 2008 will be exempted from withholding tax (“WHT”) while distribution of the profit earned by an FIE after January 1, 2008 to its foreign investor(s) shall be subject to WHT at 10% effective tax rate.
As of September 30, 2025 and December 31, 2024,
the accumulated distributable earnings under the Generally Accepted Accounting Principles (GAAP”) of PRC that are subject to WHT
are $
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 September 30, | Nine-Month Period Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Current taxes – PRC | $ | $ | $ | $ | ( | ) | ||||||||||
| Deferred tax – PRC entities | ||||||||||||||||
| Total Income tax (expenses) benefits | $ | $ | $ | $ | ||||||||||||
Significant components of the Company’s deferred tax assets and liabilities at September 30, 2025 and December 31, 2024 are as follows:
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| 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 September 30, 2025 and 2024, 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 September 30, 2025 is $
The decrease in valuation allowance for the three-month
period ended September 30, 2024 is $
The increase in valuation allowance for the nine-month
period ended September 30, 2025 is $
The decrease in valuation allowance for the nine-month
period ended September 30, 2024 is $
There were no unrecognized tax benefits and accrual for uncertain tax positions as of September 30, 2025 and December 31, 2024 and no amounts accrued for penalties and interest for the three and nine months ended September 30, 2025 and 2024.
13
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(Expressed in U.S. dollars)
(UNAUDITED)
NOTE 18 – BUSINESS SEGMENTS
The Company has
An operating segment’s performance is primarily evaluated based on segment operating income, which excludes share-based compensation expense, certain corporate costs and other income not associated with the operations of the segment. These corporate costs (income) are separately stated below and also include costs that are related to functional areas such as accounting, treasury, information technology, legal, human resources, and internal audit. The Company believes that segment operating income, as defined above, is an appropriate measure for evaluating the operating performance of its segments. All the customers are located in PRC.
Three-Month Period Ended September 30, 2025 | Bromine* | Crude Salt* | Chemical Products | Natural Gas | Segment Total | Corporate | Total | |||||||||||||||||||||
| Net revenue (external customers) | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Net revenue (intersegment) | ||||||||||||||||||||||||||||
| Loss from operations before income tax benefit | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Income tax benefit (expense) | ||||||||||||||||||||||||||||
| Loss from operations after income tax benefit (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Total assets | ||||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||||
| Capital expenditures | ||||||||||||||||||||||||||||
Three-Month Period Ended September 30, 2024 | Bromine* | Crude Salt* | Chemical Products | Natural Gas | Segment Total | Corporate | Total | |||||||||||||||||||||
| Net revenue (external customers) | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Net revenue (intersegment) | ||||||||||||||||||||||||||||
| Loss from operations before income tax benefit | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Income tax benefit (expense) | ||||||||||||||||||||||||||||
| Loss from operations after income tax benefit (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| 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 segment until April 2022. Commencing May 2022, costs were assigned to the two subsidiaries (SCHC and SHSI) by independent accounting.
14
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(Expressed in U.S. dollars)
(UNAUDITED)
NOTE 18 – BUSINESS SEGMENTS – Continued
Nine-Month Period Ended September 30, 2025 | Bromine* | Crude Salt* | Chemical Products | Natural Gas | Segment Total | Corporate | Total | |||||||||||||||||||||
| Net revenue (external customers) | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Net revenue (intersegment) | ||||||||||||||||||||||||||||
| Loss from operations before income tax benefit | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Income tax benefit (expense) | ||||||||||||||||||||||||||||
| Loss from operations after income tax benefit (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Total assets | ||||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||||
| Capital expenditures | ||||||||||||||||||||||||||||
Nine-Month Period Ended September 30, 2024 | Bromine* | Crude Salt* | Chemical Products | Natural Gas | Segment Total | Corporate | Total | |||||||||||||||||||||
| Net revenue (external customers) | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Net revenue (intersegment) | ||||||||||||||||||||||||||||
| Loss from operations before income tax benefit | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Income tax benefit (expense) | ( | ) | ||||||||||||||||||||||||||
| Loss from operations after income tax benefit (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| 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 each respective segment through April 2022. Commencing May 2022, costs were assigned to the two subsidiaries (SCHC and SHSI) by independent accounting.
15
GULF RESOURCES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2025
(Expressed in U.S. dollars)
(UNAUDITED)
NOTE 18 – BUSINESS SEGMENTS – Continued
| Three-Month Period Ended September 30, | Nine-Month Period Ended September 30, | |||||||||||||||
| Reconciliations | 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Total segment operating Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Corporate costs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income, net of expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Other expense, net | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss on disposal of long-lived assets | ( | ) | ( | ) | ( | ) | ||||||||||
| Impairment of long-lived assets | ( | ) | ( | ) | ||||||||||||
| Loss before taxes | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The following table shows the major customer(s) (10% or more) for the three-month period ended September 30, 2025.
| Number | Customer | Bromine (000’s) | Crude Salt (000’s) | Chemical Products (000’s) | Total Revenue (000’s) | Percentage of Total Revenue (%) | ||||||||||||||||
| 1 | Shandong Brother Technology Limited | $ | $ | $ | $ | % | ||||||||||||||||
| 2 | Shandong Morui Chemical Company Limited | $ | $ | $ | $ | % | ||||||||||||||||
| 3 | Shandong Shouguangshen Runfa Marine Chemical Company Limited | $ | $ | $ | $ | % | ||||||||||||||||
| 4 | Shouguang Weidong Chemical Company Limited | $ | $ | $ | $ | % | ||||||||||||||||
| 5 | Shandong Xurui New Materials Company Limited | $ | $ | $ | $ | % | ||||||||||||||||
The following table shows the major customer(s) (10% or more) for the nine-month period ended September 30, 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 | $ | $ | $ | $ | % | ||||||||||||||||
The following table shows the major customer(s) (10% or more) for the three-month period ended September 30, 2024.
| 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 | $ | $ | $ | $ | % | ||||||||||||||||
The following table shows the major customer(s) (10% or more) for the nine-month period ended September 30, 2024.
| 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 | $ | $ | $ | $ | % | ||||||||||||||||
NOTE 19– CUSTOMER CONCENTRATION
During the nine-month period ended September 30,
2025, the Company sold
During the nine-month period ended September 30,
2024, the Company sold
NOTE 20– MAJOR SUPPLIERS
During the nine-month period ended September 30,
2025 the Company purchased
During the nine-month period ended September 30,
2024 the Company purchased
NOTE 21 –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 September 30, 2025.
NOTE 22 - SUBSEQUENT EVENT
No fractional shares were issued as a result of the Reverse Stock Split. Stockholders who otherwise be entitled to receive a fractional share in connection with the Reverse Stock Split received one full share of the post-reverse stock split Common Stock in lieu of such fractional share.
Commencing on October 27, 2025, trading of the Company’s Common Stock continues The Nasdaq Capital Market on a Reverse Stock Split-adjusted basis. The new CUSIP number for the Company’s Common Stock following the Reverse Stock Split is 40251W507.
On November 12, 2025, the Company issued a press release providing certain updates on its hearing scheduling process with the Nasdaq Hearings Panel. The Company has received a hearing notification letter from Nasdaq scheduling an oral hearing for December 9, 2025. As of November 10, 2025, the Company’s common stock had maintained the requisite closing bid price in compliance with Listing Rule 5550(a)(2). In light of the above and in accordance with the instructions provided by the hearing notification letter, the Company has submitted a request to cancel the hearing, subject to the Company’s Listing Analyst review and confirmation.
16
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 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.
As disclosed in the Company’s Current Report on Form 8-K filed on September 8, 2017, the Company received, on September 1, 2017, letters from the Yangkou County, Shouguang City government addressed to each of its subsidiaries, SCHC and SYCI, which stated that in an effort to improve the safety and environmental protection management level of chemical enterprises, the plants are requested to immediately stop production and perform rectification and improvements in accordance with the country’s new safety and environmental protection requirements. In the Company’s press release of August 11, 2017 and on its conference call of August 14, 2017, the Company addressed concerns that increased government enforcement of stringent environmental rules that were adopted in early 2017 to insure corporations bring their facilities up to necessary standards so that pollution and other negative environmental issues are limited and remediated, could have an impact on our business in both the short and long-term. The Company also expressed that although it believed its facilities were fully compliant at the time, the Company did not know how its facilities would fare under the new rules. Teams of inspectors from the government were sent to many provinces to inspect all mining and manufacturing facilities. The local government requested that facilities be closed, so that the facilities could undergo the inspection and analysis in the most efficient manner by inspectors’ team. As a result, our facilities were closed on September 1, 2017.
The Company believes that this is another step by the government to improve the environment. It further believes the goal of the government is not to close all plants, but rather to codify the regulations related to project approval, land use, planning approval and environmental protection assessment approval so that illegal plants are not able to open in the future and so that plants close to population centers do not cause serious environmental damage. In addition, the Company believes that the Shandong provincial government wants to assure that each of its regional and county governments has applied the Notice in a consistent manner.
The Shouguang City Bromine Association, on behalf of all the bromine plants in Shouguang, started discussions with the local government agencies. The local governmental agencies confirmed the facts that their initial requirements for the bromine industry did not include the project approval, the planning approval and the land use rights approval and that those three additional approvals were new requirements of the provincial government. The Company understood from the local government that it has been coordinating with several government agencies to solve these three outstanding approval issues in a timely manner and that all the affected bromine plants willnot be allowed to commence production prior to obtaining those approvals.
17
In February 2019, the Company received a notification from the local government of Yangkou County that its Factory No. 1, No. 4, No. 7 and No. 9 had passed inspection and could resume operations. In April 2019, Factory No. 1 and No. 7 resumed operations.
On February 28, 2020, the Company announced that it received an approval from the government to resume bromine production after winter temporary closure. Subsequently, it received another approval from the Shouguang Yangkou People’s Government dated on March 5, 2020 to resume production at its bromine factories No. 1, No. 4, No. 7 and No. 9 in order to meet the needs of bromide products for epidemic prevention and control. With these two approvals, the Company was allowed to resume production at all four bromine factories.
The Company received an oral notification from the government for its Factory No. 8, which permitted Factory No.8 to resume production in August 2022. Factory No.8 started to contribute revenue in the fourth quarter 2022.
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. 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.
The Company is still waiting for governmental approval for factories No. 2 and No. 10. To its knowledge, the government is currently completing its planning process for all mining areas including that for prevention of flood. As a result, the Company may be required to make some modifications to our current wells and aqueducts prior to commencement of operations of these factories in order to satisfy the local government's requirements.
On November 24, 2017, Gulf Resources received a letter from the People’s Government of Yangkou County, Shouguang City notifying the Company that due to the new standards and regulations relating to safety production and environmental pollution, from certain local governmental departments, such as the municipal environmental protection department, the security supervision department and the fire department, its chemical enterprises would have to be relocated to a new industrial park called Bohai Marine Fine Chemical Industry Park. Although our chemical companies were in compliance with regulations, they were also close to a residential area. As a result, the government determined we should relocate to the Bohai park. Chemical companies that are not being asked to move into the park are being permanently closed. Since our factories closed, the Company has secured from the government the land use rights for its chemical plant. On January 6, 2020, the Company received the environmental protection approval by the government of Shouguang City, Shandong Province for the proposed Yuxin Chemical factory. The Company began the construction on its new chemical facilities located at Bohai Marine Fine Chemical Industrial Park in June 2020. The construction was expected to take approximately one year and an additional six months to complete the equipment installation and testing, however due to the COVID epidemic and electrical restrictions, the opening of the chemical factory has been delayed. The Company has received the refrigeration and air compressor units. On July 26, 2023, the Company announced that the delivery of the remaining equipment for its Yuxin chemical factory has been temporarily delayed and the Company will re-evaluate its chemical products strategy.
In January 2017, the Company completed the first brine water and natural gas well field construction in Daying located in Sichuan Province and commenced trial production in January 2019. On May 29, 2019, the Company received a verbal notice from the government of Tianbao Town ,Daying County, Sichuan Province, whereby the Company is required to obtain project approval for its well located in Daying, including the whole natural gas and brine water project, and approvals for safety production inspection, environmental protection assessment, and to solve the related land issue. Until these approvals have been received, the Company has to temporarily halt trial production at its natural gas well in Daying. In compliance with the Chinese government new policies, the Company is also required to obtain an exploration license and a mining license for bromine and natural gas, respectively. Pursuant to the Opinions of the Ministry of Natural Resources on Several Issues in Promoting the Reform of Mineral Resources Management (Trial) promulgated by the Ministry of Natural Resources of PRC on January 9, 2020, which came into effect on May 1, 2020, privately owned enterprises are allowed to participate in the natural gas production. The Company plans to proceed with its applications for the natural gas and brine project approvals with related government departments until after the governmental planning has been finalized the land and resource planning for Sichuan Province.
18
In April 2022, Shouguang Hengde Salt Industry Co. Ltd（“SHSI”）, our subsidiary, was incorporated in Shandong Province, China, for crude salt production and trading.
On January 28, 2020 we completed a 1-for-5 reverse stock split of our common stock, such that for each five shares outstanding prior to the stock split there was one share outstanding after the reverse stock split. All shares of common stock referenced in this report have been adjusted to reflect the stock split figures.
On October 27, 2025, we completed a 1-for-10 reverse stock split of our common stock, such that for each ten shares outstanding prior to the stock split there was one share outstanding after the reverse stock split. All shares of common stock referenced in this report have been adjusted to reflect the stock split figures.
Recent Developments
Acquisition Agreements
In June 2024, a wholly owned subsidiary of the Company, Shouguang Hengde Salt Industry Co. Ltd ( “SHSI”) entered into crude salt field acquisition agreements with Shouguang Qingshuibo Farm Co., LTD. (“Seller A”), Shouguang city Yangkou town Dingjia Zhuangzi village stock economic cooperative (“Seller B”), Shouguang city Yangkou town Shanjia Zhuangzi village stock economic cooperative (“Seller C”), Shouguang City Yangkou town Zhengjia Zhuangzi village stock economic cooperative (“Seller D”), and Shouguang city Yangkou town Renjia Zhuangzi village stock economic cooperative (“Seller E”), respectively, as amended in December 2024. A summary of these agreements are set forth below:
On June 26, 2024, SHSI entered into an acquisition agreement with Seller A, pursuant to which Seller A agrees to transfer to SHSI, and SHSI agrees to purchase, 2,380,000 square meters of crude salt field (including the land lease fee) for RMB54.40 per square meter, with the total transfer price of RMB129,472,000. The term of transfer is from June 29, 2024 to June 28, 2044. 80% of the transfer price shall be paid upon the execution of the agreement, and the remaining 20% shall be paid in shares of common stock of the Company within three months from the date of the agreement after SHSI has inspected the and accepted the crude salt field in writing. Subsequently, on December 17, 2024, the parties entered into an amendment to the agreement, pursuant to which the Article 2. 2 of the agreement has been amended as follows: eighty percent (80%) of the total amount, equaling RMB103,577,600 had been paid on the date of signing the contract by both parties. The remaining RMB25,894,400 shall be paid in a combination of common stock of the Company and cash as follows: (1) RMB10,357,800 shall be paid in shares, calculated on a per share price of US$1.5, using the exchange rate RMB/US$:7.27. These shares shall be issued by the Company to Seller A or Seller A's designated parties within three months after SHSI has inspected and accepted the crude salt field in writing; (2) the balance shall be paid in cash before December 31, 2028.
On June 27, 2024, SHSI entered into an acquisition agreement with each Seller B, Seller C, Seller D and Seller E, respectively, pursuant to which the sellers agreed to transfer to SHSI, and SHSI agrees to purchase from the sellers, 750,000, 804,000, 385,000, and 822,000 square meters of crude salt field (including the land lease fee) for RMB54.10, RMB54.90, RMB54.00, and RMB55.70 per square meter, respectively, with the total transfer price of RMB40,575,000, RMB44,139,600, RMB20,790,000, and RMB45,785,400, respectively. The term of transfers is from June 29, 2024 to June 28, 2044. 80% of the transfer price shall be paid upon the execution of the agreements, and the remaining 20% shall be paid in shares of common stock of the Company within three months from the date of the agreements after SHSI has inspected the and accepted the crude salt fields in writing.
On December 17, 2024, SHSI entered into an amendment to the acquisition agreement with Seller B, pursuant to which the Article 2. 2 of the agreement has been amended as follows: (80%) of the total amount, equaling RMB32,460,000 had been paid on the date of signing the contract by both parties. The remaining RMB8,115,000 shall be paid in a combination of common stock of the Company and cash as follows: (1) RMB3,246,000 shall be paid in shares, calculated on a per share price of US$1.5, using the exchange rate RMB/US$:7.27. These shares shall be issued by the Company to Seller B or Seller B’s designated parties within three months after SHSI has inspected and accepted the crude salt field in writing; (2) the balance shall be paid in cash before December 31, 2028.
On December 17, 2024, SHSI entered into an amendment to the acquisition agreement with Seller C, pursuant to which the Article 2. 2 of the agreement has been amended as follows: Eighty percent (80%) of the total amount, equaling RMB35,311,680 had been paid on the date of signing the contract by both parties. The remaining RMB8,827,920 shall be paid in a combination of common stock of the Company and cash as follows: (1) RMB3,531,168 shall be paid in shares, calculated on a per share price of US$1.5 per, using the exchange rate RMB/US$:7.27. These shares shall be issued by the Company to Seller C or Seller C's designated parties within three months after SHSI has inspected and accepted the crude salt field in writing; (2) the balance shall be paid in cash before December 31, 2028.
On December 17, 2024, SHSI entered into an amendment to the acquisition agreement with Seller D, pursuant to which the Article 2. 2 of the agreement has been amended as follows: Eighty percent (80%) of the total amount, equaling RMB 16,632,000 had been paid on the date of signing the contract by both parties. The remaining RMB 4,158,000 shall be paid in a combination of common stock of the Company and cash as follows: (1) RMB1,663,200 shall be paid in shares, calculated on a per share price ofUS$1.5, using the exchange rate RMB/US$:7.27. These shares shall be issued by the Company to Seller D or Seller D's designated parties within three months after SHSI has inspected and accepted the crude salt field in writing; (2) the balance shall be paid in cash before December 31, 2028.
On December 17, 2024, SHSI entered into an amendment to the acquisition agreement with Seller E, pursuant to which the Article 2. 2 of the agreement has been amended as follows: Eighty percent (80%) of the total amount, equaling RMB36,628,320 had been paid on the date of signing the contract by both parties. The remaining RMB9,157,080 shall be paid in a combination of common stock of the Company and cash as follows: (1) RMB3,662,832 shall be paid in shares, calculated on a per share price of US$1.5, using the exchange rate RMB/US$:7.27. These shares shall be issued by the Company to Seller E or Seller E's designated party within three months after SHSI has inspected and accepted the crude salt field in writing; (2) the balance shall be paid in cash by SHSI to Seller E before December 31, 2028.
In accordance to each amendment, the parties also acknowledged and agreed that, in compliance with the Nasdaq Listing Rule 5635, the issuance of shares pursuant to the agreement may not exceed 19.9% of the total outstanding shares of common stock of the Company prior to the issuance of the shares (the “19.9% Threshold”), unless such issuance is approved by the shareholders of the Company in accordance with the Nasdaq rules and regulations. SHSI shall cause the Company to take all necessary steps to obtain such shareholder approval if the issuance of shares under the agreement exceeds the 19.9% Threshold.
On December 30, 2024, SHSI and each of the sellers mutually acknowledged and confirmed that the salt land provided by each seller meets the acquisition criteria, is in the anticipated usable condition, and has been accepted and handed over to SHSI.
On February 28, 2025, the transactions as contemplated by the acquisition agreements were closed. On the closing date, the Company issued a total of 2,059,694 shares of the Company’s common stock at a price of $1.50 per share, to five individuals, who are citizens residing in the People’s Republic of China, designated by each seller.
19
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 (the “Form 10-K”), 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 “Form 10-Q”, together with the Form 10-K, the “Delinquent Reports”). 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. As noted above, the Staff approved the Company’s transfer application on May 6, 2025.
20
The Company has provided written notice to Nasdaq of its intention to cure the deficiency during the Second Compliance Period by effecting a reverse stock split, if necessary.
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 Company has received a hearing notification letter from Nasdaq scheduling an oral hearing for December 9, 2025. As of November 10, 2025, the Company’s common stock had maintained the requisite closing bid price in compliance with Listing Rule 5550(a)(2). In light of the above and in accordance with the instructions provided by the hearing notification letter, the Company has submitted a request to cancel the hearing, subject to the Company’s Listing Analyst review and confirmation.
21
Our current corporate structure chart is set forth in the following diagram:
As a result of our acquisitions of SCHC and SYCI, our historical financial statements and the information presented below reflects the accounts of SCHC, SYCI, SHSI and DCHC. The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere in this report.
22
RESULTS OF OPERATIONS
The following table presents certain information derived from the condensed consolidated statements of operations, cash flows and stockholders equity for the three-month and nine-month periods ended September 30, 2025 and 2024.
Comparison of the Three-Month Period Ended September 30, 2025 and 2024
| Three-Month Period Ended September 30, 2025 | Three-Month Period Ended September 30, 2024 | Percent Change Increase/ (Decrease) | ||||||||||
| Net revenue | $ | 9,044,581 | $ | 2,242,365 | 303 | % | ||||||
| Cost of net revenue | (7,996,785 | ) | (4,071,616 | ) | 96 | % | ||||||
| Gross profit(loss) | 1,047,796 | (1,829,251 | ) | (157 | %) | |||||||
| Sales and marketing expenses | (16,013 | ) | (13,484 | ) | 19 | % | ||||||
| Direct labor and factory overheads incurred during plant shutdown | (580,178 | ) | (1,736,345 | ) | (67 | %) | ||||||
| General and administrative expenses | (785,533 | ) | (1,002,529 | ) | (24 | %) | ||||||
| Loss from operations | (333,928 | ) | (4,581,609 | ) | (93 | %) | ||||||
| Interest income, net | (17,206 | ) | (14,971 | ) | 15 | % | ||||||
| Other expense, net | (3,521,613 | ) | — | — | ||||||||
| Loss on disposal of long-lived assets | (2,008,853 | ) | — | — | ||||||||
| Impairment of long-lived assets | (29,782,912 | ) | — | — | ||||||||
| Loss before taxes | (35,664,512 | ) | (4,596,580 | ) | 676 | % | ||||||
| Income tax benefit | — | 1,103,697 | (100 | %) | ||||||||
| Net loss | $ | (35,664,512 | ) | $ | (3,492,883 | ) | 921 | % | ||||
Net Loss of $35,664,512 for the three-month periods ended September 30, 2025.
The increase in net loss was mainly due to a rise of 2,008,853 in loss on disposal of long-lived assets, a rise of 29,782,912 in impairment of long-lived assets, and an increase of 3,521,613 in provision accrued liabilities.
Net revenue. The table below shows the changes in net revenue in the respective segment of the Company for the three-month period ended September 30, 2025 as compared to the same period in 2024:
| Net Revenue by Segment | ||||||||||||||||||||
| Three-Month Period Ended | Three-Month Period Ended | Percent Change Increase | ||||||||||||||||||
| September 30, 2025 | September 30, 2024 | of Net Revenue | ||||||||||||||||||
| Segment | % of total | % of total | ||||||||||||||||||
| Bromine | $ | 8,052,331 | 89 | % | $ | 1,571,313 | 70 | % | 412 | % | ||||||||||
| Crude Salt | 992,250 | 11 | % | 654,039 | 29 | % | 52 | % | ||||||||||||
| Chemical Products | — | — | — | — | — | |||||||||||||||
| Natural Gas | — | — | 17,013 | 1 | % | — | ||||||||||||||
| Total sales | $ | 9,044,581 | 100 | % | $ | 2,242,365 | 100 | % | 303 | % | ||||||||||
| Bromine and crude salt segments | Three-Month Period Ended | Percentage Change | ||||||||||
| product sold in tonnes | September 30, 2025 | September 30, 2024 | Increase (Decrease) | |||||||||
| Bromine | 2,214 | 656 | 238 | % | ||||||||
| Crude Salt | 38,379 | 24,249 | 58 | % | ||||||||
Bromine segment
For the three-month periods ended September 30, 2025 and 2024, the net revenue for the bromine segment was $8,052,331 and $1,571,313, respectively. The increase of the net revenue of bromine was due to the 238% increase in tonnes sold and the 52% increase in average selling price of bromine in the third quarter of 2025. The average selling price of bromine in the third quarter of 2025 was $3,637 compared to the average selling price of bromine in the third quarter of 2024 of $2,396 (calculated by dividing revenue by tonnes).
Crude salt segment
For the three-month periods ended September 30, 2025 and 2024, the net revenue for the crude salt was $992,250 and $654,039, respectively. The increase of net revenue of crude salt was mainly due to the 58% increase in tonnes sold and the 4% decrease in average selling price of crude salt for the three-month period ended September 30, 2025.
Chemical products segment
For the three-month periods ended September 30, 2025 and 2024, the net revenue for the chemical products segment was $0 due to the closure of our chemical factories since September 1, 2017.
Natural gas segment
For the three-month period ended September 30, 2025 and 2024, the net revenue was $0 and $17,013.
The decrease in income was due to the fact that the relevant documents of the client were incomplete, which prevented us from continuing the cooperation.
23
Cost of Net Revenue
| Cost of Net Revenue by Segment | Percent Change | |||||||||||||||||||
| Three-Month Period Ended | Three-Month Period Ended | of Cost of | ||||||||||||||||||
| September 30, 2025 | September 30, 2024 | Net Revenue | ||||||||||||||||||
| Segment | % of total | % of total | ||||||||||||||||||
| Bromine | $ | 7,666,463 | 96 | % | $ | 3,794,088 | 93 | % | 102 | % | ||||||||||
| Crude Salt | 330,322 | 4 | % | 277,451 | 7 | % | 19 | % | ||||||||||||
| Chemical Products | — | — | — | — | — | |||||||||||||||
| Natural Gas | — | — | 77 | — | (100 | %) | ||||||||||||||
| Total | $ | 7,996,785 | 100 | % | $ | 4,071,616 | 100 | % | 96 | % | ||||||||||
Cost of net revenue reflects mainly the raw materials consumed and the direct salaries and benefits of staff engaged in the production process, electricity, depreciation and amortization of manufacturing plant and machinery and other manufacturing costs. Our cost of net revenue was $7,996,785 for the three-month period ended September 30, 2025, an increase of $3,925,169 (or 96%) as compared to the same period in 2024 due to the increase of net revenue by 303% for the three-month period ended September 30, 2025 as compared to the same period in 2024.
Bromine production capacity and utilization of our factories
The table below represents the annual capacity and utilization ratios for all of our bromine producing properties:
| Annual Production Capacity (in tonnes) | Utilization Ratio (i) | |||||||
| Three-month period ended September 30, 2024 | 31,506 | 8 | % | |||||
| Three-month period ended September 30, 2025 | 31,506 | 28 | % | |||||
| Variance of the three-month period ended September 30, 2025 and 2024 | — | 20 | % | |||||
(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 September 30, 2025 and 2024 the cost of net revenue for the bromine segment was $7,666,463 and $3,794,088, respectively. The increase in costs is mainly due to the increase in sales volume.
Crude salt segment
For the three -month period ended September 30, 2025 and 2024 the cost of net revenue for the crude salt segment was $330,322 and $277,451, respectively. The increase in costs is mainly due to the increase in sales volume.
Chemical products segment
Cost of net revenue for our chemical products segment for the three-month period ended September 30, 2025 and 2024 was $0.
Natural gas segment
Cost of net revenue for our natural gas segment for the three-month period ended September 30, 2025 and 2024 was $0 and 77, respectively. The decrease in income was due to the fact that the relevant documents of the client were incomplete, which prevented us from continuing the cooperation.
24
Gross Profit (Loss). Gross profit was $1,047,796 or12%, of net revenue for three-month period ended September 30, 2025, representing an increase of $2,877,047, as compared to a gross loss of $1,829,251 or 82%, of net revenue for the same period in 2024.
| Gross Profit (Loss) by Segment | % Point Change | |||||||||||||||||||
| Three-Month Period Ended | Three-Month Period Ended | of Gross | ||||||||||||||||||
| September 30, 2025 | September 30, 2024 | Profit Margin | ||||||||||||||||||
| Segment | Gross Profit (loss) Margin | Gross Profit (loss) Margin | ||||||||||||||||||
| Bromine | $ | 385,868 | 5 | % | $ | (2,222,775 | ) | (141 | %) | 146 | % | |||||||||
| Crude Salt | 661,928 | 67 | % | 376,588 | 58 | % | 9 | % | ||||||||||||
| Chemical Products | — | — | — | — | — | |||||||||||||||
| Natural Gas | — | — | 16,936 | 100 | % | — | ||||||||||||||
| Total Gross Profit (Loss) | $ | 1,047,796 | 12 | % | $ | (1,829,251 | ) | (82 | %) | 47 | % | |||||||||
Bromine segment
For the three-month period ended September 30, 2025, the gross profit for our bromine segment was 5%, compared to gross loss margin of 141% in the three-month period ended September 30, 2024. The increase in gross profit margin was primarily attributable to the higher average selling price of bromine of $3,637 per ton in the three-month period ended September 30, 2025 compared to $2,396 per ton in the three-month period ended September 30, 2024 and the number of sales was up 238% from the second quarter of 2024.
Crude salt segment
For the three-month period ended September 30, 2025, the gross profit margin for our crude salt segment was 67%. The increase of net revenue of crude salt was mainly due to the 58% increase in tonnes sold and the 4% decrease in average selling price of crude salt for the three-month period ended September 30, 2025.
For the three-month period ended September 30, 2024, the gross profit margin for our crude salt segment was 58%.
Natural gas segment
Gross profit for our natural gas segment for the three-month period ended September 30, 2025 and 2024 was $0 and $16,936 respectively. The decrease in income was due to the fact that the relevant documents of the client were incomplete, which prevented us from continuing the cooperation.
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 $580,178 and $1,736,345 incurred for the three-month periods ended September 30, 2025 and 2024, respectively, of factories that have not resumed production were presented as part of the operating expense.
25
General and Administrative Expenses General and administrative expenses were $785,533 for the three-month period ended September 30, 2025, representing an decrease of $216,966 as compared to $1,002,529 for the same period in 2024.
Loss from Operations Loss from operations was $333,928 for the three-month period ended September 30, 2025, compared to loss from operations of $4,581,609 in the same period in 2024.
| Loss from Operations by Segment | ||||||||||||||||
| Three-Month Period Ended September 30, 2025 | Three-Month Period Ended September 30, 2024 | |||||||||||||||
| Segment: | % of total | % of total | ||||||||||||||
| Bromine | $ | (274,496 | ) | 128.98 | % | $ | (4,029,999 | ) | 89.34 | % | ||||||
| Crude Salt | 453,824 | (213.24 | %) | (102,657 | ) | 2.27 | % | |||||||||
| Chemical Products | (352,371 | ) | 165.57 | % | (339,038 | ) | 7.52 | % | ||||||||
| Natural Gas | (39,781 | ) | 18.69 | % | (39,072 | ) | 0.87 | % | ||||||||
| Loss from operations before corporate costs | (212,824 | ) | 100 | % | (4,510,766 | ) | 100 | % | ||||||||
| Corporate costs | (121,104 | ) | (70,843 | ) | ||||||||||||
| Loss from operations | $ | (333,928 | ) | $ | (4,581,609 | ) | ||||||||||
Bromine segment
Loss from operations from our bromine segment was $274,496 for the three-month period ended September 30, 2025, compared to loss from operations of $4,029,999 in the same period in 2024. The increase of the net revenue of bromine was due to the 238% increase in tonnes sold and the 52% increase in average selling price of bromine in the third quarter of 2025.
Crude salt segment
Income from operations from our crude salt segment was $453,824 for the three-month period ended September 30, 2025, compared to loss from operations of $102,657 in the same period in 2024. The increase of net revenue of crude salt was mainly due to the 58% increase in tonnes sold and the 4% decrease in average selling price of crude salt for the three-month period ended September 30, 2025.
Chemical products segment
Loss from operations from our chemical products segment was $352,371 for the three-month period ended September 30, 2025, compared to loss from operations of $339,038 in the same period in 2024.
Natural gas segment
Loss from operations from our natural gas segment was $39,781 for the three -month period ended September 30, 2025, compared to a loss of $39,072 in the same period in 2024.
Interest income, net Interest income, net of $17,206 represented bank interest income, net of finance lease interest expense for the three-month period ended September 30, 2025, an increase of $2,235 as compared to the same period in 2024.
Other Expenses, net
As the company was the joint guarantor party for the debts of Shandong Shouguang Vegetable Industry Group Co., Ltd. and Shandong Shouguang Vegetable Seed Group Co., Ltd. ("Vegetable Group"). Currently, the Vegetable Group is unable to repay the debt. As the joint liability party, our company has to accrue a provision of $3,521,613.
Loss on Disposal of Long-lived Assets
As the company was the joint responsible party for the debts of the Vegetable Group, the court auctioned the idle land and the attached properties on it of SYCI, resulting in a total asset disposal loss of $2,008,853.
Impairment of Long-lived Assets
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 $4,580,892. The Company recognized an impairment loss of $29,782,912 accordingly.
Net Loss Net loss was $35,664,512 for the three-month period ended September 30, 2025, compared to a net loss of
$3,492,883 in the same period in 2024.
26
Comparison of the Nine-Month Period Ended September 30, 2025 and 2024
| Nine-Month Period Ended September 30, 2025 | Nine-Month Period Ended September 30, 2024 | Percent Change Increase/ (Decrease) | ||||||||||
| Net revenue | $ | 18,992,813 | $ | 5,932,596 | 220 | % | ||||||
| Cost of net revenue | (16,948,185 | ) | (11,303,519 | ) | 50 | % | ||||||
| Gross profit (loss) | 2,044,628 | (5,370,923 | ) | (138 | %) | |||||||
| Sales and marketing expenses | (35,868 | ) | (31,608 | ) | 13 | % | ||||||
| Direct labor and factory overheads incurred during plant shutdown | (4,533,760 | ) | (7,185,537 | ) | (37 | %) | ||||||
| General and administrative expenses | (3,169,821 | ) | (2,409,957 | ) | 32 | % | ||||||
| Loss from operations | (5,694,821 | ) | (14,998,025 | ) | (62 | %) | ||||||
| Interest income ,net | (56,378 | ) | 6,236 | 804 | % | |||||||
| Other expense,net | (3,524,825 | ) | (4,003 | ) | 880 | % | ||||||
| Loss from asset disposal | (2,008,853 | ) | (29,169,008 | ) | (93 | %) | ||||||
| Impairment of long-lived assets | (29,782,912 | ) | — | — | ||||||||
| Loss before taxes | (41,067,789 | ) | (44,164,800 | ) | (7 | %) | ||||||
| Income tax benefit (expense) | — | 3,581,867 | (100 | %) | ||||||||
| Net loss | $ | (41,067,789 | ) | $ | (40,582,933 | ) | 1 | % | ||||
27
Net revenue. The table below shows the changes in net revenue in the respective segment of the Company for the nine-month period ended September 30, 2025 as compared to the same period in 2024:
| Net Revenue by Segment | |||||||||||||||||||||
| Nine-Month Period Ended | Nine-Month Period Ended | Percent Increase | |||||||||||||||||||
| September 30, 2025 | September 30, 2024 | of Net Revenue | |||||||||||||||||||
| Segment | % of total | % of total | |||||||||||||||||||
| Bromine | $ | 17,210,574 | 91 | % | $ | 4,576,744 | 77 | % | 276 | % | |||||||||||
| Crude Salt | 1,782,239 | 9 | % | 1,294,645 | 22 | % | 38 | % | |||||||||||||
| Chemical Products | - | - | - | - | |||||||||||||||||
| Natural Gas | - | - | 61,207 | 1 | % | (100 | %) | ||||||||||||||
| Total sales | $ | 18,992,813 | 100 | % | $ | 5,932,596 | 100 | % | 220 | % | |||||||||||
| Bromine and crude salt segments | Nine-Month Period Ended | Percentage Change | ||||||||||
| product sold in tonnes | September 30, 2025 | September 30, 2024 | Increase | |||||||||
| Bromine (excluding volume sold to SYCI) | 4,589 | 1,889 | 143 | % | ||||||||
| Crude Salt | 69,047 | 53,172 | 30 | % | ||||||||
Bromine segment
Net revenue from our bromine segment increased to $17,210,574 for the nine-month period ended September 30, 2025 compared to $4,576,744 for the same period in 2024 due to the higher selling price of bromine and tonnes sold of bromine.
Crude salt segment
Net revenue from our crude salt segment increased to $1,782,239 for the nine-month period ended September 30, 2025 compared $1,294,645 for the same period in 2024, respectively, due to the higher selling quantity.
Chemical products segment
For the nine-month period ended September 30, 2025 and 2024, the net revenue for the chemical products segment was $0 due to the closure of our chemical factories since September 1, 2017.
Natural gas segment
For the nine-month period ended September 30, 2025 and 2024, the net revenue for the natural gas was $0 and $61,207,respectively. The decrease in income was due to the fact that the relevant documents of the client were incomplete, which prevented us from continuing the cooperation.
Cost of Net Revenue
| Cost of Net Revenue by Segment | % Change | |||||||||||||||||||
| Nine-Month Period Ended | Nine-Month Period Ended | of Cost of | ||||||||||||||||||
| September 30, 2025 | September 30, 2024 | Net Revenue | ||||||||||||||||||
| Segment | % of total | % of total | ||||||||||||||||||
| Bromine | $ | 16,216,406 | 96 | % | $ | 10,595,899 | 94 | % | 53 | % | ||||||||||
| Crude Salt | 731,779 | 4 | % | 707,344 | 6 | % | 3 | % | ||||||||||||
| Chemical Products | — | — | — | — | — | |||||||||||||||
| Natural Gas | — | — | 276 | 0 | % | (100 | %) | |||||||||||||
| Total | $ | 16,948,185 | 100 | % | $ | 11,303,519 | 100 | % | 50 | % | ||||||||||
Cost of net revenue reflects mainly the raw materials consumed-direct salaries and benefits of staff engaged in the production process, electricity, depreciation and amortization of manufacturing plant and machinery and other manufacturing costs. Our cost of net revenue was $16,948,185 for nine-month period ended September 30, 2025, representing a $5,644,666 (or 50%) increase compared to the nine- month period ended September 30, 2025. The increase in costs was mainly due to a significant increase in sales volume.
28
Bromine production capacity and utilization of our factories
The table below represents the annual capacity and utilization ratios for all of our bromine producing properties:
| Annual Production Capacity (in tonnes) | Utilization Ratio (i) | |||||||
| Nine-month period ended September 30, 2024 | 31,506 | 8 | % | |||||
| Nine-month period ended September 30, 2025 | 31,506 | 20 | % | |||||
| Variance of the nine-month period ended September 30, 2025 and 2024 | — | 12 | % | |||||
| (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 nine-month period ended September 30, 2025 and 2024 the cost of net revenue for the bromine segment was $16,216,406 and $10,595,899, respectively. The increase in costs is mainly due to the increase in sales volume.
Crude salt segment
For the nine-month period ended September 30, 2025 and 2024 the cost of net revenue for the crude salt segment was $731,779 and $707,344, respectively. The increase in costs is mainly due to the increase in sales volume.
Natural gas segment
Cost of net revenue for our natural gas segment for the nine-month period ended September 30, 2025 and 2024 was $0 and $276, respectively. The decrease in income was due to the fact that the relevant documents of the client were incomplete, which prevented us from continuing the cooperation.
Gross Profit. Income profit was $2,044,628, or 10.8%, of net revenue for nine-month period ended September 30, 2025 compared to gross loss $5,370,923, or 91%, of net revenue for the same period in 2024.
| Gross Profit (Loss) by Segment | % Point Change | |||||||||||||||||||
| Nine-Month Period Ended | Nine-Month Period Ended | of Gross | ||||||||||||||||||
| September 30, 2025 | September 30, 2024 | Profit Margin | ||||||||||||||||||
| Segment | Gross Profit (loss) Margin | Gross Profit (loss) Margin | ||||||||||||||||||
| Bromine | $ | 994,168 | 5.8 | % | $ | (6,019,155 | ) | (132 | %) | 137.8 | % | |||||||||
| Crude Salt | 1,050,460 | 58.9 | % | 587,301 | 45 | % | 13.9 | % | ||||||||||||
| Chemical Products | — | — | — | — | — | |||||||||||||||
| Natural Gas | — | — | 60,931 | 100 | % | — | ||||||||||||||
| Total Gross Profit(Loss) | $ | 2,044,628 | 10.8 | % | $ | (5,370,923 | ) | (91 | %) | (101.8 | %) | |||||||||
Bromine segment
For the nine-month period ended September 30, 2025, the gross profit margin for our bromine segment was 6%, compared to gross loss margin of 132% in the nine-month period ended September 30, 2024. The increase in gross loss margin was primarily attributable to the higher average selling price of bromine of $3,751 per ton in the nine-month period ended September 30, 2025 compared to $2,423 per ton in the nine-month period ended September 30, 2024.
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Crude salt segment
For the nine-month period ended September 30, 2025, the gross profit margin for our crude salt segment was 59%.
For the nine-month period ended September 30, 2024 the gross profit margin for our crude salt segment was 45%.
Chemical products segment
For the nine-month period ended September 30, 2025, the gross profit margin for our chemical segment was 0% due to the closure of our chemical products plant. As a result of the closure, there were no chemical products for sale for the nine-month period ended September 30, 2025.
Natural gas segment
Gross profit for our natural gas segment for the nine-month period ended September 30, 2025 and 2024 was $0 and $60,931 respectively. The decrease in income was due to the fact that the relevant documents of the client were incomplete, which prevented us from continuing the cooperation.
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 $4,533,760 and $7,185,537 incurred for the nine-month periods ended September 30, 2025 and 2024, respectively, for the factories that have not resumed production were presented as part of the operating expense.
General and Administrative Expenses. General and administrative expenses were $3,169,821 for the nine-month period ended September 30, 2025, an increase of $759,864 (or 32%) as compared to $2,409,957 for the same period in 2024. The increase in administrative expenses is mainly due to the increase in depreciation.
Loss from Operations. Loss from operations was $5,694,821 for the nine-month period ended September 30, 2025, compared to a loss of $14,998,025 in the same period in 2024.
| Loss from Operations by Segment | ||||||||||||||||
| Nine-Month Period Ended September 30, 2025 | Nine-Month Period Ended September 30, 2024 | |||||||||||||||
| Segment: | % of total | % of total | ||||||||||||||
| Bromine | $ | (3,775,713 | ) | 72.51 | % | $ | (13,475,400 | ) | 91.94 | % | ||||||
| Crude Salt | (247,727 | ) | 4.76 | % | (47,725 | ) | 0.32 | % | ||||||||
| Chemical Products | (1,055,947 | ) | 20.28 | % | (993,116 | ) | 6.78 | % | ||||||||
| Natural Gas | (127,880 | ) | 2.45 | % | (140,554 | ) | 0.96 | % | ||||||||
| Loss from operations before corporate costs | (5,207,267 | ) | 100 | % | (14,656,795 | ) | 100 | % | ||||||||
| Corporate costs | (487,554 | ) | (341,230 | ) | ||||||||||||
| Loss from operations before taxes | $ | (5,694,821 | ) | $ | (14,998,025 | ) | ||||||||||
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Bromine segment
Loss from operations from our bromine segment was $3,775,713 for the nine-month period ended September 30, 2025, compared to a loss of $13,475,400 in the same period in 2024. The decrease in gross loss margin was primarily attributable to the higher average selling price of bromine of $3,751 per ton in the nine-month period ended September 30, 2025 compared to $2,423 per ton in the nine-month period ended September 30, 2024.
Crude salt segment
Loss from operations from our crude salt segment was $247,727 for the nine-month period ended September 30, 2025, compared to a loss of $47,725 in the same period in 2024. The increase in operating losses is mainly due to the increase in administrative expenses.
Chemical products segment
Loss from operations from our chemical products segment was $1,055,947 for the nine-month period ended September 30, 2025, compared to a loss of $993,116 in the same period in 2024.
Natural gas segment
Loss from operations from our natural gas segment was $127,880 for the nine-month period ended September 30, 2025, compared to a loss of $140,554 in the same period in 2024.
Interest Income (Loss), Net. interest income, net of $56,378 represented bank interest income, net of finance lease interest expense for the nine -month period ended September 30, 2025, a decrease of $62,614 as compared to the same period in 2024.
Other Expenses, net
As the company was the joint guarantor party for the debts of the Vegetable Group. Currently, the Vegetable Group is unable to repay the debt. As the joint liability party, our company has to accrue a provision of $3,524,825.
Loss on Disposal of Long-lived Assets
As the company was the joint responsible party for the debts of the Vegetable Group, the court auctioned the idle land and the attached properties on it of SYCI, resulting in a total asset disposal loss of $2,008,853.
Impairment of Long-lived Assets
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 $4,580,892. The Company recognized an impairment loss of $29,782,912 accordingly.
Net Loss. Net loss was $41,067,789 for the nine-month period ended September 30, 2025, compared to a net loss of $40,582,933 in the same period in 2024.
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LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2025, cash and cash equivalents were $5,820,083 as compared to $10,075,162 as of December 31, 2024. The components of this decrease of $4,255,079 are reflected below.
Statement of Cash Flows
| Nine-Month Period Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Net cash provided by (used in) operating activities | $ | 4,574,613 | $ | (293,463 | ) | |||
| Net cash used in investing activities | (8,673,384 | ) | (60,526,213 | ) | ||||
| Net cash used in financing activities | (260,997 | ) | (264,094 | ) | ||||
| Effects of exchange rate changes on cash and cash equivalents | 104,689 | 97,369 | ||||||
| Net increase (decrease) in cash and cash equivalents | $ | (4,255,079 | ) | $ | (60,986,401 | ) | ||
For the nine-month period ended September 30, 2025, we met our working capital and capital investment requirements by using cash on hand.
Net Cash provided by (used in) Operating Activities
During the nine-month period ended September 30, 2025, cash flow provided by operating activities of approximately $4.57 million was mainly due to a non-cash adjustment related to depreciation and amortization of property, plant and equipment of $11.75 million, a loss on disposal of long-lived assets of $2 million, a impairment of long-lived assets of 29.78 million, and offset by a net loss of $41.07 million, a decrease in accounts receivable of $2.83 million.
During the nine-month period ended September 30, 2024, cash flow used in by operating activities of approximately $0.29 million was mainly due to a net loss of $40.58 million, a decrease in deferred taxes of $3.62 million and offset by depreciation and amortization expense of $14.04 million and loss on disposal of equipment of $29.17 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 September 30, 2025 and December 31, 2024.
| September 30, 2025 | December 31, 2024 | |||||||||||||||
| % of total | % of total | |||||||||||||||
| Aged 1-30 days | $ | 3,422,564 | 100 | % | $ | 419,581 | 74 | % | ||||||||
| Aged 31-60 days | — | — | 144,942 | 26 | % | |||||||||||
| Aged 61-90 days | — | — | — | — | ||||||||||||
| Aged 91-120 days | — | — | — | — | ||||||||||||
| Aged 121-150 days | — | — | — | — | ||||||||||||
| Aged 151-180 days | — | — | — | — | ||||||||||||
| Aged 181-210 days | — | — | — | — | ||||||||||||
| Aged 211-240 days | — | — | — | — | ||||||||||||
| Total | $ | 3,422,564 | 100 | % | $ | 564,523 | 100 | % | ||||||||
The overall accounts receivable balance as of September 30, 2025 increased by $2,858,041, as compared to those of December 31, 2024. We have policies in place to ensure that sales are made to customers with an appropriate credit history. We perform ongoing credit evaluation on the financial condition of our customers.
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Inventory
Our inventory consists of the following:
| September 30, 2025 | December 31, 2024 | |||||||||||||||
| % of total | % of total | |||||||||||||||
| Raw materials | $ | 30,870 | 6 | % | $ | 10,610 | 3 | % | ||||||||
| Finished goods | 451,842 | 94 | % | 304,761 | 97 | % | ||||||||||
| Total | $ | 482,712 | 100 | % | $ | 315,371 | 100 | % | ||||||||
The net inventory level as of September 30, 2025 increased by $167,341, as compared to the net inventory level as of December 31, 2024. The main reason for the increase in inventory is to ensure the timely demands of customers, thereby increasing the stock.
Raw materials increased by $20,260 as of September 30, 2025 as compared to December 31, 2024.
Our finished goods increased by $147,081 as of September 30, 2025 as compared to December 31, 2024.
Net Cash Used in Investing Activities
During the nine months ended September 30, 2025, the Company carried out and completed an update and renovation on them during year 2025, with a total cost of $8,673,384.
For the nine-month period ended September 30, 2024, we used approximately $60.5 million to the flood prevention project aiming to prevent flooding that could harm the wells, aqueducts and crude salt pans at our plant.
Net Cash Used in Financing Activities
For the nine-month period ended September 30, 2025 and 2024, we used $0.3 million to repay finance lease obligations.
We believe that our available funds and cash flows generated from operations will be sufficient to meet our anticipated ongoing operating needs and our obligations as they full due in the next twelve (12) months.
We had available cash of approximately $5.82 million at September 30, 2025, 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, SYCI, SHSI and DCHC as these segments continue to expand within the Chinese market.
We may not be able to identify, successfully integrate or profitably manage any 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 at September 30, 2025 is provided in the notes to our consolidated financial statements. See “Notes to Condensed Consolidated Financial Statements.
Material Off-Balance Sheet Arrangements
We do not currently have any off balance sheet arrangements falling within the definition of Item 303(a) of Regulation S-K.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and this requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We base its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions. We have identified the following critical accounting policies and estimates used by us in the preparation of our financial statements: accounts receivable and allowance for doubtful accounts, inventories and allowance for obsolescence, assets retirement obligation, property, plant and equipment, recoverability of long-lived assets, mineral rights, leases, revenue recognition, income taxes, and loss contingencies. These policies and estimates are described in the Company’s Form 10-Q for the nine months ended September 30, 2025.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).
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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 21 – 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, 2024. 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 audited 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 March31, 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 annual 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 annual 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 September 30, 2024, 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 September 30, 2023 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: November 19, 2025 | By: | /s/ Xiaobin Liu |
| Xiaobin Liu | ||
| Chief Executive Officer | ||
| (principal executive officer) | ||
| Dated: November 19, 2025 | By: | /s/ Min Li |
| Min Li | ||
| Chief Financial Officer | ||
| (principal financial and accounting officer) | ||
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FAQ
How did Gulf Resources (GURE) perform financially in Q3 2025?
For the three months ended September 30, 2025, Gulf Resources generated net revenue of
What was Gulf Resources’ net loss and earnings per share for the first nine months of 2025?
For the nine months ended September 30, 2025, Gulf Resources reported a net loss of
What does the 10-Q say about Gulf Resources’ liquidity and going concern status?
As of
How did impairments and asset sales affect Gulf Resources in 2025?
During the three and nine months ended September 30, 2025, the company recognized an impairment of long‑lived assets totaling
What are Gulf Resources’ main business segments and where are operations located?
Gulf Resources operates entirely in the People’s Republic of China. Through its subsidiaries, it manufactures and trades bromine, produces crude salt, and manufactures chemical products used in the oil industry, pesticides, paper production and antibiotics. It also has a natural gas and brine project in Daying, Sichuan Province, where trial production began in 2019 but has been temporarily halted pending additional governmental approvals.
Did Gulf Resources generate positive operating cash flow in the first nine months of 2025?
Yes. For the nine months ended September 30, 2025, net cash provided by operating activities was
What was Gulf Resources’ capital structure and share count as of late 2025?
As of
