Gulf Resources(GURE) - 2025 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements This section presents the company's condensed consolidated financial statements, including balance sheets, statements of loss, stockholders' equity, and cash flows, with detailed notes on accounting policies and segment performance Condensed Consolidated Balance Sheets The balance sheets show total assets decreased to $164.63 million and total liabilities to $22.42 million as of June 30, 2025 | Metric | June 30, 2025 | December 31, 2024 | Change | | :-------------------------- | :-------------- | :---------------- | :----- | | Total Current Assets | $20,275,976 | $17,450,826 | +$2,825,150 | | Total Non-Current Assets | $144,355,597 | $152,005,169 | -$7,649,572 | | Total Assets | $164,631,573 | $169,455,995 | -$4,824,422 | | Total Current Liabilities | $14,790,088 | $17,731,858 | -$2,941,770 | | Total Non-Current Liabilities | $7,626,660 | $8,017,467 | -$390,807 | | Total Liabilities | $22,416,748 | $25,749,325 | -$3,332,577 | | Total Stockholders' Equity | $142,214,825 | $143,706,670 | -$1,491,845 | Condensed Consolidated Statements of Loss and Comprehensive Loss The company reported a significant reduction in net loss for both the three-month and six-month periods ended June 30, 2025, driven by substantial revenue growth | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :-------------------------------- | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Net Revenue | $8,343,785 | $2,383,169 | +250% | $9,948,232 | $3,690,231 | +170% | | Total Operating Costs and Expense | $(9,094,471) | $(7,530,166) | +21% | $(15,309,125) | $(14,106,647) | +8.5% | | Loss from Operations | $(750,686) | $(5,146,997) | -85% | $(5,360,893) | $(10,416,416) | -49% | | Loss before taxes | $(773,777) | $(34,306,028) | -98% | $(5,403,277) | $(39,568,220) | -86% | | Net Loss | $(773,777) | $(33,097,918) | -98% | $(5,403,277) | $(37,090,050) | -85% | | Basic and Diluted Loss Per Share | $(0.06) | $(3.09) | -98% | $(0.43) | $(3.46) | -88% | Condensed Consolidated Statement of Stockholders' Equity The statement details changes in stockholders' equity for the six-month period ended June 30, 2025, including net loss and issuance of restricted shares | Metric | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Common Stock (Amount) | $25,934 | $24,623 | | Treasury Stock | $(1,372,673) | $(1,372,673) | | Additional Paid-in Capital | $105,167,292 | $101,688,262 | | Retained Earnings Unappropriated | $31,955,527 | $37,358,804 | | Retained Earnings Appropriated | $26,667,097 | $26,667,097 | | Accumulated Other Comprehensive Income | $(20,228,352) | $(20,854,143) | | Total Stockholders' Equity | $142,214,825 | $143,706,670 | - During the six months ended June 30, 2025, the Company issued 2,619,694 restricted shares for services, increasing common stock by $1,311 and additional paid-in capital by $3,479,030[11] Condensed Consolidated Statements of Cash Flows The company experienced a net decrease in cash and cash equivalents of $2.34 million for the six months ended June 30, 2025, primarily from operating and financing activities | Cash Flow Activity | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------------- | :--------------------------- | :--------------------------- | | Net cash used in operating activities | $(2,139,435) | $(812,141) | | Net cash provided by (used in) investing activities | $0 | $(60,526,213) | | Net cash used in financing activities | $(260,997) | $(264,094) | | Effects of exchange rate changes on cash | $61,351 | $(253,907) | | Net Decrease in Cash and Cash Equivalents | $(2,339,081) | $(61,856,355) | | Cash and Cash Equivalents - End of Period | $7,736,081 | $10,367,539 | Notes to Condensed Consolidated Financial Statements This section provides detailed disclosures on accounting policies, business segments, going concern considerations, and loss contingencies - The company's financial statements are prepared on a going concern basis, but management acknowledges significant doubts about its ability to continue operations due to sustained losses and the need for additional funds. Measures are being taken to control costs, shift business focus, and seek financing[20][21][22] - The company operates in four segments: bromine, crude salt, chemical products, and natural gas, all located in the PRC. Production in the chemical and natural gas segments has been temporarily halted or suspended due to government regulations and relocation requirements[23][29][34] - The company is exposed to credit risk from accounts receivable and cash held in PRC financial institutions. As of June 30, 2025, $7,736,081 in cash was held in PRC institutions[38] - The company has significant loss contingencies related to land use and planning approvals for its bromine factories, with administrative penalties and court rulings issued in 2018-2019. However, the company believes enforcement is remote due to ongoing discussions with local government and new regulations[146][147][150] - On July 3, 2025, the Company filed a Form S-3 registration statement for an aggregate offering price not to exceed $10,000,000 of common stock, preferred stock, and warrants, which has not yet been declared effective[151][152] | Segment | 3 Months Ended June 30, 2025 Net Revenue | 3 Months Ended June 30, 2024 Net Revenue | Change (YoY) | 6 Months Ended June 30, 2025 Net Revenue | 6 Months Ended June 30, 2024 Net Revenue | Change (YoY) | | :---------------- | :----------------------------------- | :----------------------------------- | :----------- | :----------------------------------- | :----------------------------------- | :----------- | | Bromine | $7,676,374 | $1,859,234 | +313% | $9,158,243 | $3,005,431 | +205% | | Crude Salt | $667,411 | $523,935 | +27% | $789,989 | $640,606 | +23% | | Chemical Products | $0 | $0 | — | $0 | $0 | — | | Natural Gas | $0 | $0 | — | $0 | $44,194 | -100% | | Total | $8,343,785 | $2,383,169 | +250% | $9,948,232 | $3,690,231 | +170% | | Segment | 3 Months Ended June 30, 2025 Loss from Operations | 3 Months Ended June 30, 2024 Loss from Operations | Change (YoY) | 6 Months Ended June 30, 2025 Loss from Operations | 6 Months Ended June 30, 2024 Loss from Operations | Change (YoY) | | :---------------- | :---------------------------------------- | :---------------------------------------- | :----------- | :---------------------------------------- | :---------------------------------------- | :----------- | | Bromine | $(130,381) | $(4,662,586) | -97% | $(3,501,217) | $(9,445,401) | -63% | | Crude Salt | $(147,489) | $130,024 | -213% | $(701,551) | $54,932 | -1377% | | Chemical Products | $(344,947) | $(339,254) | +1.7% | $(703,576) | $(654,078) | +7.5% | | Natural Gas | $(43,255) | $(73,773) | -41% | $(88,099) | $(101,482) | -13% | | Corporate Costs | $(84,614) | $(201,408) | -58% | $(366,450) | $(270,387) | +35% | | Total Loss from Operations | $(750,686) | $(5,146,997) | -85% | $(5,360,893) | $(10,416,416) | -49% | - The company sold 65.2% of its products to its top five customers and purchased 100% of its raw materials from its top three suppliers during the six-month period ended June 30, 2025, indicating significant customer and supplier concentration[142][145] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial performance, liquidity, and capital resources, highlighting changes in revenue, expenses, operational challenges, and recent developments Overview Gulf Resources operates through China-based subsidiaries in bromine, crude salt, chemical products, and natural gas segments, facing government-mandated production halts and relocations - The company operates four segments: bromine, crude salt, chemical products, and natural gas, all in China[155] - Bromine and crude salt factories (No. 1, 4, 7, 8, 9) have resumed operations after government inspections and temporary closures, with Factory No. 8 contributing revenue since Q4 2022. Factories No. 2 and 10 are still awaiting governmental approval[161][162][164] - Chemical production plants were ordered to relocate to Bohai Marine Fine Chemical Industrial Park in 2017 due to environmental concerns. Construction of new facilities began in June 2020 but has been delayed, and the company is reviewing its chemical products strategy[165] - Natural gas trial production in Daying, Sichuan Province, commenced in January 2019 but was halted in May 2019 due to requirements for project, safety, environmental, and land approvals. The company plans to proceed with applications once governmental planning is finalized[166] Recent Developments Recent developments include significant crude salt field acquisition agreements in 2024 and the company's transfer to the Nasdaq Capital Market in 2025 to regain $1.00 bid price compliance Acquisition Agreements SHSI acquired approximately 5.14 million square meters of crude salt fields for RMB 260.77 million in 2024, with payments in cash and common stock, closing on February 28, 2025 - SHSI acquired approximately 5.14 million square meters of crude salt fields from five sellers in June and December 2024[168][170] - The total transfer price for the crude salt fields was RMB 260,767,000 (approximately $35.87 million at RMB/US$:7.27)[168][170] - Payments were structured as 80% cash upfront and 20% in a combination of common stock and cash, with 2,059,694 shares issued at $1.50 per share on February 28, 2025[169][177] - The issuance of shares is subject to a 19.9% Nasdaq Listing Rule threshold, requiring shareholder approval if exceeded[175] Nasdaq Compliance The company transferred its listing to The Nasdaq Capital Market on May 8, 2025, and has until November 3, 2025, to regain compliance with the $1.00 minimum bid price requirement - On May 6, 2025, Nasdaq granted the company's request to transfer its common stock listing to The Nasdaq Capital Market tier[178] - The company received a second 180-calendar day period, until November 3, 2025, to regain compliance with the $1.00 minimum bid price requirement (Nasdaq Listing Rule 5550(a)(2))[178] - The company intends to monitor its bid price and may effect a reverse stock split if needed to cure the deficiency[182] RESULTS OF OPERATIONS The company significantly improved financial performance for both the three-month and six-month periods ended June 30, 2025, primarily driven by substantial increases in bromine sales Comparison of the Three-Month Period Ended June 30, 2025 and 2024 For the three months ended June 30, 2025, net revenue surged by 250% to $8.34 million, resulting in a gross profit of $0.99 million and a 98% decrease in net loss | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Percent Change | | :--------------------------------------- | :--------------------------- | :--------------------------- | :------------- | | Net Revenue | $8,343,785 | $2,383,169 | 250% | | Cost of Net Revenue | $(7,357,130) | $(5,112,058) | 44% | | Gross Profit (Loss) | $986,655 | $(2,728,889) | 136% | | Loss from Operations | $(750,686) | $(5,146,997) | (85%) | | Loss on disposal of property, plant and equipment | $0 | $(29,169,008) | (100%) | | Net Loss | $(773,777) | $(33,097,918) | (98%) | | Segment | 3 Months Ended June 30, 2025 Net Revenue | 3 Months Ended June 30, 2024 Net Revenue | Percent Change | | :---------------- | :----------------------------------- | :----------------------------------- | :------------- | | Bromine | $7,676,374 | $1,859,234 | 313% | | Crude Salt | $667,411 | $523,935 | 27% | | Chemical Products | $0 | $0 | — | | Natural Gas | $0 | $0 | — | - Bromine sales volume increased by 152% and average selling price by 64% YoY for the three-month period ended June 30, 2025[190] - Crude salt average selling price increased by 22% YoY for the three-month period ended June 30, 2025[191] - Gross profit margin for bromine segment improved from -154% in 2024 to 9% in 2025, and for crude salt from 27% to 49%[202][203][204] Comparison of the Six-Month Period Ended June 30, 2025 and 2024 For the six months ended June 30, 2025, net revenue grew by 170% to $9.95 million, resulting in a gross profit of $0.99 million and an 85% decrease in net loss | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Percent Change | | :--------------------------------------- | :--------------------------- | :--------------------------- | :------------- | | Net Revenue | $9,948,232 | $3,690,231 | 170% | | Cost of Net Revenue | $(8,951,400) | $(7,231,903) | 24% | | Gross Profit (Loss) | $996,832 | $(3,541,672) | (128%) | | Loss from Operations | $(5,360,893) | $(10,416,416) | (49%) | | Loss on disposal of property, plant and equipment | $0 | $(29,169,008) | (100%) | | Net Loss | $(5,403,277) | $(37,090,050) | (85%) | | Segment | 6 Months Ended June 30, 2025 Net Revenue | 6 Months Ended June 30, 2024 Net Revenue | Percent Increase | | :---------------- | :----------------------------------- | :----------------------------------- | :--------------- | | Bromine | $9,158,243 | $3,005,431 | 205% | | Crude Salt | $789,989 | $640,606 | 23% | | Chemical Products | $0 | $0 | — | | Natural Gas | $0 | $44,194 | -100% | - Bromine sales volume increased by 93% and average selling price by 58% YoY for the six-month period ended June 30, 2025[231][239] - Crude salt segment's loss from operations increased significantly due to depreciation from new asset acquisitions in 2024[240] LIQUIDITY AND CAPITAL RESOURCES The company's cash and cash equivalents decreased by $2.34 million to $7.74 million as of June 30, 2025, primarily due to cash used in operating and financing activities | Metric | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------- | :-------------- | :---------------- | :----- | | Cash and Cash Equivalents | $7,736,081 | $10,075,162 | -$2,339,081 | | Net cash used in operating activities | $(2,139,435) | $(812,141) | +$1,327,294 | | Net cash used in investing activities | $0 | $(60,526,213) | +$60,526,213 | | Net cash used in financing activities | $(260,997) | $(264,094) | +$3,097 | - The overall accounts receivable balance increased by $2,586,327 to $3,150,850 as of June 30, 2025, with 100% aged 1-30 days[250] - Net inventory increased by $199,642 (63%) to $515,013 as of June 30, 2025, driven by growth in current sales volume[251] - The company spent $0 on investing activities in the first six months of 2025, a significant decrease from $60.5 million in 2024 which was for property, plant, and equipment acquisitions[255] - Management believes available funds and cash flows from operations will be sufficient for the next twelve months[256] - The company has no significant off-balance sheet arrangements[260] - Critical accounting policies and estimates include accounts receivable, inventories, long-lived assets, leases, revenue recognition, and income taxes[261] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a "smaller reporting company," Gulf Resources is not required to provide quantitative and qualitative disclosures about market risk - The company is exempt from providing quantitative and qualitative disclosures about market risk as it qualifies as a "smaller reporting company"[262] Item 4. Controls and Procedures The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - The CEO and CFO evaluated the effectiveness of disclosure controls and procedures and concluded they were effective as of June 30, 2025[264] - No material changes in internal control over financial reporting occurred during the most recently completed fiscal quarter[265] PART II—OTHER INFORMATION Item 1. Legal Proceedings The company is involved in legal proceedings related to administrative penalties for land use violations and a subsidiary has a civil mediation statement to pay RMB 226,825.44 for goods - SCHC faces administrative penalties and court rulings from 2018-2019 for illegal land use of several bromine factories, with monetary penalties and orders to restore land and demolish facilities[266] - The company believes enforcement of these penalties is remote due to ongoing discussions with local government and new regulations, and the Bureau has withdrawn enforcement applications for some factories[148][150] - SCHC is obligated to pay Shouguang Chengyu Trading Co., Ltd. RMB 226,825.44 for goods, with monthly payments of RMB 50,000 starting April 2025[268] Item 1A. Risk Factors A primary risk factor is the company's non-compliance with Nasdaq's minimum bid price requirement, with a deadline of November 3, 2025, to regain compliance - The company is not in compliance with Nasdaq's $1.00 minimum bid price requirement and faces delisting if compliance is not regained by November 3, 2025[270][273] - The company transferred its listing to The Nasdaq Capital Market tier on May 8, 2025, to qualify for a second 180-day grace period[270][271] - A reverse stock split is being considered as a potential measure to cure the bid price deficiency[274] Item 2. Unregistered Sale of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report during the period - No unregistered sales of equity securities or use of proceeds occurred[275] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - No defaults upon senior securities were reported[276] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[277] Item 5. Other Information No directors or officers informed the company of the adoption or termination of Rule 10b5-1 trading arrangements during the quarter - No Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the fiscal quarter ended June 30, 2025[278] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications, XBRL financial statements, and the interactive data file - The exhibits include CEO and CFO certifications (31.1, 31.2), Section 906 certification (32.1), XBRL financial statements (101), and the Cover Page Interactive Data File (104)[279] Signatures The report is duly signed on behalf of Gulf Resources, Inc. by its Chief Executive Officer, Xiaobin Liu, and Chief Financial Officer, Min Li, on August 13, 2025 - The report was signed by Xiaobin Liu (CEO) and Min Li (CFO) on August 13, 2025[282]