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. Yesx No o

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). Yesx No o

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.

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. o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

As of ~~May 17,~~August 13, 2021, the registrant had outstanding 10,469,477 shares of common stock.

	March 31, 2021 Unaudited			December 31, 2020 Audited			June 30, 2021 Unaudited		December 31, 2020 Audited
Current Assets
Cash	$	96,699,324		$	94,222,538		$	97,058,027	$	94,222,538
Accounts receivable		4,859,705			6,521,798			4,741,259		6,521,798
Inventories, net		576,607			419,609			677,418		419,609
Prepayments and deposits		2,449,526			6,146,461			2,476,867		6,146,461
Other receivable		559			559			1,624		559
Total Current Assets		104,585,721			107,310,965			104,955,195		107,310,965
Non-Current Assets
Property, plant and equipment, net		149,966,631			148,947,689			153,288,493		148,947,689
Finance lease right-of use assets		183,550			186,272			185,276		186,272
Operating lease right-of –use assets		8,662,972			8,868,661			8,507,190		8,868,661
Prepaid land leases, net of current portion		10,063,469			10,134,004			10,234,582		10,134,004
Deferred tax assets		19,131,925			18,590,227			19,254,324		18,590,227
Total non-current assets		188,008,547			186,726,853			191,469,865		186,726,853
Total Assets	$	292,594,268		$	294,037,818		$	296,425,060	$	294,037,818

Liabilities and Stockholders’ Equity
Current Liabilities
Accounts and other payable and accrued expenses	$	8,549,889		$	5,081,701
Accounts, other payable and accrued expenses							$	7,071,707	$	5,081,701
Taxes payable-current		1,405,772			1,326,179			1,506,771		1,326,179
Finance lease liability, current portion		250,591			217,070			160,498		217,070
Operating lease liabilities, current portion		317,544			477,350			470,999		477,350
Total Current Liabilities		10,523,796			7,102,300			9,209,975		7,102,300
Non-Current Liabilities
Finance lease liability, net of current portion		1,875,592			1,888,903			1,747,385		1,888,903
Operating lease liabilities, net of current portion		7,857,421			8,022,342			7,365,145		8,022,342
Total Non-Current Liabilities		9,733,013			9,911,245			9,112,530		9,911,245
Total Liabilities	$	20,256,809		$	17,013,545		$	18,322,505	$	17,013,545

Commitment and Loss Contingencies
	$	—		$	—
Stockholders’ Equity
PREFERRED STOCK; $0.001 par value; 1,000,000 shares authorized; none outstanding	$	—		$	—
COMMON STOCK; $0.0005 par value; 80,000,000 shares authorized; 10,043,307 shares issued; and 9,997,477 shares outstanding as of March 31, 2021 and December 31, 2020, respectively		24,139			24,139
Treasury stock; 45,830 shares as of March 31, 2021 and December 31, 2020 at cost		(510,329	)		(510,329	)
PREFERRED STOCK; $0.001 par value; 1,000,000 shares authorized; NaN outstanding							$	0	$	0
COMMON STOCK; $0.0005 par value; 80,000,000 shares authorized; 10,515,307 and 10,043,307 shares issued; 10,469,477 and 9,997,477 shares outstanding as of June 30, 2021 and December 31, 2020, respectively								24,375		24,139
Treasury stock; 45,830 and 45,830 shares as of June 30, 2021 and December 31, 2020 at cost								510,329		510,329
Additional paid-in capital		97,435,316			97,435,316			100,569,160		97,435,316
Retained earnings unappropriated		148,886,232			151,388,356			146,183,012		151,388,356
Retained earnings appropriated		24,233,544			24,233,544			24,233,544		24,233,544
Accumulated other comprehensive income		2,268,557			4,453,247
Accumulated other comprehensive loss								7,602,793		4,453,247
Total Stockholders’ Equity		272,337,459			277,024,273			278,102,555		277,024,273
Total Liabilities and Stockholders’ Equity	$	292,594,268		$	294,037,818		$	296,425,060	$	294,037,818


	Three-Month Period Ended March 31,						Three-Month Period Ended June 30,						Six-Month Period Ended June 30,
	2021			2020			2021			2020			2021			2020

NET REVENUE
Net revenue	$	5,259,243		$	557,670		$	11,148,008		$	5,359,483		$	16,407,251		$	5,917,153

OPERATING EXPENSE
OPERATING INCOME (EXPENSE)
Cost of net revenue		(4,181,389	)		(921,320	)		(6,915,774	)		(5,022,896	)		(11,097,163	)		(5,944,216	)
Sales, marketing and other operating expenses		(9,545	)		(2,243	)		(15,625	)		(10,838	)		(25,170	)		(13,081	)
Direct labor and factory overheads incurred during plant shutdown		(2,613,483	)		(3,610,423	)		(1,394,717	)		(1,737,599	)		(4,008,200	)		(5,348,022	)
General and administrative expenses		(1,736,250	)		(843,337	)		(5,204,701	)		(1,541,702	)		(6,940,951	)		(2,385,039	)
Other operating expense		—			(15,776	)
		(8,540,667	)		(5,393,099	)
Other operating income (loss)								0			0			0			(15,776
Total operating expense								(13,530,817	)		(8,313,035	)		(22,071,484	)		(13,706,134	)

LOSS FROM OPERATIONS		(3,281,424	)		(4,835,429	)		(2,382,809	)		(2,953,552	)		(5,664,233	)		(7,788,981	)

OTHER INCOME (EXPENSE)
Interest expense		(36,862	)		(35,428	)		(39,368	)		(34,888	)		(76,230	)		(70,316	)
Interest income		72,453			74,656			75,437			71,188			147,890			145,844
LOSS BEFORE TAXES		(3,245,833	)		(4,796,201	)		(2,346,740	)		(2,917,252	)		(5,592,573	)		(7,713,453	)

INCOME TAX BENEFIT		743,709			1,256,443			(356,480	)		672,633			387,229			1,929,076

NET LOSS	$	(2,502,124	)	$	(3,539,758	)	$	(2,703,220	)	$	(2,244,619	)	$	(5,205,344	)	$	(5,784,377	)

COMPREHENSIVE LOSS:
NET LOSS	$	(2,502,124	)	$	(3,539,758	)	$	(2,703,220	)	$	(2,244,619	)	$	(5,205,344	)	$	(5,784,377	)
OTHER COMPREHENSIVE LOSS
- Foreign currency translation adjustments		(2,184,690	)		(4,515,359	)		5,334,236			221,869			3,149,546			(4,293,490	)

COMPREHENSIVE LOSS	$	(4,686,814	)	$	(8,055,117	)	$	2,631,016		$	(2,022,750	)	$	(2,055,798	)	$	(10,077,867	)

LOSS PER SHARE:
BASIC AND DILUTED	$	(0.25	)	$	(0.37	)	$	(0.26	)	$	(0.24	)	$	(0.50	)	$	(0.61	)

WEIGHTED AVERAGE NUMBER OF SHARES:

BASIC AND DILUTED		9,997,477			9,517,427			10,469,477			9,517,427			10,469,477			9,517,427


	Three-Month Period Ended March 31,						Six-Month Period Ended June 30,
	2021			2020			2021			2020

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(2,502,124	)	$	(3,539,758	)	$	(5,205,344	)	$	(5,784,377	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Interest on capital lease obligation		35,538			35,272
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Interest on finance lease obligation								71,197			70,009
Depreciation and amortization		4,104,357			3,454,891			8,224,864			7,559,224
Unrealized exchange (gain) loss on translation of inter-company balances		104,812			(400,449	)
Unrealized exchange gain on translation of inter-company balances								594,150			(382,331	)
Deferred tax asset		(743,709	)		(1,256,443	)		(387,230	)		(1,929,553	)
Common stock issued for services		—			—			3,134,080			0
Changes in assets and liabilities
Issuance of stock options to employee								0			0
Changes in assets and liabilities:
Accounts receivable		1,637,800			4,245,576			1,839,939			1,807,547
Inventories		(162,099	)		523			(252,995	)		152,369
Prepayments and deposits		(71,888	)		54,350			(98,992	)		32,807
Other receivables		—			—			0			0
Accounts and Other payable and accrued expenses		830,751			(41,562	)		(785,889	)		(9,284	)
Retention payable		—			—			0			0
Taxes payable		72,758			(18,999	)		190,892			298,599
Prepaid land leases		—			(369,066	)		0			(369,066	)
Operating leases		35,199			38,022
Net cash provided by operating activities		3,341,395			2,202,357
Operating lease								(298,897	)		(268,192	)
Net cash provided by (used in) by operating activities								7,025,775			1,177,752

CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of property, plant and equipment		—			(7,416,211	)		(5,806,435	)		(9,860,142	)
Net cash used in investing activities		—			(7, 416,211)			(5,806,435	)		(9,860,142	)

CASH FLOWS USED IN FINANCING ACTIVITIES
Repayment of finance lease obligation								(296,597	)		(264,976	)
Net cash used in financing activities								(296,597	)		(264,976	)

EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(864,609	)		(1,455,442	)		1,912,746			(1,382,029	)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		2,476,786			(6,669,296	)
NET DECREASE IN CASH AND CASH EQUIVALENTS								2,835,489			(10,329,395	)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		94,222,538			100,301,986			94,222,538			100,301,986
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	96,699,324		$	93,632,690		$	97,058,027		$	89,972,591

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Cash paid during the periods for:
Income taxes	$	—		$	—		$	0		$	0
Operating right-of-use assets obtained in exchange for lease obligations	$	—		$	—		$	0		$	0
SUPPLEMENTAL DISCLOSURE OF CASH NON-CASH INVESTING AND FINANCING ACTIVITIES
Increase in Property, plant and equipment transferred from Prepayment and deposits and included in Accounts and other payable and accrued expenses	$	6,199,214		$	—
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

The accompanying condensed financial statements have been prepared by Gulf Resources, ~~Inc~~Inc. (“Gulf Resources”). a Nevada corporation and its subsidiaries (collectively, the “Company”), without audit, in accordance with the instructions to Form 10-Q and, therefore, do not necessarily include all information and footnotes necessary for a fair statement of its financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States (“US GAAP”).

In the opinion of management, the unaudited financial information for the ~~quarter~~three and six months ended ~~March 31,~~June 30, 2021 presented reflects all adjustments, which are only normal and recurring, necessary for a fair statement of results of operations, financial position and cash flows. These condensed financial statements should be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Operating results for the interim periods are not necessarily indicative of operating results for an entire fiscal year.

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts that are reported in the financial statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may be different from the estimates. The Company also exercises judgments in the preparation of these condensed financial statements in ~~the~~certain areas, including classification of leases and related party transactions.

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”) and Daying County Haoyuan Chemical Company Limited (“DCHC”). All material intercompany transactions have been eliminated on consolidation.

The Company manufactures and trades bromine and crude salt through its wholly-owned subsidiary, Shouguang City Haoyuan Chemical Company Limited ("SCHC") in the People’s Republic of China (“PRC”), which is also planning to engage in seawater desalination technology research and service and to handle the import and export of goods and technologies within the scope permitted by the State. The Company also 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~~ PRC. DCHC was established to further explore and develop natural gas and brine resources (including bromine and crude salt) in the PRC. DCHC commenced trial operation in January 2019 but suspended production temporarily in May 2019 as required by the government to obtain project approval (see Note 1 (b)(iii) below).

On March 11, 2020, the World Health Organization (WHO) officially declared COVID-19 a pandemic. The duration and intensity of the impact of the COVID-19 and resulting disruption to the Company’s operations and financial position is uncertain. While our operations are currently not materially affected, it is unknown whether or how they may be affected if such a pandemic persists for an extended period. While not yet quantifiable, the Company believes this situation did not have a material adverse impact on its operating results in the ~~first~~second quarter of 2021 and will continue to assess the financial impact. The virus outbreak slightly delayed the commencement of the operations for Factory No.1, No.4, No.7, No.9, and it may also delay the approval for the remaining three factories include No.2, No.8 and No.10. It is, however, still unclear how the pandemic will evolve going forward, and we cannot assure you whether the COVID-19 pandemic will bring about significant negative impact on our business operations, financial condition and operating results, including but not limited to negative impact to our total revenues.

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 which allowed 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.

Pursuant to the notification issued on November 24, 2020 from the government of Shouguang City, all bromine facilities in Shouguang City had to be temporarily closed from December 25, 2020 until February 19, 2021 8:00 AM China Time. To comply with such notification, the Company temporarily stopped production at its bromine facilities in factory No. 1, No. 4, No. 7 and No. 9 during the aforesaid period and commenced production as scheduled on February 19, 2021.

On November 24, 2017, the Company received a letter from the Government of Yangkou County, Shouguang City notifying the Company to relocate its two chemical production plants located in the second living area of the Qinghe Oil Extraction to the Bohai Marine Fine Chemical Industrial Park (“Bohai Park”). This is because the two plants are located in a residential area and their production activities will impact the living environment of the residents. This is as a result of the country’s effort to improve the development of the chemical industry, manage safe production and curb environmental pollution accidents effectively, and ensure the quality of the living environment of residents. All chemical enterprises which do not comply with the requirements of the safety and environmental protection regulations will be ordered to shut down.

In December 2017, the Company secured from the government the land use rights for its chemical plants located at the Bohai Park and in June 2018, the Company presented a completed construction design draft and other related ~~docu15ments~~documents to the local authorities for approval. In January 2020, the Company obtained the environmental protection assessment approval performed by the government of Shouguang City, Shandong Province for the proposed new Yuxin chemical factory. With this approval, the Company is permitted to construct the new chemical factory and began the construction in the second quarter of 2020.

The Company ~~estimates~~believes this relocation process will cost approximately ~~$64~~$67 million in total. The Company incurred relocation costs comprising prepaid land lease, professional fees related to the design of the new chemical factory, ~~purchase of plant~~ and ~~equipment~~progress payment and ~~construction costs and installation costs incurred~~deposit for the construction of the new ~~chemical~~ factory building in the amount of ~~$35,635,297~~$41,080,681 and ~~$33,496,295,~~$33,496,295, which were recorded in the ~~Property,~~prepaid land leases and property, plant and equipment in the consolidated balance sheets as of ~~March 31,~~June 30, 2021 and December 31, 2020.

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.

As of ~~March 31,~~June 30, 2021 and December 31, 2020, there were no0 allowances for doubtful accounts. No allowances for doubtful accounts were charged to the condensed consolidated statements of loss for the three-month and six-month periods ended ~~March 31,~~June 30, 2021 and 2020.

~~The Company collected from its accounts receivable an amount of $3,396,688 in April 2021 through May 5, 2021.~~

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 and Sichuan Rural Credit Union, which are not insured or otherwise protected. The Company placed ~~$96,699,324~~$97,058,027 and ~~$94,222,538~~$94,222,538 with these institutions as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively. The Company has not experienced any losses in such accounts in the PRC.

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

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:

Basis of Presentation and Summary of Significant Accounting Policies - Schedule of Property, Plant and Equipment Useful Life

Property, plant and equipment under the ~~capital~~finance lease are depreciated over their expected useful lives on the same basis as owned assets, or where shorter, the term of the ~~lease.~~lease, which is 20 years.

Producing oil and gas properties are depreciated on a unit-of-production basis over the proved developed reserves. Common facilities that are built specifically to service production directly attributed to ~~designated~~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.

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 ~~income~~loss on an accrual basis when they are due. The Company’s contributions totaled ~~$246,622~~$220,968 and ~~$140,108~~$43,838 for the three-month ~~periods~~period ended ~~March 31,~~June 30, 2021 and 2020, respectively, and totaled $467,590 and $183,946 for the six-month period ended June 30, 2021 and 2020, respectively.

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 14.

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

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~~three and six months period ended ~~March 31,~~June 30, 2021 and 2020, the Company determined that there were no events or circumstances indicating possible ~~additional~~ impairment of its long-lived assets.

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 ~~62,704~~0 and ~~113,370~~74,781 shares for the three-month ~~periods~~period ended ~~March 31,~~June 30, 2021 and 2020, respectively, and amounted to 31,352 and 94,075 shares for the six-month period ended June 30, 2021 and 2020, respectively. These awards could be dilutive in the future if the market price of the common stock increases and is greater than the exercise price of these awards.

~~Because~~As the Company reported a net loss for the ~~three-month periods~~three and six months ended ~~March 31,~~June 30, 2021 and 2020, common stock equivalents including stock options and warrants were ~~anti-dilutive, therefore~~anti-dilutive. Therefore, the amounts reported for basic and diluted loss per share were the same.

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

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 ~~income.~~loss. The statement of ~~income~~loss and comprehensive ~~income~~loss is translated at average rate during the reporting period. Gains or losses resulting from transactions in currencies other than the functional currencies are recognized in net ~~income~~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.

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.

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.

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.

~~NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued~~

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.

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 estimabled. 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.

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 ~~profit~~income (loss).

There were no recent accounting pronouncements adopted during the ~~three~~six months ended ~~March 31,~~June 30, 2021.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The amendments in this Update affect loans, debt securities, ~~trade.~~

~~NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued~~

trade receivables, and any other financial assets that have the contractual right to receive cash. The ASU requires an entity to recognize expected credit losses rather than incurred losses for financial assets. For public entities, the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For the Company which is a smaller reporting company, ASU No. 2019-10 extends the effective dates for two years. The Company is currently evaluating the effect of this on the condensed consolidated financial statements and related disclosure.

There was no allowance for slow-moving inventories as of ~~March 31,~~June 30, 2021 and 2020.

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 ten to fifty 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 6.

In December 2017, the Company paid a one lump sum upfront amount of ~~$9,677,429~~$9,844,040 for a 50-year lease of a parcel of land at Bohai Marine Fine Chemical Industrial Park (“Bohai”) for the new chemical factory under construction. There is no purchase option at the end of the lease term. This was classified as an operating lease prior to and as of January 1, 2019. The land use certificate was issued on October 25, 2019. The lease term expires on August 12, 2069. The amount paid was recorded as prepaid land leases, net of current portion in the consolidated balance sheet as of ~~March 31~~June 30 2021 and December 31, 2020. As of ~~March 31,~~June 30, 2021, the prepaid land lease increased to ~~$10,063,469~~$10,234,582 due to an additional amount paid for stamp duty and related land use rights fees. Amortization of this prepaid land lease will commence when the chemical factory is built and placed in service.

InThe Company began the construction on its new chemical facilities located at Bohai Marine Fine Chemical Industrial Park in June 2020 and basically completed the ~~construction~~civil works by end of ~~the new chemical factory commenced and is expected to complete around~~ June 2021.

10 9

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 ~~$18,720,653~~$18,587,921 and ~~$19,302,600~~$19,302,600 as at ~~March 31,~~June 30, 2021 and December 31, 2020, respectively.

During the three-month period ended ~~March 31,~~June 30, 2021, depreciation and amortization expense totaled ~~$4,102, 929,~~$4,119,073 of which ~~$1,816,782, $163,233~~$758,445, $163,868 and ~~$2,122,914~~$3,196,760 were recorded in direct labor and factory overheads incurred during plant shutdown, administrative expenses and cost of net revenue ~~respectively.~~

. During the ~~three-month~~six-month period ended ~~March 31, 2020,~~ June 30, 2021,depreciation and amortization expense totaled ~~$3,453,563,~~$8,222,022 of which ~~$2,578,771, $201,406~~$2,575,227, $327,101 and ~~$673,386~~$5,319,694 were recorded in direct labor and factory overheads incurred during plant shutdown, administrative expenses and cost of net revenue ~~respectively.~~.

During the three-month period ended June 30, 2020, depreciation and amortization expense totaled $4,103,026 of which $1,167,114, $198,413 and $2,737,500 were recorded in direct labor and factory overheads incurred during plant shutdown, administrative expenses and cost of net revenue. During the six-month period ended June 30, 2020, depreciation and amortization expense totaled $7,556,589 of which $3,745,884, $399,819 and $3,410,886 were recorded in direct labor and factory overheads incurred during plant shutdown, administrative expenses and cost of net revenue.

Property, plant and equipment under finance ~~lease,~~leases, net consist of the following:

Finance Lease Right-Of-Use Assets - Schedule of Property, Plant and Equipment Under Finance Leases

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-month~~three and six months period ended ~~March 31,~~June 30, 2021, depreciation and amortization expense totaled ~~$1,428,~~$1,434 and $2,862, respectively, which was recorded in direct labor and factory overheads incurred during plant shutdown.

During the ~~three-month~~three and six months period ended ~~March 31,~~June 30, 2020, depreciation and amortization expense totaled ~~$1,327,~~$1,308 and $2,635, respectively, which was recorded in direct labor and factory overheads incurred during plant shutdown.

11 10

As of ~~March 31,~~June 30, 2021, the total operating lease ROU assets was ~~$8,662,972.~~

$8,507,190. The total operating lease cost for the three-month period ended ~~March 31,~~June 30, 2021 and 2020 was ~~$240,150~~$241,145 and ~~$219,687, respectively.~~$216,422.

The total operating lease cost for the six-month period ended June 30, 2021 and 2020 was $481,295 and $436,109.

The Company has the rights to use certain parcels of land located in Shouguang, the PRC, through lease agreements signed with local townships or the government ~~authority.~~authority (See Note 3). 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 38.6 square kilometers of aggregate carrying value of ~~$8,155,820~~$8,153,080 as at ~~March 31,~~June 30, 2021.

Accounts ~~and~~payable, other payable and accrued expenses consist of the following:

Accounts Payable, Other Payable and Accrued Expenses - Schedule of Accounts Payable and Accrued Liabilities

The deposit on subscription of a subsidiary's share of ~~$152,180~~$154,800 as of ~~March 31,~~June 30, 2021 relates to sale of non-controlling interests in DCHC.

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 ~~$5.7~~$5.7 million in cash, of which Mr. Ming Yang, the Chairman of the Company, had a ~~99%~~99% equity interest in the Seller. During the first quarter of 2018, the Company entered into an agreement with the Seller, a related party, to provide property management services for an annual amount of approximately ~~$94,940~~$96,574 for five years from January 1, 2018 to December 31, ~~2022.~~2022. The expense associated with this agreement for the three and six months ended ~~March 31,~~June 30, 2021 was approximately $24,144and $47,878. The expense associated with this agreement for the three and six months ended June 30, 2020 was approximately ~~$23,735~~$22,030 and ~~$22,013.~~$44,043. The amounting owing for the property management services as of ~~March 31,~~June 30, 2021 and December 31, 2020 was ~~$23,738~~$48,290 and ~~$95,616~~$95,616 (Note 7). The amount owed as of ~~March 31,~~June 30, 2021 is interest-free, unsecured and payable in January 2022.

	March 31,		December 31,		June 30,		December 31,
	2021		2020		2021		2020
Land use tax payable		827,702		833,576	$	841,951	$	833,576
Value added tax and other taxes payable		578,070		492,603		664,820		492,603
Land use tax payable	$	1,405,772	$	1,326,179	$	1,506,771	$	1,326,179

Lease Liabilities-Finance and Operating Lease - Schedule of Finance Leased Liabilities

Interest expenses from ~~a finance~~capital lease ~~liability~~obligations amounted to ~~$35,538~~$35,659 and ~~$35,262~~$34,747 for the three-month ~~periods~~period ended ~~March 31,~~June 30, 2021 and 2020, respectively, which were charged to the condensed consolidated statement of ~~loss. The~~income (loss). Interest expenses from capital lease obligations amounted to $71,197 and $70,009 for the six-month period ended June 30, 2021 and 2020, respectively, which were charged to the condensed consolidated statement of income (loss).The remaining finance lease term at ~~March 31, 2020~~June 30, 2021 was 10 years.

Lease Liabilities-Finance and Operating Lease - Schedule of Operating Leased Liabilities

The weighted average remaining operating lease term at ~~March 31,~~June 30, 2021 was 21 years and the weighted average discounts rate was ~~4.89%. This discount rates used are based on~~4.89%.Lease payments for the ~~base rate quoted by the People's Bank of China and vary with the remaining term of the lease. Lease payment in the three-months~~three-month period ended ~~March 31,~~June 30, 2021 and 2020, ~~was $204,951~~respectively, were $575,242 and ~~$181,665.~~$522,636. Lease payments for the six-month period ended June 30, 2021 and 2020, respectively, were $780,193 and $704,301.

Lease Liabilities-Finance and Operating Leases - Schedule of Financing and Operating Lease Maturities

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.

During the three months ended June 30, 2021, the Company granted in the aggregate, 472,000 restricted shares to a consultant, the company's directors, officers and employees. The restricted shares award were granted from the 2019 Omnibus Equity Incentive Plan and vested immediately. The fair value of the award on the date of grant was $3,134,080 which was expensed in full during the three months ended June 30, 2021.

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:

SCHC, SYCI 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. The Statutory Common Reserve Fund as of ~~March 31,~~June 30, 2021 for SCHC, SYCI and DCHC is 16%, 14% and 0% of its registered capital respectively.

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 2,068,398 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 ~~March 31,~~June 30, 2021, the number of shares of the Company’s common stock available for grant of ~~stock options and issuance~~awards under the 2019 Plan is ~~515,648~~159,248 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.

In April 2021, the Company and certain management staff and directors mutually agreed to cancel certain unexercised stock options previously granted for an aggregate of 115,600 shares of the Company’s common stock underlying those stock options, having exercise prices at $7.27 per share, without consideration.

For the three months ended ~~March 31,~~June 30, 2021 and 2020, total compensation costs for options issued recorded in the consolidated statement of loss were ~~$0.~~$0.

During the three and six months ended ~~March 31,~~June 30, 2021, there were no options ~~issued~~granted to employees or non-employees.

The following table summarizes all Company stock option transactions between January 1, 2021 and ~~March 31,~~June 30, 2021.

The aggregate intrinsic value of options outstanding and exercisable as of ~~March 31,~~June 30, 2021 was ~~$4,710.~~$4,710.

During the three and six months ended ~~March 31,~~June 30, 2021 and 2020, there were no options exercised.

14 12

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.~~

Gulf Resources, Inc. may be subject to the United States of America Tax laws at a tax rate of ~~21%~~21%. No provision for the US federal income taxes has been made as the Company had no US taxable income for the three-month and six-month periods ended ~~March 31,~~June 30, 2021 and 2020, and management believes that its earnings are permanently invested in the PRC.

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 six-month periods ended ~~March 31,~~June 30, 2021 and 2020.

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 six-month periods ended ~~March 31,~~June 30, 2021 and 2020. The applicable statutory tax rates for the three-month and six-month periods ended ~~March 31,~~June 30, 2021 and 2020 are ~~16.5%~~16.5%. There is no dividend withholding tax in Hong Kong.

Enterprise income tax (“EIT”) for SCHC, SYCI and DCHC in the PRC is charged at ~~25%~~25% of the assessable profits.

The operating subsidiaries SCHC, SYCI and DCHC are wholly foreign-owned enterprises (“FIE”) 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 5% effective tax rate.

As of ~~March 31,~~June 30, 2021 and December 31, 2020, the accumulated distributable earnings under the Generally Accepted Accounting Principles (GAAP”) of PRC that are subject to WHT are ~~$122,460,382~~$125,637,125 and ~~$126,643,733,~~$126,643,733, respectively. Since the Company intends to reinvest its earnings to further expand its businesses in mainland China, its foreign invested enterprises do not intend to declare dividends to their immediate foreign holding companies in the foreseeable future. Accordingly, as of ~~March 31,~~June 30, 2021 and December 31, 2020, the Company has not recorded any WHT on the cumulative amount of distributable retained earnings of its foreign invested enterprises that are subject

to WHT in China. As of ~~March 31,~~June 30, 2021 and December 31, 2020, the unrecognized WHT are ~~$5,086,534~~$5,227,527 and ~~$5,288,346,~~$5,288,346, respectively.

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 ~~2017~~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 ~~are currently subject to examination.~~have been examined, and there is no Hong Kong Profits Tax was charged.

The components of the ~~provision for~~ income tax benefit ~~(expense)~~ from continuing operations are:

	Three-Month Period Ended March 31,
	2021			2020			Three-Month Period Ended June 30,					Six-Month Period Ended June 30,
							2021			2020		2021		2020
Current taxes – PRC	$	—		$	—		$	0		$	0	$	0	$	0
Deferred tax – PRC entities		743,709			1,256,443
Deferred taxes –US entity		15,957			24,053
Deferred taxes								(356,408	)		612,354		387,229		1,739,929
Change in valuation allowance		(15,957	)		(24,053	)		0			60,279		0		189,147
	$	743,709		$	1,256,443
Tax Expense Benefit							$	(356,408	)	$	672,633	$	387,229	$	1,929,076

The effective income tax ~~benefit differ~~rate differs from the PRC statutory income tax rate of 25% from continuing operations in the PRC as follows:Income Taxes - Schedule of Income Tax Rate Reconciliation


	Three-Month Period Ended March 31,						Three-Month Period Ended June 30,						Six-Month Period Ended June 30,
Reconciliations	2021			2020			2021			2020			2021			2020
Statutory income tax rate		25	%		25	%		25	%		25	%		25	%		25	%
Non-taxable & Non-deductible items		(1	%)		2	%		(6	%)		(2	%)		(3	%)		0
Change in valuation allowance		(1	%)		(1	%)		(34	%)		0			(15	%)		0
Effective income tax benefit (expense) rate		23	%		26	%
Effective tax rate								(15	%)		23	%		7	%		25	%

Significant components of the Company’s deferred tax assets and liabilities at ~~March 31,~~June 30, 2021 and December 31, 2020 are as follows:

The increase in valuation allowance for the three-month period ended June 30, 2021 is $144,890.

The decrease in valuation allowance for the three-month period ended ~~March 31, 2021~~June 30, 2020 is ~~$86,964.~~$60,279.

The increase in valuation allowance for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2021 is $57,926.

The decrease in valuation allowance for the six-month period ended June 30, 2020 is ~~$128,868.~~$189,147.

There were no unrecognized tax benefits and accrual for uncertain tax positions as of ~~March 31,~~June 30, 2021 and December 31, 2020 and no amounts accrued for penalties and interest for the three and six months ended ~~March 31,~~June 30, 2021 and 2020.

The Company has four reportable segments: bromine, crude salt, chemical products and natural gas. The reportable segments are consistent with how management views the markets served by the Company and the financial information that is reviewed by its chief operating decision maker.

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 March 31, 2021	Bromine *			Crude Salt *			Chemical Products			Natural Gas			Segment Total			Corporate			Total
Three-Month Period Ended June 30, 2021																						Bromine*			Crude Salt*			Chemical Products			Natural Gas			Segment Total			Corporate			Total
Net revenue (external customers)	$	4,810,990		$	448,253		$	—		$	—		$	5,259,243		$	—		$	5,259,243		$	10,025,438		$	1,122,570		$	0		$	0		$	11,148,008		$	0		$	11,148,008
Net revenue (intersegment)		—			—			—			—			—			—			—			0			0			0			0			0			0			0
Loss from operations before income benefit		(1,279,565	)		(1,009,585	)		(746,469	)		(54,787	)		(3,090,406	)		(191,018	)		(3,281,424	)
Income(loss) from operations before income tax benefit																							2,682,233			(578,435	)		(741,312	)		(62,850	)		1,299,636			(3,682,445	)		(2,382,809	)
Income tax benefit		318,868			252,396			172,445			—			743,709			—			743,709			(672,696	)		145,070			171,146			0			(356,480	)		0			(356,480	)
Loss from operations after income taxes(benefit)		(960,697	)		(757,189	)		(574,024	)		(54,787	)		(2,346,697	)		(191,018	)		(2,537,715	)
Income (loss) from operations after income tax benefit																							2,009,537			(433,365	)		(570,166	)		(62,850	)		943,156			(3,682,445	)		(2,739,289	)
Total assets		144,744,423			24,170,863			121,760,637			1,875,459			292,551,382			42,886			292,594,268			138,872,887			32,840,392			122,381,338			1,846,367			295,940,984			484,076			296,425,060
Depreciation and amortization		2,920,689			1,077,460			68,607			37,601			4,104,357			—			4,104,357			2,610,442			1,403,262			68,874			37,929			4,120,507			0			4,120,507
Capital expenditures		—			—			—			—			—			—			—			0			0			5,806,435			0						0			5,806,435

Three-Month Period Ended March 31, 2020	Bromine *			Crude Salt *			Chemical Products			Natural Gas			Segment Total			Corporate		Total
Three-Month Period Ended June 30, 2020																					Bromine*			Crude Salt*			Chemical Products			Natural Gas			Segment Total				Corporate			Total
Net revenue (external customers)	$	462,846		$	94,824		$	—		$	—		$	557,670		$	—	$	557,670		$	4,487,017		$	872,466		$	0		$	0		$	5,359,483		��	$	0		$	5,359,483
Net revenue (intersegment)		—			—			—			—			—			—		—			0			0			0			0			0				0			0
Income (loss) from operations before income taxes(benefit)		(2,866,438	)		(1,513,582	)		(710,909	)		(48,846	)		(5,139,775	)		304,346		(4,835,429	)
Income(loss) from operations before income tax benefit																						(1,479,084	)		(611,472	)		(654,652	)		(53,270	)		(2,798,478	)			(155,074	)		(2,953,552	)
Income tax benefit		717,438			378,396			160,609			—			1,256,443			—		1,256,443			350,708			172,849			149,076			0			672,633				0			672,633
Income (loss) from operations after income taxes(benefit)		(2,149,000	)		(1,135,186	)		(550,300	)		(48,846	)		(3,883,332	)		304,346		(3,578,986	)
Income (loss) from operations after income tax benefit																						(1,128,376	)		(438,623	)		(505,576	)		(53,270	)		(2,125,845	)			(155,074	)		(2,280,919	)
Total assets		117,061,540			39,066,713			109,222,446			1,657,769			267,008,468			105,430		267,113,898			115,956,839			38,299,428			108,862,565			1,599,014			264,717,846				70,367			264,788,213
Depreciation and amortization		2,197,844			1,108,443			113,484			35,120			3,454,891			—		3,454,891			3,038,936			919,003			111,797			34,598			4,104,334				0			4,104,334
Capital expenditures		3,157,669			646,752			3,611,790			—			7,416,211			—		7,416,211			0			0			2,443,931			0			2,443,931				0			2,443,931

* 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 respective segment.

17 14

The following table shows the major ~~customers~~customer(s) (10% or more) for the three-month period ended ~~March 31,~~June 30, 2021.

The following table shows the major ~~customers~~customer(s) (10% or more) for the six-month period ended June 30, 2021.

The following table shows the major customer(s) (10% or more) for the three-month period ended ~~March 31,~~June 30, 2020.

Number	Customer	Bromine (000’s)		Crude Salt (000’s)		Chemical Products (000’s)		Total Revenue (000’s)		Percentage of Total Revenue (%)			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	$	70	$	41	$	—	$	111		20	%	Shandong Morui Chemical Company Limited	$	809	$	321	$	0	$	1,130		21.1	%
2	Shandong Brother Technology Limited	$	60	$	36	$	—	$	96		17.1	%	Shouguang Weidong Chemical Company Limited	$	982	$	251	$	0	$	1,233		23	%
3	Shouguang Weidong Chemical Company Limited	$	65	$	18	$	—	$	83		14.9	%	Shandong Brother Technology Limited	$	550	$	300	$	0	$	850		15.8	%
4	Dongying Bomeite Chemical Company Limited	$	70	$	—	$	—	$	70		12.5	%	Shandong Shouguang Shenrunfa Ocean Chemical Company Limited	$	711	$	0	$	0	$	711		13.3	%
5	Shandong Shouguang Shenrunfa Ocean Chemical Company Limited	$	57	$	—	$	—	$	57		10.2	%	Dongying Bomeite Chemical Company Limited	$	537	$	0	$	0	$	537		10	%
6	Shouguang JinWang Chemical Company Limited	$	56	$	—	$	—	$	56		10	%

The following table shows the major customer(s) (10% or more) for the six-month period ended June 30, 2020.

During the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2021, the Company sold ~~74.5%~~66.4% of its products to its top five ~~customers.~~customers, respectively. As of ~~March 31,~~June 30, 2021, amounts due from these customers were ~~$3,571,150.~~$2,878,885.

During the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2020, the Company sold ~~84.8%~~82.4% of its products to its top ~~six customers.~~five customers, respectively. As of ~~March 31,~~June 30, 2020, amounts due from these customers were ~~$526,288.~~$2,488,001.

During the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2021 the Company purchased ~~100%~~100% of its raw materials from its top five suppliers. As of ~~March 31,~~June 30, 2021, amounts due to those suppliers were ~~$1,040,950.~~$412,601.

During the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2020 the Company purchased ~~100%~~100% of its raw materials from its top five suppliers. As of ~~March 31,~~June 30, 2020, amounts due to those suppliers were ~~$53,707.~~$286,401.

The carrying values of financial instruments, which consist of cash, accounts receivable and accounts payable and other payables, approximate their fair values due to the short-term nature of these instruments. There were no material unrecognized financial assets and liabilities as of ~~March 31,~~June 30, 2021 and December 31, 2020.

The following table sets forth the Company’s contractual obligations as of ~~March 31,~~June 30, 2021:

Capital Commitment and Other Service Contractual Obligations - Schedule of Contractual Obligations

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 Shouguang City Natural Resources and Planning Bureau (the “Bureau”), naming SCHC as respondent respectively thereof. The Decisions challenged the land use of Factory nos. 2, 9, 7, 4, 8 and 10, respectively, and alleged, among other things, that SCHC had illegally occupied and used the land in the total area of approximately 52,674 square meter, on which Factory nos. 2, 9, 7, 4, 8 and 10 were built, respectively. The Written Decisions ordered SCHC, among other things, to return the land subject to the Written Decisions to its respective legal owner, restore the land to its original state, and demolish or confiscate all the buildings and facilities thereon and pay monetary penalty of approximately RMB 1.3 million ($184,000) in the aggregate. Each of the Written Decisions shall be executed within 15 days upon serving on SCHC. Additional interest penalty shall be imposed at a daily rate of 3% in the event that SCHC does not make the monetary penalty payment in a timely manner. Subsequently, the Bureau filed enforcement actions to the People’s Court of Shouguang City, Shandong Province (the “Court”), naming SCHC as enforcement respondent and alleged, among other things, that SCHC failed to perform its obligations under each of the Written Decisions within the specified timeframe. The enforcement proceedings sought court orders to enforce the Written Decisions.On May 5, 2019, written decisions of administrative ruling captioned (2019) Lu 0783 Xing Shen No. 384, (2019) Lu 0783 Xing Shen No. 385, (2019) Lu 0783 Xing Shen No. 389, (2019) Lu 0783 Xing Shen No. 390, (2019) Lu 0783 Xing Shen No. 393, and (2019) Lu 0783 Xing Shen No. 394, respectively (together, the “Court Rulings”) were made by the Court in favor of the Bureau. The Court orders, among other relief, to enforce each of the Written Decisions, to return each subject land to its legal owners and demolish or confiscate the buildings and facilities thereon and restore the land to its original state within 10 days from the service of the Court Rulings on SCHC. The Court Rulings became enforceable immediately upon service on SCHC on May 5, 2019.

In the last twenty years, to the Company’s knowledge, there were no government regulations requiring bromine manufacturers to obtain land use and planning approval document. As such, the Company believes most of the bromine manufacturers in Shouguang City do not have land use and planning approval documents and lease their land parcels from the village associations. They are facing the same issues in connection with land use and planning as the Company. To the Company’s knowledge, the local government has submitted its plan to solve the issues to higher authority and are waiting for approval from the higher authority.

The Company is in the process of resolving the issues in connection with SCHC’s land use and planning diligently. The Company has been in discussions closely with the local government authorities with the help from Shouguang City Bromine Association to seek reliefs and, based on verbal confirmation by local government authorities, believes the administrative penalties imposed by the Bureau according to the Written Decisions are being re-assessed by local government authorities and may be revoked. Pursuant to a Written Application dated October 28, 2019 addressed to the Court by the Bureau, the Bureau withdrew its application for the enforcement proceedings regarding the administrative penalty imposed on Factory No. 7, Factory No. 8 and Factory No.10. Pursuant to a written decisions of administrative ruling captioned (2019) Lu 0783 Xing Shen No. 389 Zhi Yi, dated November 25, 2020, the Court orders to terminate the enforcement of the case captioned (2019) Lu 0783 Xing Shen No. 389. Production of Factory No. 7 was allowed to resume in April 2019. The Company received a notification from the Shouguang City Government in February 2019 informing the Company that Factory No. 1, No.4, No. 7 and No. 9 have passed inspection and were approved to resume operation.

In addition, on August 28, 2019, the People’s Government of Shandong Province, issued a regulation titled “Investment Project Management Requirements of Chemical Companies in Shandong Province” permitting the construction of facilities on existing sites or infrastructure of bromine manufacturing and other chemical industry-related types of projects (clause 11 of section 3). The Company believes that the goal of the government is to standardize and regulate the industry and not to demolish the facilities or penalize the manufacturers. As of the date of this report, the Company has not been notified by the local government that it will take any measure to enforce the administrative penalties. Based on information known to date, the Company believes that it is remote that the Written Decisions or Court Rulings will be enforced within the expected timeframe and a material penalty or costs and expenses against the Company will result. However, there can be no assurance that there will not be any further enforcement action, the occurrence of which may result in further liabilities, penalties and operational disruption.

In view of the above facts and circumstances, the Company believes that it is not necessary to accrue for any estimated losses or impairment as of ~~March 31,~~June 30, 2021.

On April 26, 2021, the Company entered into an agreement with its officers and employees, pursuant to which the options to purchase 115,600 shares of our common stock granted on August 23, 2017 were cancelled.

On May 10, 2021, the Company entered into restricted stock agreements with its consultant, officers, directors and employees, pursuant to which the Company issued a total of 472,000 restricted shares of common stock of the Company, par value $0.0005 per share under the Company’s 2019 Omnibus Equity Incentive Plan.None.

18 17

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

We are a 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. SCHC is also planning to be involved in activities related to seawater desalination, seawater desalination technology research and service and to handle the import and export of goods and technologies within the scope permitted by the state.

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 ~~manufacture and sell~~ 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 and that the Company expected to have a full understanding of the implications within the next two months. 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 can 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, has 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 are not allowed to commence production prior to obtaining those approvals.

19 18

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 have passed inspection and can 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 take the steps to resume production at all four bromine factories.

The Company is still waiting for governmental approval for factories No.2, No.8, 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 to satisfy the local government's requirements. The Company expects to receive approvals for these factories by the second half of 2021 due to the COVID-19 impact.

On November 24, 2017, the Company received a letter from the People’s Government of Yangkou County, Shouguang City notifying the Company that due to the new standards and regulations relating to safety production and environmental pollution, from certain local governmental departments, such as the municipal environmental protection department, the security supervision department and the fire department, its chemical plants would have to be relocated to a new industrial park called Bohai Marine Fine Chemical Industry Park. Chemical companies that were not being asked to move into the park will be permanently closed. Although our chemical plants 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. Since our chemical factories closed, the Company has secured from the government the land use rights for its chemical plants located at the Bohai Park and presented a completed construction design draft and other related documents to the local authorities for approval. 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~~2020 and basically completed the civil works by end of June 2021 . Equipment installation and testing is expected to take ~~approximately one year, and an additional~~6 months or somewhat longer if issues occur. Trial production should take another six ~~months to complete the equipment installation and testing. The Company expects to begin trial production at the beginning of 2022.~~months.

In January 2017, the Company completed the first brine water and natural gas well field construction in Sichuan Province and announced the commencement of trial production. The Company has been working with Xinan Shiyou Daxue (Southwest Petroleum University) and developed a solution to DHCH’s technical drilling problem. In resolving the problem, the Company purchased customized equipment for its natural gas project. The installation of such equipment, including providing piping and electricity, was completed in July 2018. The Company has completed the test production at its first natural gas well in Sichuan Province and has commenced trial production in January 2019. Later 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.

As a result of our acquisitions of SCHC and SYCI, our historical consolidated financial statements and the information presented below reflects the accounts of SCHC, SYCI and DCHC, the condensed consolidated financial statements and the information presented below as of and for the quarter ended ~~March 31,~~June 30, 2021. The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere in this report.

20 19

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 and DCHC. The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere in this report.

The following table presents certain information derived from the condensed consolidated statements of ~~income,~~operations, cash flows and ~~stockholders’~~stockholders equity for the three-month and six-month periods ended ~~March 31,~~June 30, 2021 and 2020.

Comparison of the Three-Month ~~Periods~~Period Ended ~~March 31,~~June 30, 2021 and 2020

Net ~~revenue~~revenue. The table below shows the changes in net revenue in the respective segment of the Company for the three-month period ended ~~March 31,~~June 30, 2021 as compared to the same period in 2020:

	Net Revenue by Segment													Net Revenue by Segment
	Three-Month Period Ended					Three-Month Period Ended					Percent Change			Three-Month Period Ended					Three-Month Period Ended					Percent Change Increase
	March 31, 2021					March 31, 2020					Increase			June 30, 2021					June 30, 2020					of Net Revenue
Segment			% of total					% of total								% of total					% of total
Bromine	$	4,810,990		92	%	$	462,846		83	%		939	%	$	10,025,438		89.93	%	$	4,487,017		83.72	%		123	%
Crude Salt	$	448,253		8	%	$	94,824		17	%		373	%		1,122,570		10.07	%		872,466		16.28	%		29	%
Chemical Products	$	—		—		$	—		—			—			—		—			—		—
Natural Gas	$	—		—		$	—		—			—			—		—			—		—
Total sales	$	5,259,243		100	%	$	557,670		100	%		843	%	$	11,148,008		%		$	5,359,483		100	%		108	%

For the three-month periods ended ~~March 31,~~June 30, 2021 and 2020, the net revenue for the bromine segment was ~~$4,810,990~~$10,025,438 and ~~$462,846,~~$4,487,017, respectively, due to ~~the fact that four plants resumed production~~an increase in selling prices and ~~sales~~volume in the ~~first~~second quarter of ~~2021, while only two plants were in operation in the first quarter of 2020.~~2021.

For the three-month periods ended ~~March 31,~~June 30, 2021 and 2020, the net revenue for the crude salt was ~~$448,253~~$1,122,570 and ~~$94,824~~$872,466 mainly due to ~~the fact that production and sales resumed at three plants~~an increase in ~~the first quarter of 2021, while only two plants resumed production in the first quarter of 2020.~~ selling prices.. .

For the three-month periods ended ~~March 31,~~June 30, 2021 and 2020, the net revenue for the chemical products segment was $0 due to the closure of our chemical factories since September 1, 2017. As a result of the closure, there were no chemical products for sale for the three-month period ended ~~March 31,~~June 30, 2021. ~~Our~~We are setting up a new ~~chemical~~ factory ~~is under construction~~ in Bohai Park.

For the three-month period ended ~~March 31,~~June 30, 2021 and 2020, the net revenue for the natural gas was $0.

	Cost of Net Revenue by Segment										Percent Change			Cost of Net Revenue by Segment										Percent Change
	Three-Month Period Ended					Three-Month Period Ended					of Cost of			Three-Month Period Ended					Three-Month Period Ended					of Cost of
	March 31, 2021					March 31, 2020					Net Revenue			June 30, 2021					June 30, 2020					Net Revenue
Segment			% of total					% of total								% of total					% of total
Bromine	$	3,514,046		84	%	$	609,820		66	%		476	%	$	5,553,493		80.3	%	$	4,269,239		85	%		30	%
Crude Salt	$	667,343		16	%	$	311,500		34	%		114	%		1,362,281		19.7	%		753,657		15	%		81	%
Chemical Products	$	—		—		$	—		—			—			—		—			—		—			—
Natural Gas	$	—		—		$	—		—			—			—		—			—		—			—
Total	$	4,181,389		100	%	$	921,320		100	%		353	%	$	6,915,774		100	%	$	5,022,896		100	%		38	%

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.

The table below represents the annual capacity and utilization ratios for all of our bromine producing properties:

(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.~~tonnes of all the seven factories including those that have not commenced operations.

Our utilization ratio was ~~17%~~23% for the three-month period ended ~~March 31,~~June 30, 2021 ~~an increase of 12%~~ compared to ~~that~~15% recorded for the three-month period ended ~~March 31,~~June 30, 2020 ~~because four plants resumed production in March 31, 2021 compared~~mainly due to ~~two plants in operations in March 31, 2020.~~ the overall market environment that has been slowly recovering.

For the three-month period ended ~~March 31,~~June 30, 2021 the cost of net revenue for the bromine segment was ~~$3,514,046.~~$5,553,493. This ~~$2,904,226 increase~~$1,284,254 was primarily ~~attributable~~due to ~~the~~an increase in ~~factory~~manufacturing unit overhead, ~~per unit produced,~~ which was ~~mainly caused by the~~primarily due to an increase in ~~depreciation charges~~the number of ~~plant and equipment for four factories that resumed operation in~~units sold during the ~~three-month~~three months ended ~~March 31,~~June 30, 2021.

For the three-month period ended ~~March 31,~~June 30, 2020 the cost of net revenue for the bromine segment was ~~$609,820.~~$4,269,239.

For the three-month period ended ~~March 31,~~June 30, 2021 the cost of net revenue for the crude salt segment was $667,343. This $355,843 increase was primarily attributable to the increase in factory overhead per unit produced, which was mainly caused by the increase in depreciation charges of plant and equipment for three factories that resumed operation in the three-month ended March 31, 2021.$1,362,281.

For the three-month period ended ~~March 31,~~June 30, 2020 the cost of net revenue for the crude salt segment was ~~$311,500.~~$753,657.

Cost of net revenue for our chemical products segment for the three-month period ended ~~March 31,~~June 30, 2021 and 2020 was $0.

Cost of net revenue for our natural gas segment for the three-month period ended ~~March 31,~~June 30, 2021 and 2020 was $0.

Gross ~~Profit(Loss)~~Profit. Gross profit was ~~$1,077,854,~~$4,232,234, or ~~21%~~38%, of net revenue for three-month period ended ~~March 31,~~June 30, 2021, representing ana increase of ~~$1,441,504 (or 86%),~~$3,895,647, as compared to a gross ~~loss~~profit of ~~$363,650,~~$336,587, or ~~65%~~6%, of net revenue for the same period in 2020.

	Gross Profit(Loss) by Segment												% Point Change			Gross Profit (Loss) by Segment											% Point Change
	Three-Month Period Ended						Three-Month Period Ended						of Gross			Three-Month Period Ended						Three-Month Period Ended					of Gross
	March 31, 2021						March 31, 2020						Profit (Loss) Margin			June 30, 2021						June 30, 2020					Profit Margin
Segment				Gross Profit Margin						Gross Profit Margin									Gross Profit Margin					Gross Profit Margin
Bromine	$	1,296,944			27	%	$	(146,974	)		(32	%)		59	%	$	4,471,945			45	%	$	217,778		5	%		40	%
Crude Salt	$	(219,090	)		(49	%)	$	(216,676	)		(229	%)		180	%		(239,711	)		(21	%)		118,809		14	%		(35	%)
Chemical Products	$	—			—		$	—			—			—			—			—			—		—
Natural Gas	$	—			—			—			—			—			—			—			—		—			—
Total Gross Profit (Loss)	$	1,077,854			21	%	$	(363,650	)		(65	%)		86	%
Total Gross Profit																$	4,232,234			38	%	$	336,587		6	%		32	%

For the three-month period ended ~~March 31,~~June 30, 2021, the gross profit margin for our bromine segment was ~~27%~~45%. This ~~59%~~40% increase was due to the ~~fact that production and sales resumed at four plants~~increase in the ~~first~~selling price and volume of bromine sold in the second quarter of ~~2021, while only two plants resumed production in the first quarter of 2020, which caused the production volume to increase and unit cost to fall.~~2021.

For the three-month period ended ~~March 31,~~June 30, 2020, the gross ~~loss~~profit margin for our bromine segment was ~~32%~~5%.

For the three-month period ended ~~March 31,~~June 30, 2021, the gross loss margin for our crude salt segment was ~~49%~~21%. This 180% increase was due to the fact that production and sales resumed at three plants in the first quarter of 2021, while only two plants resumed production in the first quarter of 2020, which caused the production volume to increase and unit cost to fall.

For the three-month period ended ~~March 31,~~June 30, 2020, the gross ~~loss~~profit margin for our crude salt segment was ~~229%.~~14%

Direct labor and factory overheads incurred during plant shutdownThe direct labor and factory overhead costs (including depreciation of plant and machinery) in the amount of $1,394,717 and $1,737,599 incurred for the three-month period end June 30, 2021 and 2020, respectively, were that of the factories that have not resumed operations in the three-month periods ended June 30, 2021 and 2020.

On September 1, 2017, the Company received notification from the government of Yangkou County, Shouguang City of PRC that stated that production at all its bromine and crude salt and chemical factories should be halted with immediate effect in order for the Company to perform rectification and improvement in accordance with the county’s new safety and environmental protection requirements. On November 24, 2017, the Company received a letter from the Government of Yangkou County, Shouguang City notifying the Company to relocate its two chemical production plants located in the second living area of the Qinghe Oil Extraction Plant to Bohai Park. As a result, direct labor and factory overhead costs (including depreciation of plant and machinery) in the amount of ~~$2,613,483~~$1,394,717 and ~~$3,610,423~~$1,737,599 incurred for the three-month periods ended ~~March 31,~~June 30, 2021 and 2020, respectively, of factories that have not resumed production were presented as part of the operating expense. The decrease in the direct labor and factory overheads incurred during plant shutdown in the three-month period ended March 31, 2021 compared to the same period in 2020 was due to five plants not in operation in 2020, but only three were not in operation in 2021.

General and Administrative ~~Expenses~~Expenses. General and administrative expenses were ~~$1,736,250~~$5,204,701 for the three-month period ended ~~March 31, 2021,~~June 30, 2019, an increase of ~~$892,913~~$3,662,999 (or ~~106%~~138%) as compared to ~~$843,337~~$1,541,702 for the same period in 2020. ~~The increase~~

Income (loss) from Operations Loss from operations was ~~mainly due to~~$2,382,809 for the ~~unrealized foreign currency transaction loss on intercompany balance recorded in~~ three-month period ended ~~March 31,~~June 30, 2021, compared to an ~~unrealized foreign currency transaction gain on intercompany balance recorded in the same period in the previous year.~~

~~Loss from Operations~~ ~~Loss from operations was $3,281,424 the three-month period ended March 31, 2021, compared to loss from operation~~income of ~~$4,835,429~~$2,953,552 in the same period in 2020.

	Loss from Operations by Segment												Loss from Operations by Segment
	Three-Month Period Ended March 31, 2021						Three-Month Period Ended March 31, 2020						Three-Month Period Ended June 30, 2021						Three-Month Period Ended June 30, 2020
Segment:				% of total						% of total						% of total						% of total
Bromine	$	(1,279,565	)		41	%	$	(2,866,438	)		56	%	$	2,682,233			206	%	$	(1,479,084	)		53	%
Crude Salt		(1,009,585	)		33	%		(1,513,582	)		29	%		(578,435	)		(45	%)		(611,472	)		22	%
Chemical Products		(746,469	)		24	%		(710,909	)		14	%		(741,312	)		(57	%)		(654,652	)		23	%
Natural Gas		(54,787	)		2	%		(48,846	)		1	%		(62,850	)		(4	%)		(53,270	)		2	%
Loss from operations before corporate costs		(3,090,406	)		100	%		(5,139,775	)		100	%		1,299,636			100	%		(2,798,478	)		100	%
Corporate cost		(86,206	)					(96,103	)
Unrealized gain (loss) on translation of intercompany balance		(104,812	)					400,449
Corporate costs														(3,193,107	)					(136,956	)
Unrealized gain on translation of Intercompany balance														(489,338	)					(18,118	)
Loss from operations	$	(3,281,424	)				$	(4,835,429	)				$	(2,382,809	)				$	(2,953,552	)

~~Loss~~Income from operations from our bromine segment was ~~$1,279,565~~$2,682,233 for the three-month period ended ~~March 31,~~June 30, 2021, compared to loss from operations of ~~$2,866,438~~$1,479,084 in the same period in 2020.

Loss from operations from our crude salt segment was ~~$1,009,585~~$578,435 for the three-month period ended ~~March 31,~~June 30, 2021, compared to loss from operations of ~~$1,513,582~~$611,472 in the same period in 2020.

Loss from operations from our chemical products segment was ~~$746,469~~$741,312 for the three-month period ended ~~March 31,~~June 30, 2021, compared to loss from operations of ~~$710,909~~$654,652 in the same period in 2020.

Loss from operations from our natural gas segment was ~~$54,787~~$62,850 for the three -month period ended ~~March 31,~~June 30, 2021, compared to a loss of ~~$48,846~~$53,270 in the same period in 2020.

Other Income, Net Other income, net of ~~$35,591~~$36,069 represented bank interest income, net of ~~finance~~capital lease interest expense for the three -month period ended ~~March 31,~~June 30, 2021, aan decrease of ~~$3,637~~$231 (or approximately 9%1%) as compared to the same period in 2020.

Net ~~Loss~~Income (loss) Net loss was ~~$2,502,124~~$2,703,220 for the three-month period ended ~~March 31,~~June30, 2021, compared to a net loss of ~~$3,539,758~~$2,244,619 in the same period in 2020.

Effective Tax Rate Our effective income tax benefit rate for the three-month ~~periods~~period ended ~~March 31,~~June 30, 2021 and 2020 ~~was~~were (15%) and 23% ~~and 26%~~ respectively. The effective tax rate for the three-month period ended ~~March 31,~~June 30, 2021 was 2%38% lower than the PRC statutory income tax rate of 25%, mainly due to ~~a non-deductible item~~non-taxable items in connection with the unrealized exchange ~~loss~~gain for the Company off set by non-deductible expense.

Net revenue. The table below shows the changes in net revenue in the respective segment of the Company for the six-month period ended June 30, 2021 as compared to the same period in 2020:

Net revenue from our bromine segment increased to $14,836,428 for the six-month period ended June 30, 2021 compared to $4,949,863 for the same period in 2020 respectively, due to the higher selling price and selling quantity.

Net revenue from our crude salt segment increased to $1,570,823 for the six-month period ended June 30, 2021 compared $967,290 for the same period in 2020, respectively, due to the higher selling price and selling quantity.

For the six-month period ended June 30, 2021 and 2020, the net revenue for the chemical products segment was $0 due to the closure of our chemical factories since September 1, 2017.

For the six-month period ended June 30, 2021 and 2020, the net revenue for the natural gas was $0.

Costof 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.

The table below represents the annual capacity and utilization ratios for all of our bromine producing properties:

(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 of all the seven factories including those that have not commenced operations.

Our utilization ratio was 27% for the six-month period ended June 30, 2021 compared to 17% recorded for the six-month period ended June 30, 2020.

For the six-month period ended June 30, 2021 the cost of net revenue for the bromine segment was $9,067,539. This $4,188,480 increase was primarily attributable to the increase in ~~valuation allowance recorded~~quantity sold leads to higher costs.

For the six-month period ended June 30, 2020 the cost of net revenue for ~~deferred tax assets arising from~~the bromine segment was $4,879,059.

For the six-month period ended June 30, 2021 the cost of net ~~operating losses~~revenue for the crude salt segment was $2,029,624.The cost of net revenue for our crude salt segment for the six-month period ended June 30, 2020 was $1,065,157. This $964,467 increase was primarily attributable to the increase in factory overhead per unit produced, which was mainly caused by the increase in depreciation charges of plant and equipment for three factories that resumed operation in the three-month ended June 30, 2020.

For the six-month period ended June 30, 2020 the cost of net revenue for the crude salt segment was $1,065,157.

Cost of net revenue for our natural gas segment for the six-month period ended June 30, 2021 and 2020 was $0.

Gross Profit. Gross loss was $5,310,088, or 32%, of net revenue for six-month period ended June 30, 2021 compared to $27,063, or 0.5%, of net revenue for the same period in 2020.

For the six-month period ended June 30, 2021, the gross profit margin for our bromine segment was 39%. This 38% increase was due to the higher selling price and selling quantity.

For the six-month period ended June 30, 2020, the gross profit margin for our bromine segment was 1%.

For the six-month period ended June 30, 2021, the gross loss margin for our crude salt segment was 29%.

For the six-month period ended June 30, 2020 the gross loss margin for our crude salt segment was 10%.

For the six-month period ended June 30, 2021, the gross profit margin for our chemical segment was 0% due to the closure of our plant and factories to perform rectification and improvement. As a result of the ~~parent company.~~course, there were no chemical products for sale for the six-month period ended June 30, 2021.

Direct labor and factory overheads incurred during plant shutdown The direct labor and factory overhead costs (including depreciation of plant and machinery) in the amount of $4,008,200 and $5,348,022 incurred for the six-month period end June 30, 2021 and 2020, respectively, were for factories that have not resumed production in the six-month periods ended June 30, 2021 and 2020.

General and Administrative Expenses. General and administrative expenses were $6,940,951 for the six-month period ended June 30, 2021, a increase of $4,555,912 (or 191%) as compared to$2,385,039 for the same period in 2020.

Income (Loss) from Operations. Loss from operations was $5,664,233 for the six-month period ended June 30, 2021, compared to a loss of $7,788,981 in the same period in 2020.

Income from operations from our bromine segment was $1,402,668 for the six-month period ended June 30, 2021, compared to a loss of $4,345,522 in the same period in 2020.

Loss from operations from our crude salt segment was $1,588,020 for the six-month period ended June 30, 2021, compared to a loss of $2,125,054 in the same period in 2020.

Loss from operations from our chemical products segment was $1,487,781 for the six-month period ended June 30, 2021, compared to a loss of $1,365,561 in the same period in 2020.

Loss from operations from our natural gas segment was $117,637 for the six-month period ended June 30, 2021, compared to a loss of $102,116 in the same period in 2020.

Other Income, Net. Other income, net of $71,660 represented bank interest income, net of capital lease interest expense for the six -month period ended June 30, 2021, a decrease of $3,868 (or approximately 5%) as compared to the same period in 2020.

Net Income (Loss). Net loss was $5,205,344 for the six-month period ended June 30, 2021, compared to a net loss of $5,784,377 in the same period in 2020.

Effective Tax Rate. Our effective income tax benefit rate for the six-month period ended June 30, 2021 and 2020 was 7% and 25%, respectively. The effective tax rate for the three-month period ended ~~March 31, 2020~~June 30, 2021 was ~~1% higher~~18% lower than the PRC statutory income tax rate of 25%, mainly due to non-taxable items ~~net~~in connection with the unrealized exchange gain for the Company off set by non-deductible expense.

As of ~~March 31,~~June 30, 2021, cash and cash equivalents were ~~$96,699,324~~$97,058,027 as compared to $94,222,538 as of December 31, 2020. The components of this increase of ~~$2,476,786~~$2,835,489 are reflected below.

	Three-Month Period Ended March 31,						Six-Month Period Ended June 30,
	2021			2020			2021			2020
Net cash provided by operating activities	$	3,341,395		$	2,202,357
Net cash (used in) provided by operating activities							$	7,025,775		$	1,177,752
Net cash used in investing activities	$	—		$	(7,416,211	)		(5,806,435	)		(9,860,142	)
Net cash used in financing activities								(296,597	)		(264,976	)
Effects of exchange rate changes on cash and cash equivalents	$	(864,609	)	$	(1,455,442	)		1,912,746			(1,382,029	)
Net increase(decrease) in cash and cash equivalents	$	2,476,786		$	(6,669,296	)
Net decrease in cash and cash equivalents							$	2,835,489		$	(10,329,395	)

For the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2021, we met our working capital and capital investment requirements ~~mainly~~ by using cash on hand.

During the ~~three -month~~six-month period ended ~~March 31,~~June 30, 2021, cash flow provided by operating activities of approximately ~~$3.3~~$7.02 million was mainly due to a decrease in accounts receivable of ~~$1.6~~$1.8 million, and a non-cash adjustment related to depreciation and amortization of property, plant and equipment, reduced by a net loss of ~~$2.5~~$8.2 million and an adjustment for income tax benefit of ~~$0.7~~$0.4 million.

During the ~~three -month~~six-month period ended ~~March 31,~~June 30, 2020, cash flow provided by operating activities of approximately ~~$2.2~~$1.18 million was mainly due to a decrease in accounts receivable of ~~$4.2~~$1.8 million, and a non-cash adjustment related to depreciation and amortization of property, plant and equipment, reduced by a net loss of ~~$3.5~~$7.6 million and an adjustment for income tax benefit of ~~$1.2 million.~~$1.93million.

Cash collections on our accounts receivable had a major impact on our overall liquidity. The following table presents the aging analysis of our accounts receivable as of ~~March 31,~~June 30, 2021 and December 31, 2020.

The overall accounts receivable balance as of ~~March 31,~~June 30, 2021 decreased by ~~$1,662,093,~~$1,780,539, as compared to those of December 31, 2020. 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. No allowance for doubtful accounts for the three-month ~~period~~and six-month periods ended ~~March 31,~~June 30, 2021 is required.

	March 31, 2021					December 31, 2020					June 30, 2021					December 31, 2020
			% of total					% of total					% of total					% of total
Raw materials	$	39,855		7	%	$	21,484		5	%	$	56,267		8	%	$	21,484		5	%
Finished goods		536,752		93	%		398,125		95	%		621,151		92	%		398,125		95	%
Total	$	576,607		100	%	$	419,609		100	%	$	677,418		100	%	$	419,609		100	%

The net inventory level as of ~~March 31,~~June 30, 2021 increased by ~~$156,998~~$257,809 (or ~~37%~~61%), as compared to the net inventory level as of December 31, 2020.

Raw materials increased by ~~$18,371~~$34,783 as of ~~March 31,~~June 30, 2021 as compared to December 31, 2020.

Our finished goods increased by ~~$138,627~~$223,026 as of ~~March 31,~~June 30, 2021 as compared to December 31, 2020.

For the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2021, we ~~have no investing activities.~~used approximately $5.8 million to acquire property, plant and equipment.

For the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2020, we used approximately ~~$7.4~~$9.9 million to acquire property, plant and equipment.

~~We have no financing activities for~~For the ~~three-month periods~~six-month period ended ~~March 31,~~June 30, 2021 and ~~2020.~~2020, we used $0.3 million to repay finance lease obligation.

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 ~~$96.7~~$97 million at ~~March 31,~~June 30, 2021, ~~most of~~all which is in highly liquid current deposits which earn 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 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 COVID-19 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.

We have no significant contractual obligations not fully recorded on our ~~condensed~~ consolidated balance sheets or fully disclosed in the notes to our ~~condensed~~ consolidated financial statements. Additional information regarding our contractual obligations and commitments at ~~March 31, 2021~~June 30, 2018 is provided in the notes to our ~~condensed~~ consolidated financial statements. See “Notes to Condensed Consolidated Financial Statements, Note ~~18–~~17 – Capital Commitment and ~~Other Service Contractual Obligations”~~Operating Lease Commitments”.

We do not currently have any off ~~-balance~~balance sheet arrangements falling within the definition of Item 303(a) of Regulation S-K.

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,~~leases, property, plant and equipment, recoverability of long lived assets, ~~mineral rights, leases,~~ revenue recognition, income taxes, loss contingencies, and ~~loss contingencies.~~stock-based compensation. These policies and estimates are described in the Company’s 2019 Form ~~10-Q for the three months ended March 31, 2021.~~10-K.

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).

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.

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.

~~For more details~~respondent respectively thereof. The Decisions challenged the land use of Factory nos. 2, 9, 7, 4, 8 and ~~information related~~10, respectively, and alleged, among other things, that SCHC had illegally occupied and used the land in the total area of approximately 52,674 square meters, on which Factory nos. 2, 9, 7, 4, 8 and 10 were built, respectively. The Written Decisions ordered SCHC, among other things, to return the land subject to the Written Decisions ~~please see “Note 19 – Loss Contingencies, Notes~~ to ~~Condensed Consolidated Financial Statement” contained~~its respective legal owner, restore the land to its original state, and demolish or confiscate all the buildings and facilities thereon and pay monetary penalty of approximately RMB 1.3 million ($184,000) in the aggregate. Each of the Written Decisions shall be executed within 15 days upon serving on SCHC. Additional interest penalty shall be imposed at a daily rate of 3% in the event that SCHC does not make the monetary penalty payment in a timely manner. Subsequently, the Bureau filed enforcement actions to the People’s Court of Shouguang City, Shandong Province (the “Court”), naming SCHC as enforcement respondent and alleged, among other things, that SCHC failed to perform its obligations under each of the Written Decisions within the specified timeframe. The enforcement proceedings sought court orders to enforce the Written Decisions. On May 5, 2019, written decisions of administrative ruling captioned (2019) Lu 0783 Xing Shen No. 384, (2019) Lu 0783 Xing Shen No. 385, (2019) Lu 0783 Xing Shen No. 389, (2019) Lu 0783 Xing Shen No. 390, (2019) Lu 0783 Xing Shen No. 393, and (2019) Lu 0783 Xing Shen No. 394, respectively (together, the “Court Rulings”) were made by the Court in favor of the Bureau. The Court orders, among other relief, to enforce each of the Written Decisions, to return each subject land to its legal owner and demolish or confiscate the buildings and facilities thereon and restore the land to its original state within 10 days from the service of the Court Rulings on SCHC. The Court Rulings became enforceable immediately upon service on SCHC on May 5, 2019.

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 regularly 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 ~~quarterly report.~~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.

~~Investing in our common stock involves~~This information has been omitted based on the Company’s status as 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, 2020. Readers should carefully review risks described in other documents we file from time to time with the Securities and Exchange Commission.smaller reporting company.

Item 2. Unregistered ~~Shares~~Sale of Equity Securities and Use of Proceeds

29 31

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.

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended ~~March 31,~~June 30, 2021

	Or

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from _________ to _________

Nevada		13-3637458
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Level 11,Vegetable Building,Industrial Park of the East City, Shouguang City, Shandong, China		262700
(Address of principal executive offices)		(Zip Code)

Title of each class	Trading Symbol (s)	Name of each exchange on which registered
Common Stock, $0.0005 par value	GURE	NASDAQ Global Select Market

Large accelerated filer o	Accelerated filer o
Non-accelerated ~~filer~~ Filerx	Smaller reporting company x
	Emerging Growth Company o

Part I – Financial Information
	Item 1. Financial Statements	1
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1918
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	2829
	Item 4. Controls and Procedures	2830
Part II – Other Information
	Item 1. Legal Proceedings	2930
	Item 1A. Risk Factors	2931
	Item 2. Unregistered ~~Shares~~Sale of Equity Securities and Use of Proceeds	2931
	Item 3. Defaults Upon Senior Securities	2931
	Item 4. Mine Safety ~~Disclosure~~Disclosures	2931
	Item 5. Other Information	2931
	Item 6. Exhibits	2931
Signatures	3032

	Common stock																		Accumulated
	Number		Number		Number							Additional		Retained			Retained		other
	of shares		of shares		of treasury				Treasury			paid-in		earnings			earnings		comprehensive
	issued		outstanding		stock		Amount		stock			capital		unappropriated			appropriated		Income(loss)			Total

BALANCE AT DECEMBER 31, 2020 (Audited)		10,043,307		9,997,477		45,830	$	24,139	$	(510,329	)	$	97,435,316	$	151,388,356		$	24,233,544	$	4,453,247		$	277,024,273
Translation adjustment		—		—		—		—		—			—		—			—		(2,184,690	)		(2,184,690	)
Net loss for three-month period ended March 31, 2021		—		—		—		—		—			—		(2,502,124	)		—		—			(2,502,124	)
BALANCE AT MARCH 31, 2021 (Unaudited)		10,043,307		9,997,477		45,830	$	24,139	$	(510,329	)	$	97,435,316	$	148,886,232		$	24,233,544	$	2,268,557		$	272,337,459

Minimum Maximum	Useful life (in years)
Buildings (including salt pans)		8 - 20
Plant and machinery (including protective shells, transmission channels and ducts)		3 - 8
Motor vehiclesMotor Vehicles		5
Furniture, fixtures and equipment		~~3-8~~3-8

	March 31, 2021		December 31, 2020

Raw materials	$	39,855	$	21,484
Finished goods		536,752		398,125
	$	576,607	$	419,609

	June 30, 2021		December 31, 2020

Raw materials	$	56,267	$	21,484
Finished goods		621,151		398,125
Inventory, net	$	677,418	$	419,609

	March 31, 2021			December 31, 2020
At cost:
Mineral rights	$	2,934,951		$	2,955,780
Buildings		63,573,495			64,024,667
Plant and machinery		256,579,799			258,400,710
Motor vehicles		6,507			6,553
Furniture, fixtures and office equipment		3,295,179			3,318,564
Construction in process		18,127,541			12,095,565
Total		344,517,472			340,801,839
Less: Accumulated depreciation and amortization		(176,040,608	)		(173,212,554	)
Impairment		(18,510,233	)		(18,641,596	)
Net book value	$	149,966,631		$	148,947,689

	Imputed		March 31,			December 31,
	Interest rate		2020			2020
Total finance lease liability		6.7%	$	2,126,183		$	2,105,973
Less: Current portion				(250,591	)		(217,070	)
Finance lease liability, net of current portion			$	1,875,592		$	1,888,903

	Financial lease			Operating Lease
Payable within:
the next 12 months	$	285,642		$	672,669
the next 13 to 24 months		285,642			678,258
the next 25 to 36 months		285,642			677,300
the next 37 to 48 months		285,642			683,280
the next 49 to 60 months		285,642			689,295
thereafter		1,428,210			11,421,886
Total		2,856,420			14,822,688
Less: Amount representing interest		(730,237	)		(6,647,723	)
Present value of net minimum lease payments		2,126,183		$	8,174,965

	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, 2021		121,600	$	7.09		$3.57 - $7.27
Granted during the period		—		—		—
Exercised during the period		—		—		—
Expired during the period		—	$	—	$	—
Balance, March 31, 2021		121,600	$	7.09		$3.57 - $7.27

	Number of Option Outstanding and exercisable			Weighted- Average Exercise price of Option		Range of Exercise Price per Common Share
Balance, January 1, 2021		121,600		$	7.09		$3.57 - $7.27
Exercised during the period		0			0		—
Expired during the period		(115,600	)		0	$	7.27
Balance, June 30, 2021		6,000		$	3.57	$	3.57

Six-Month Period Ended June 30, 2021	Bromine*			Crude Salt*			Chemical Products			Natural Gas			Segment Total			Corporate			Total
Net revenue (external customers)	$	14,836,428		$	1,570,823		$	0		$	0		$	16,407,251		$	0		$	16,407,251
Net revenue (intersegment)		0			0			0			0			0			0			0
Loss from operations before income tax benefit		1,402,668			(1,588,020	)		(1,487,781	)		(117,637	)		(1,790,770	)		(3,873,463	)		(5,664,233	)
Income tax benefit		(353,828	)		397,466			343,591			0			387,229			0			387,229
Loss from operations after income tax benefit		1,048,840			(1,190,554	)		(1,144,190	)		(117,637	)		(1,403,541	)		(3,873,463	)		(5,277,004	)
Total assets		138,872,887			32,840,392			122,381,338			1,846,367			295,940,984			484,076			296,425,060
Depreciation and amortization		5,531,131			2,480,722			137,481			75,530			8,224,864			0			8,224,864
Capital expenditures		0			0			5,806,435			0						0			5,806,435

	Property Management Fees		Capital Expenditure
Payable within:
the next 12 months	$	94,940	$	12,391,563
the next 13 to 24 months		94,940		748,433
the next 25 to 36 months		—		—
Total	$	189,880	$	13,139,996

	Three-Month Period Ended March 31, 2021			Three-Month Period Ended March 31, 2020			Percent Change Increase/ (Decrease)
Net revenue	$	5,259,243		$	557,670			843	%
Cost of net revenue	$	(4,181,389	)	$	(921,320	)		353	%
Gross profit (loss)	$	1,077,854		$	(363,650	)		396	%
Sales, marketing and other operating expenses	$	(9,545	)	$	(2,243	)		325	%
Direct labor and factory overheads incurred during plant shutdown	$	(2,613,483	)		(3,610,423	)		(27	%)
Other operating expense	$	—			(15,776	)		—
General and administrative expenses	$	(1,736,250	)	$	(843,337	)		106	%
Loss from operations	$	(3,281,424	)	$	(4,835,429	)		(32	%)
Other income, net	$	35,591		$	39,228			(9	%)
Loss before taxes	$	(3,245,833	)	$	(4,796,201	)		(32	%)
Income tax benefit	$	743,709		$	1,256,443			(41	%)
Net loss	$	(2,502,124	)	$	(3,539,758	)		(29	%)

	Three-Month Period Ended June 30, 2021			Three-Month Period Ended June 30, 2020			Percent Change Increase/ (Decrease)
Net revenue	$	11,148,008		$	5,359,483			108	%
Cost of net revenue		(6,915,774	)		(5,022,896	)		38	%
Gross profit		4,232,234			336,587			1157	%
Sales, marketing and other operating expenses		(15,625	)		(10,838	)		44	%
Direct labor and factory overheads incurred during plant shutdown		(1,394,717	)		(1,737,599	)		(20	%)
General and administrative expenses		(5,204,701	)		(1,541,702	)		238	%
Loss from operations		(2,382,809	)		(2,953,552	)		(19	%)
Other income		36,069			36,300			(1	%)
Loss before taxes		(2,346,740	)		(2,917,252	)		(20	%)
Income tax benefit		(356,480	)		672,633			(153	%)
Net loss	$	(2,703,220	)	$	(2,244,619	)		20	%

	Three-Month Period Ended				Percentage Change
Bromine and crude salt segments product sold in tonnes	March 31, 2021		March 31, 2020		Increase
Bromine (excluded volume sold to SYCI)		955		122		683	%
Crude Salt		20,436		5,341		283	%

Bromine and crude salt segments	Three-Month Period Ended				Percentage Change
product sold in tonnes	June 30, 2021		June 30, 2020		Increase (Decrease)
Bromine		1,805		1,222		48	%
Crude Salt		43,104		53,532		(19	%)

	Annual Production Capacity (in tonnes)			Utilization Ratio (i)
Three-month period ended March 31, 2020		31,506	—		5	%
Three-month period ended March 31, 2021		31,506	—		17	%
Variance of the three-month periods ended March 31, 2021 and 2020		—			12	%

	Annual Production Capacity (in tonnes)	Utilization Ratio (i)
Three-month period ended June 30, 2020	31,506	15%
Three-month period ended June 30, 2021	31,506	23%
Variance of the three-month period ended June 30, 2021 and 2020	—	8%

	Six-Month Period Ended June 30, 2021			Six-Month Period Ended June 30, 2020			Percent Change Increase/ (Decrease)
Net revenue	$	16,407,251		$	5,917,153			177	%
Cost of net revenue		(11,097,163	)		(5,944,216	)		87	%
Gross profit		5,310,088			(27,063	)		19721	%
Sales, marketing and other operating expenses		(25,170	)		(13,081	)		92	%
Direct labor and factory overheads incurred during plant shutdown		(4,008,200	)		(5,348,022	)		(25	%)
Other operating loss		—			(15,776	)		(100	%)
General and administrative expenses		(6,940,951	)		(2,385,039	)		191	%
Loss from operations		(5,664,233	)		(7,788,981	)		(27	%)
Other income		71,660			75,528			(5	%)
Loss before taxes		(5,592,573	)		(7,713,453	)		(27	%)
Income tax benefit		387,229			1,929,076			(80	%)
Net loss	$	(5,205,344	)	$	(5,784,377	)		(10	%)

	Net Revenue by Segment
	Six-Month Period Ended					Six-Month Period Ended					Percent Increase
	June 30, 2021					June 30, 2020					of Net Revenue
Segment			% of total					% of total
Bromine	$	14,836,428		90	%	$	4,949,863		84	%		200	%
Crude Salt		1,570,823		10	%		967,290		16	%		62	%
Chemical Products		—					—		—			—
Natural Gas		—					—		—			—
Total sales	$	16,407,251		100	%	$	5,917,153		100	%		177	%

	Cost of Net Revenue by Segment										% Change
	Six-Month Period Ended					Six-Month Period Ended					of Cost of
	June 30, 2021					June 30, 2020					Net Revenue
Segment			% of total					% of total
Bromine	$	9,067,539		82	%	$	4,879,059		82	%		86	%
Crude Salt		2,029,624		18	%		1,065,157		18	%		91	%
Chemical Products		—		—			—		—			—
Natural Gas		—		—			—		—			—
Total	$	11,097,163		100	%	$	5,944,216		100	%		87	%

	Annual Production Capacity (in tonnes)	Utilization Ratio (i)
Six-month period ended June 30, 2020	31,506		17%
Six-month period ended June 30, 2021	31,506		27%
Variance of the six-month period ended June 30, 2021 and 2020	—		10%

	Income(Loss) from Operations by Segment
	Six-Month Period Ended June 30, 2021						Six-Month Period Ended June 30, 2020
Segment:				% of total						% of total
Bromine	$	1,402,668			(79	%)	$	(4,345,522	)		55	%
Crude Salt		(1,588,020	)		89	%		(2,125,054	)		27	%
Chemical Products		(1,487,781	)		83	%		(1,365,561	)		17	%
Natural Gas		(117,637	)		7	%		(102,116	)		1	%
Loss from operations before corporate costs		(1,790,770	)		100	%		(7,938,253	)		100	%
Corporate costs		(3,279,313	)					(233,059	)
Unrealized gain on translation of intercompany balance		(594,150	)					382,331
Loss from operations before taxes	$	(5,664,233	)				$	(7,788,981	)

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.

32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~101.1~~101	The following financial statements from Gulf Resources, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended ~~March 31,~~June 30, 2021 formatted in XBRL ~~(eXtensible~~(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.

	GULF RESOURCES, INC.

Dated: ~~May 17,~~August 13, 2021	By:	/s/ Xiaobin Liu
		Xiaobin Liu
		Chief Executive Officer
		(principal executive officer)

Dated: ~~May 17,~~August 13, 2021	By:	/s/ Min Li
		Min Li
		Chief Financial Officer
		(principal financial and accounting officer)