NASDAQ: GURE

Upper Class Group Limited, incorporated
in the British Virgin Islands in July 2006, acquired all the outstanding stock of Shouguang City Haoyuan Chemical Company Limited (“SCHC”),
a company incorporated in Shouguang City, Shandong Province, the People’s Republic of China (the “PRC”), in May 2005.
At the time of the acquisition, members of the family of Mr. Ming Yang, our president and former chief executive officer, owned approximately
63.20% of the outstanding shares of Upper Class Group Limited. Since the ownership of Upper Class Group Limited and SCHC was then substantially
the same, the acquisition was accounted for as a transaction between entities under common control, whereby Upper Class Group Limited
recognized the assets and liabilities transferred at their carrying amounts.

1

On December 12, 2006, our Company,
then known as Diversifax, Inc., a public “shell” company, acquired Upper Class Group Limited and SCHC. Under the terms of
the agreement, the stockholders of Upper Class Group Limited received 13,250,000 (restated for the 2- for-1 stock split in 2007 and the
1-for-4 stock split in 2009) shares of our voting common stock in exchange for all outstanding shares of Upper Class Group Limited. Members
of the Yang family received approximately 62% of our common stock as a result of the acquisition. Under accounting principles generally
accepted in the United States, the share exchange is considered to be a capital transaction rather than a business combination. That is,
the share exchange is equivalent to the issuance of stock by Upper Class Group Limited for the net assets of Gulf Resources, Inc., accompanied
by a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the share exchange is identical
to that resulting from a reverse acquisition, except no goodwill is recorded. Under reverse takeover accounting, the post reverse acquisition
comparative historical consolidated financial statements of the legal acquirer, Diversifax, Inc., are those of the legal acquiree, Upper
Class Group Limited. Share and per share amounts stated have been retroactively adjusted to reflect the share exchange. On February 20,
2007, we changed our corporate name to Gulf Resources, Inc.

On February 5, 2007, we
acquired Shouguang Yuxin Chemical Industry Co., Limited (“SYCI”), a company incorporated in the People’s Republic
of China. Under the terms of the acquisition agreement, the stockholders of SYCI received a total of 8,094,059 (restated for the
2-for-1 stock split in 2007 and the 1-for-4 stock split in 2009) shares of common stock of Gulf Resources, Inc. in exchange for all
outstanding shares of SYCI’s common stock. Simultaneously with the completion of the acquisition, a dividend of $2,550,000 was
paid to the former stockholders of SYCI. At the time of the acquisition, approximately 49.1% of the outstanding shares of SYCI were
owned by Ms. Yu, Mr. Yang’s wife, and the remaining 50.9% of the outstanding shares of SYCI were owned by SCHC, all of whose
outstanding shares were owned by Mr. Yang and his wife. Since the ownership of Gulf Resources, Inc. and SYCI are substantially the
same, the acquisition was accounted for as a transaction between entities under common control, whereby Gulf Resources, Inc.
recognized the assets and liabilities of SYCI at their carrying amounts. Share and per share amounts have been retroactively
adjusted to reflect the acquisition.

To satisfy certain ministerial
requirements necessary to confirm certain government approvals required in connection with the acquisition of SCHC by Upper Class Group
Limited, all of the equity interest of SCHC were transferred to a newly formed Hong Kong corporation named Hong Kong Jiaxing Industrial
Limited (“Hong Kong Jiaxing”) all of the outstanding shares of which are owned by Upper Class Group Limited. The transfer
of all of the equity interest of SCHC to Hong Kong Jiaxing received approval from the local State Administration of Industry and Commerce
on December 10, 2007.

As a result of the transactions
described above, our corporate structure is linear. That is Gulf Resources owns 100% of the outstanding shares of Upper Class Group Limited,
which owns 100% of the outstanding shares of Hong Kong Jiaxing, which owns 100% of the outstanding shares of SCHC, which owns 100% of
the outstanding shares of SYCI. Further, as a result of our acquisitions of SCHC and SYCI, our historical consolidated financial statements,
as contained in our Consolidated Financial Statements and Management’s Discussion and Analysis, appearing elsewhere in the report,
reflect the accounts of SCHC and SYCI.

On January 12, 2015, the Company
and SCHC entered into an Equity Interest Transfer Agreement with Shouguang City Rongyuan Chemical Co., Ltd (“SCRC”), pursuant
to which SCHC agreed to acquire SCRC and all rights, title and interest in and to all assets owned by SCRC, a leading manufacturer of
materials for human and animal antibiotics in China and other parts of Asia.

On February 4, 2015, the Company
closed the transactions contemplated by the agreement between the Company, SCHC and SCRC. On the closing Date, the Company issued 7,268,011
shares of its common stock, par value $0.0005 per share (the “Shares”), at the closing market price of $1.84 per Share on
the closing date to the four former equity owners of SCRC .The issuance of the Shares was exempt from registration pursuant to Regulation
S of the Securities Act of 1933, as amended. On the Closing Date, the Company entered into a lock-up agreement with the four former equity
owners of SCRC. In accordance with the terms of the lock-up agreement, the shareholders agreed not to sell or transfer the Shares for
five years from the date the stock certificates evidencing the Shares were issued.

2

The sellers of SCRC agreed as
part of the purchase price to accept the Shares, based on a valuation of $10.00 (restated for the 1-for-5 reverse stock split in January
2020), which was a 73% premium to the price on the day the agreement was reached. For accounting purposes, the Shares were valued at $9.20
(restated for the 1-for-5 reverse stock split in January 2020), which was the closing price of our common stock on the closing date of
the agreement. The price difference between the original sale price of $10.00 (restated for the 1-for-5 reverse stock split in January
2020) and the $9.20 (restated for the 1-for-5 reverse stock split in January 2020) closing price of our stock on the closing date of the
agreement is solely for accounting purposes. There has been no change in the number of shares issued.

On November 24, 2015, Gulf Resources,
Inc., a Delaware corporation, consummated a merger with and into its wholly-owned subsidiary, Gulf Resources, Inc., a Nevada corporation.
As a result of the reincorporation, the Company is now a Nevada corporation.

On December 15, 2015, the Company
incorporated a new subsidiary in the Sichuan Province of the PRC named Daying County Haoyuan Chemical Company Limited (“DCHC”)
with registered capital of RMB50,000,000, and there was RMB14,848,730 capital contributed by SCHC as of December 31, 2021. DCHC was established
to further explore and develop natural gas and brine resources (including bromine and crude salt) in China.

On September 2, 2016, the Company
announced the planned merger of two of its 100% owned subsidiaries, SYCI and SCRC. On March 24, 2017, the legal process of the merger
was completed and SCRC was officially deregistered on March 28, 2017. The results of these two subsidiaries were reported under SYCI in
the fiscal year 2018.

On January 27, 2020, we completed
a 1-for-5 reverse stock split of our common stock, such that for each five shares outstanding prior to the stock split there was one share
outstanding after the reverse stock split. All shares of common stock referenced in this report have been adjusted to reflect the stock
split figures. On January 28, 2020, our shares began trading on the NASDAQ Global Select Market under the new CUSIP # 40251W.

In April 2022, Shouguang Hengde
Salt Industry Co. Ltd, our subsidiary, was incorporated in Shandong Province, China, for crude salt production and trading.

Recent Developments

Acquisition Agreements

In June 2024, a wholly owned subsidiary of the Company,
Shouguang Hengde Salt Industry Co. Ltd ( “SHSI”) entered into crude salt field acquisition agreements with Shouguang Qingshuibo
Farm Co., LTD. (“Seller A”), Shouguang city Yangkou town Dingjia Zhuangzi village stock economic cooperative (“Seller
B”), Shouguang city Yangkou town Shanjia Zhuangzi village stock economic cooperative (“Seller C”), Shouguang City Yangkou
town Zhengjia Zhuangzi village stock economic cooperative (“Seller D”), and Shouguang city Yangkou town Renjia Zhuangzi village
stock economic cooperative (“Seller E”), respectively, as amended in December 2024. A summary of these agreements are set
forth below:

On June 26, 2024, SHSI entered into an acquisition
agreement with Seller A, pursuant to which Seller A agrees to transfer to SHSI, and SHSI agrees to purchase, 2,380,000 square meters of
crude salt field (including the land lease fee) for RMB54.40 per square meter, with the total transfer price of RMB129,472,000. The term
of transfer is from June 29, 2024 to June 28, 2044. 80% of the transfer price shall be paid upon the execution of the agreement, and the
remaining 20% shall be paid in shares of common stock of the Company within three months from the date of the agreement after SHSI has
inspected the and accepted the crude salt field in writing. Subsequently, on December
17, 2024, the parties entered into an amendment to the agreement, pursuant to which the Article 2. 2 of the agreement has been amended
as follows: eighty percent (80%) of the total amount, equaling RMB103,577,600 had been paid on the date of signing the contract by both
parties. The remaining RMB25,894,400 shall be paid in a combination of common stock of the Company and cash as follows: (1) RMB10,357,800
shall be paid in shares, calculated on a per share price of US$1.5, using the exchange rate RMB/US$:7.27. These shares shall be issued
by the Company to Seller A or Seller A's designated parties within three months after SHSI has inspected and accepted the crude salt field
in writing; (2) the balance shall be paid in cash before December 31, 2028.

On June 27, 2024, SHSI entered into an acquisition
agreement with each Seller B, Seller C, Seller D and Seller E, respectively, pursuant to which the sellers agreed to transfer to SHSI,
and SHSI agrees to purchase from the sellers, 750,000, 804,000, 385,000, and 822,000 square meters of crude salt field (including the
land lease fee) for RMB54.10, RMB54.90, RMB54.00, and RMB55.70 per square meter, respectively, with the total transfer price of RMB40,575,000,
RMB44,139,600, RMB20,790,000, and RMB45,785,400, respectively. The term of transfers is from June 29, 2024 to June 28, 2044. 80% of the
transfer price shall be paid upon the execution of the agreements, and the remaining 20% shall be paid in shares of common stock of the
Company within three months from the date of the agreements after SHSI has inspected the and accepted the crude salt fields in writing.

3

On
December 17, 2024, SHSI entered into an amendment to the acquisition agreement with Seller B, pursuant to which the Article 2. 2 of the
agreement has been amended as follows: (80%) of the total amount, equaling RMB32,460,000 had been paid on the date of signing the contract
by both parties. The remaining RMB8,115,000 shall be paid in a combination of common stock of the Company and cash as follows: (1) RMB3,246,000
shall be paid in shares, calculated on a per share price of US$1.5, using the exchange rate RMB/US$:7.27. These shares shall be issued
by the Company to Seller B or Seller B’s designated parties within three months after SHSI has inspected and accepted the crude
salt field in writing; (2) the balance shall be paid in cash before December 31, 2028.

On
December 17, 2024, SHSI entered into an amendment to the acquisition agreement with Seller C, pursuant to which the Article 2. 2 of the
agreement has been amended as follows: Eighty percent (80%) of the total amount, equaling RMB35,311,680 had been paid on the date of signing
the contract by both parties. The remaining RMB8,827,920 shall be paid in a combination of common stock of the Company and cash as follows:
(1) RMB3,531,168 shall be paid in shares, calculated on a per share price of US$1.5 per, using the exchange rate RMB/US$:7.27. These shares
shall be issued by the Company to Seller C or Seller C's designated parties within three months after SHSI has inspected and accepted
the crude salt field in writing; (2) the balance shall be paid in cash before December 31, 2028.

On December 17, 2024,
SHSI entered into an amendment to the acquisition agreement with Seller D, pursuant to which the Article 2. 2 of the agreement has been
amended as follows: Eighty percent (80%) of the total amount, equaling RMB 16,632,000 had been paid on the date of signing the contract
by both parties. The remaining RMB 4,158,000 shall be paid in a combination of common stock of the Company and cash as follows: (1) RMB1,663,200
shall be paid in shares, calculated on a per share price ofUS$1.5, using the exchange rate RMB/US$:7.27. These shares shall be issued
by the Company to Seller D or Seller D's designated parties within three months after SHSI has inspected and accepted the crude salt field
in writing; (2) the balance shall be paid in cash before December 31, 2028.

On December 17, 2024, SHSI
entered into an amendment to the acquisition agreement with Seller E, pursuant to which the Article 2. 2 of the agreement has been amended
as follows: Eighty percent (80%) of the total amount, equaling RMB36,628,320 had been paid on the date of signing the contract by both
parties. The remaining RMB9,157,080 shall be paid in a combination of common stock of the Company and cash as follows: (1) RMB3,662,832
shall be paid in shares, calculated on a per share price of US$1.5, using the exchange rate RMB/US$:7.27. These shares shall be issued
by the Company to Seller E or Seller E's designated party within three months after SHSI has inspected and accepted the crude salt field
in writing; (2) the balance shall be paid in cash by SHSI to Seller E before December 31, 2028.

In accordance to each amendment,
the parties also acknowledged and agreed that, in compliance with the Nasdaq Listing Rule 5635, the issuance of shares pursuant to the
agreement may not exceed 19.9% of the total outstanding shares of common stock of the Company prior to the issuance of the shares (the
“19.9% Threshold”), unless such issuance is approved by the shareholders of the Company in accordance with the Nasdaq rules
and regulations. SHSI shall cause the Company to take all necessary steps to obtain such shareholder approval if the issuance of shares
under the agreement exceeds the 19.9% Threshold.

On December 30, 2024, SHSI
and each of the sellers mutually acknowledged and confirmed that the salt land provided by each seller meets the acquisition criteria,
is in the anticipated usable condition, and has been accepted and handed over to SHSI.

On February 28, 2025, the
transactions as contemplated by the acquisition agreements were closed. On the closing date, the Company issued a total of 2,059,694 shares
of the Company’s common stock at a price of $1.50 per share, to five individuals, who are citizens residing in the People’s
Republic of China, designated by each seller.

4

Nasdaq Compliance

The
Company received a notice (the “Initial Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC
(“Nasdaq”) on April 18, 2024 notifying the Company that due to the Company’s failure to timely file its Annual Report
on Form 10-K for the fiscal year ended December 31, 2023 (the “Form 10-K”), with the SEC, the Company was not in compliance
with Nasdaq’s continued listing requirements under Nasdaq Listing Rule 5250(c)(1) (the “Listing Rule 5250(c)(1) Rule”),
which requires the timely filing of all required periodic reports with the SEC, and the Company subsequently received a notice (the “May
Notice”) from Nasdaq on May 21, 2024 due to the Company’s non-compliance with the Listing Rule 5250(c)(1) Rule as a result
of the Company’s failure to timely file its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024 (the “First
Quarter Form 10-Q”, together with the Form 10-K, the “Delinquent Reports”). The May Notice states that the Company
had until June 17, 2024 to submit to Nasdaq a plan to regain compliance with the Rule.

On
June 26, 2024, the Company received a letter from Nasdaq indicating that, based on its further review and the plan of compliance submitted
by the Company on June 14, 2024, Nasdaq determined to grant an exception to enable the Company to regain compliance with the Listing Rule
5250(c)(1) Rule. The terms of the exception were as follows: on or before October 14, 2024, the Company must file the Delinquent Reports,
as required by the Listing Rule 5250(c)(1) Rule. In the event the Company does not satisfy the terms, Nasdaq will provide written notification
that its securities will be delisted. At that time, the Company may appeal Nasdaq’s determination to a hearings panel.

Subsequently,
on August 20, 2024, the Company received a notice (the “August Notice”) from Nasdaq indicating that, because the Company is
delinquent in filing its quarterly report on Form 10-Q for the period ended June 30, 2024 (the “Second Quarter Form 10-Q”),
the Company was not in compliance with the Rule. The August Notice also indicates that as a result of this additional delinquency, the
Company must submit an update to its original plan to regain compliance with respect to the filing requirements. The Company had until
September 4, 2024 to submit such update to Nasdaq.

On
October 15, 2024, the Company received written notice from Nasdaq that, as a result of the Company filing the Form 10-K, the First Quarter
Form 10-Q and the Second Quarter Form 10-Q with the SEC, the Staff has determined that the Company complies with the Listing Rule 5250(c)(1)
Rule and considers the matter to be closed.

On
November 5, 2024, the Company received a notice (“Price Deficiency Letter”) from Nasdaq stating that the Company was not in
compliance with Nasdaq Listing Rule 5450(a)(1) because the bid price for the Company’s common stock had closed below $1.00 per share
for the previous 34 consecutive business days (the “Minimum Bid Price Requirement”). In accordance with Nasdaq Listing Rule
5810(c)(3)(A), the Company has been given 180 calendar days, or until May 5, 2025, to regain compliance with the Minimum Bid Price Requirement.
If at any time before May 5, 2025, the bid price of the Company’s common stock closes at $1.00 per share or more for a minimum of
10 consecutive business days, Nasdaq will provide written confirmation that the Company has achieved compliance. In the event the Company
does not regain compliance, the Company may be eligible for additional time. To qualify for the additional compliance period, the Company
will be required to (i) submit, no later than the expiration date, an on-line Transfer Application, (ii) submit a non-refundable $5,000
application fee, (iii) meet the continued listing requirement for the market value of its publicly held shares and all other continued
listing standards for The Nasdaq Stock Market, with the exception of the bid price requirement, and (iv) will need to provide written
notice of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split if necessary. As
part of its review process, Nasdaq will make a determination of whether they believe the Company will be able to cure this deficiency.
Should Nasdaq conclude that the Company will not be able to cure the deficiency, or should the Company determine not to submit a transfer
application or make the required representation, the Staff will provide notice that the Company’s securities will be subject to
delisting.

The
Nasdaq Price Deficiency Letter has no immediate impact on the listing of the Company’s common stock, which will continue to be listed
and traded on The Nasdaq Global Select Market, subject to the Company’s compliance with the other continued listing requirements
of The Nasdaq Stock Market.

5

Corporate Structure

Our current corporate structure chart
is set forth in the following diagram:

6

Currently, we operate our business
through our wholly-owned subsidiaries in China, including (i) Shouguang City Haoyuan Chemical Company Limited, or SCHC; (ii) Shouguang
Yuxin Chemical Industry Co., Limited, or SYCI; (iii) Daying County Haoyuan Chemical Co., Ltd., or DCHC; and (iv) Shouguang Hengde Salt
Industry Co. Limited, or SHSI, each a PRC company.

Our executive offices are located at
Level 11, Vegetable Building, Industrial Park of the East in Shouguang City, Shandong Province,

P.R.C. Our telephone number is +86 (536) 5670008. Our
website address is www.gulfresourcesinc.com. The information contained on or accessed through our website is not intended to constitute
and shall not be deemed to constitute part of this Form 10-K.

Recent Regulatory Developments in
China

Because all of our operations
are conducted in China through our wholly-owned subsidiaries, the Chinese government may exercise significant oversight and discretion
over the conduct of our business and may intervene in or influence our operations at any time, which could result in a material change
in our operations and/or the value of our common stock.

Recent statements by the Chinese
government have indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investments
in China based issuers. Any future action by the Chinese government expanding the categories of industries and companies whose foreign
securities offerings are subject to government review could significantly limit or completely hinder our ability to offer or continue
to offer securities to investors and could cause the value of such securities to significantly decline or be worthless.

Recently, the PRC government initiated
a series of regulatory actions and made a number of public statements on the regulation of business operations in China with little advance
notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed
overseas using a variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding
efforts in anti-monopoly enforcement. We do not believe that we are directly subject to these regulatory actions or statements, as we
do not have a variable interest entity structure and our business does not involve the collection of user data, implicate cybersecurity,
or involve any other type of restricted industry. Because these statements and regulatory actions are new, however, it is highly uncertain
how soon legislative or administrative regulation making bodies in China will respond to them, or what existing or new laws or regulations
will be modified or promulgated, if any, or the potential impact such modified or new laws and regulations will have on our daily business
operations or our ability to accept foreign investments and list on an U.S. exchange.

On February 17, 2023, the China
Securities Regulatory Commission (‘CSRC”) released the Trial Measures for Administration of Overseas Securities Offerings
and Listings by Domestic Companies (the “Trial Measures”) and five supporting guidelines, which came into effect on March
31, 2023. Pursuant to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly,
should fulfill the filing procedures and report relevant information to the CSRC. If a domestic company fails to complete the filing procedures
or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative
penalties by the CSRC, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly
in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. As a listed company,
we believe that we, and all of our PRC subsidiaries are not required to fulfill filing procedures and obtain approvals from the CSRC to
continue to offer our securities or operate our business as of the date of this annual report. In addition, to date, none of us and our
PRC subsidiaries has received any filing or compliance requirements from CSRC for the listing of the Company at Nasdaq and all of its
overseas offerings. Furthermore, based on our understanding of the current PRC laws, we believe that the CSRC’s approval is not
required to be obtained for the Company’s listing on Nasdaq; however, there are substantial uncertainties regarding the interpretation
and application of the Regulation on Mergers and Acquisitions of Domestic Companies by Foreign Investors (“M&A Rules”),
other PRC Laws and future PRC laws and regulations, and there can be no assurance that any governmental agency will not take a view that
is contrary to or otherwise different from our belief stated herein.

On February 24, 2023, the CSRC,
the Ministry of Finance, the National Administration of State Secrets Protection and the National Archives Administration jointly issued
the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies,
or the Confidentiality and Archives Provisions, which took effective from March 31, 2023. The Confidentiality and Archives Provisions
specify that during the overseas securities offering and listing activities of domestic companies, domestic companies and securities companies
and securities service institutions that provide relevant securities business shall, by strictly abiding by the relevant laws and regulations
of the PRC and this Confidentiality and Archives Provisions, institute a sound confidentiality and archives administration systems, take
necessary measures to fulfill confidentiality and archives administration obligations, and shall not divulge any national secrets, work
secrets of governmental agencies and harm national and public interests. Confidentiality and Archives Provisions provides that it is applicable
to initial public offerings as well as other types of securities listing of PRC domestic enterprises, and any future issuance of securities
and listing activities after the initial listing. Working papers generated in the PRC by securities companies and securities service providers
that provide relevant securities services for overseas issuance and listing of securities by domestic companies shall be kept in the PRC.
Confidentiality and Archives Provisions provide no explicit definition of working papers. In practice, the securities companies’
working papers usually refer to various important information and work records related to the securities business obtained and prepared
by the securities companies and securities service providers and their representatives in the whole process of the securities businesses,
such as due diligence work. Without the approval of relevant competent authorities, such as CSRC, MOF PRC National Administration of State
Secrets Protection, and National Archives Administration of China, depending on the nature and transmission method of secrets, it shall
not be transferred overseas. Where documents or materials need to be transferred outside of the PRC, it shall be subject to the approval
procedures in accordance with relevant PRC regulations. The relevant competent authorities, such as, CSRC, MOF, PRC National Administration
of State Secrets Protection, and National Archives Administration of China will regulate, supervise and inspect pursuant to their respective
statutory mandates over matters of Confidentiality and Archives Administration concerning overseas offering and listing by domestic companies.
As Confidentiality and Archives Administration is newly promulgated, there is substantial uncertainty regarding their specific requirements.
If we fail to comply with related laws and regulation, we may be subject to fine, confiscation, blocking transmission or criminal offense.
We have taken measures to adopt management systems for the compliance of Confidentiality and Archives Provisions. We believe our listing
does not involve in national secrets, work secrets of governmental agencies and undermine national and public interests. There is no assurance
that we will be able to meet all applicable regulatory requirements and guidelines, or comply with all applicable regulations at all times,
or that we will not be subject to fines or other penalties in the future as a result of regulatory inspections.

7

Cash Transfers and Dividend Distribution

Our corporate structure is a direct
holding structure, that is, the overseas entity listed in the U.S., Gulf Resources, Inc., a Nevada corporation (“Gulf Resources”),
controls SCHC (the “WFOE”), SYCI and DCHC through the Hong Kong company, Hong Hong Jiaxing Industrial Limited, or Hong Kong
Jiaxing.

Within our direct holding structure,
the cross-border transfer of funds within our corporate group is legal and compliant with the laws and regulations of the PRC. Foreign
investors’ funds can be directly transferred to Hong Kong Jiaxing, and then transferred to subordinate operating entities through
SCHC, or the WFOE.

If the Company intends to distribute
dividends, the Company will transfer the dividends to Hong Kong Jiaxing in accordance with the laws and regulations of the PRC, and then
Hong Kong Jiaxing will transfer the dividends to Gulf Resources, and the dividends will be distributed from Gulf Resources to all shareholders
respectively in proportion to the shares they hold, regardless of whether the shareholders are U.S. investors or investors in other countries
or regions.

In the reporting periods presented in this annual report,
no cash and other asset transfers have occurred among the Company and its subsidiaries; and no dividends or distributions of a subsidiary
has been made to the Company or to the shareholders from the Company. For the foreseeable future, the Company does not expect to pay any
cash dividends.

Our PRC subsidiaries’ ability
to distribute dividends is based upon their distributable earnings. Current PRC regulations permit our PRC subsidiaries to pay dividends
to their respective shareholders only out of their accumulated profits, if any, determined in accordance with PRC accounting standards
and regulations. In addition, each of our PRC subsidiaries is required to set aside at least 10% of its after-tax profits each year, if
any, to fund a statutory reserve until such reserve reaches 50% of each of their registered capitals. These reserves are not distributable
as cash dividends.

8

To address persistent capital
outflows and the RMB’s depreciation against the U.S. dollar in the fourth quarter of 2016, the People’s Bank of China and
the State Administration of Foreign Exchange, or SAFE, have implemented a series of capital control measures in the subsequent months,
including stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments
and shareholder loan repayments. The PRC government may continue to strengthen its capital controls and our PRC subsidiaries’ dividends
and other distributions may be subject to tightened scrutiny in the future. The PRC government also imposes controls on the conversion
of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing
the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore,
if our subsidiaries in the PRC incur debt on their own in the future, the instruments governing the debt may restrict their ability to
pay dividends or make other payments.

In addition, the Enterprise Income
Tax Law and its implementation rules provide that a withholding tax at a rate of 10% will be applicable to dividends payable by Chinese
companies to non-PRC-resident enterprises unless reduced under treaties or arrangements between the PRC central government and the governments
of other countries or regions where the non-PRC resident enterprises are tax resident. Pursuant to the tax agreement between Mainland
China and the Hong Kong Special Administrative Region, the withholding tax rate in respect to the payment of dividends by a PRC enterprise
to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10%. However, if the relevant tax authorities determine that our
transactions or arrangements are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust
the favorable withholding tax in the future. Accordingly, there is no assurance that the reduced 5% withholding rate will apply to dividends
received by our Hong Kong subsidiary from our PRC subsidiaries. This withholding tax will reduce the amount of dividends we may receive
from our PRC subsidiaries.

Please see “Risk Factors”
beginning on page 20 of this annual report for additional information.

Holding Foreign Company Accountable
Act

Our common stock may be delisted from the Nasdaq under
the Holding Foreign Companies Accountable Act (“HFCAA”), if the PCAOB is unable to adequately inspect audit documentation
located in China, or investigate our auditor. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies
Accountable Act, which was signed into law, and amends the HFCAA and requires the SEC to prohibit an issuer’s securities from trading
on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three. Our auditor,
GGF CPA LTD., Certified Public Accountants, is a China-based accounting firm registered with the PCAOB, and is subject to laws in the
United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards.
Our auditor is headquartered in the China and is subject to inspection by the PCAOB on a regular basis. On August 26, 2022, the PCAOB
signed the Protocol with the CSRC and the MOF of the People’s Republic of China, governing inspections and investigations of audit
firms based in mainland China and Hong Kong. The Protocol remains unpublished and is subject to further explanation and implementation.
Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC, the PCAOB shall have independent discretion to select any
issuer audits for inspection or investigation and the unfettered ability to transfer information to the SEC. On December 15, 2022, the
PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB registered public accounting firms headquartered
in China mainland and Hong Kong completely in 2022. The PCAOB Board vacated its previous 2021 determinations that the PCAOB was unable
to inspect or investigate completely registered public accounting firms headquartered in China mainland and Hong Kong. However, whether
the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in
China mainland and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s control.
The PCAOB is continuing to demand complete access in China mainland and Hong Kong moving forward and was already making plans to resume
regular inspections in early 2023 and beyond, as well as to continue pursuing ongoing investigations and initiate new investigations as
needed. The PCAOB has indicated that it will act immediately to consider the need to issue new determinations with the HFCAA if needed.
Therefore, the PCAOB in the future may determine that it is unable to inspect or investigate completely registered public accounting firms
in mainland China and Hong Kong. Our auditor’s working papers related to us and our subsidiaries are located in China. If our auditor
is not permitted to provide requested audit work papers located in China to the PCAOB, investors would be deprived of the benefits of
PCAOB’s oversight of our auditor through such inspections which could result in limitation or restriction to our access to the U.S.
capital markets and trading of our securities may be prohibited under the HFCAA, which would result in the delisting of our securities
from the Nasdaq. See “Risk Factors - Our common stock may be delisted from the Nasdaq under the Holding Foreign Companies Accountable
Act if the PCAOB is unable to adequately inspect audit documentation located in China. The delisting of our common stock, or the threat
of their being delisted, may materially and adversely affect the value of your investment.”

9

Closure and rectification process
of our Bromine, Crude Salt and Chemical Products factories

On September 1, 2017, the Company
received letters from the People’s Government of Yangkou Town, Shouguang City to each of its subsidiaries, Shouguang City Haoyuan
Chemical Company Limited and Shouguang Yuxin Chemical Industry Co., Limited, 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, environmental protection requirements. As a result,
our facilities located in Yangkou Town were closed on September 1, 2017 to allow for rectification.

Subsequently, the Safety Supervision
and Administration Department and the Environmental Protection Departments of the local government conducted inspections of every bromine
production enterprise within its jurisdiction including our facilities, in order to improve security, environmental protections, pollution,
and safety.

On September 21, 2018, the Company
received a closing notice from the People’s Government of Yangkou Town, Shouguang City informing it to close its three bromine factories
(Number 3, Number 4, and Number 11.) and not allowed to resume production. The crude salt fields surrounding these factories have been
reclaimed as cultivated or construction land and hence did not meet the requirement for bromine and crude salt co-production set by the
relevant authority. In closing these factories, the Company wrote off net book value of these factories’ property, plant and equipment
in the amount of $18,644,473 in the loss on demolition of the factory in the consolidated statements of loss for the fiscal year ended
December 31, 2018, recorded an impairment loss on the related mineral rights of these three factories of $1,284,832 included in the impairment
of property, plant and equipment in the consolidated statements of loss for the fiscal year ended December 31, 2018 and wrote off $52,926
of prepaid land lease recorded in other operating loss in the consolidated statements of loss for fiscal year ended December 31, 2018.
The Company incurred dismantling fee in the amount of

$273,757 recorded in other operating
loss in the consolidated statements of loss for fiscal year ended December 31, 2018. The Company negotiated with the local villages over
compensation for the payment already made for these land leases and mineral rights in the past. This part of the cost has been used as
the resumption of land use, so the village committee will not be compensated.

In February 2019, the Company
received a notification from the local government of Yangkou County that its Factory No. 1, No. 4, No. 7 and No. 9 passed inspection and
could resume operations. In April 2019, Factory No.1 and Factory No.7 resumed operation.

On November 25, 2019, the government
of Shouguang City issued a notice ordering all bromine facilities in Shouguang City, including the Company’s bromine facilities,
including Factory No. 1 and Factory No. 7, to temporarily stop production from December 16, 2019 to February 10, 2020. Subsequently, due
to the coronavirus outbreak in China, the local government ordered those bromine facilities to postpone the commencement of production.
Subsequently, the Company received an approval dated February 27, 2020 issued by the local governmental authority allowing the Company
to resume production after the winter temporary closure. Further, the Company received another approval from the Shouguang Yangkou People’s
Government dated March 5, 2020 allowing the Company to resume production at its bromine factories No. 1, No. 4, No.7 and No. 9 in order
to meet the needs of bromide products for epidemic prevention and control (the “March 2020 Approval”). The Company’s
Factories No. 1 and No. 7 commenced trial production in mid-March 2020 and commercial production on April 3, 2020 and its Factories No.
4 and No. 9 commenced commercial production on May 6, 2020. The Company received verbal notification from the government regarding Factory
No. 8, allowing it to recommence production in August 2022. Factory No. 8 began contributing revenue in the fourth quarter 2022.

Pursuant to a notification from
the government of Shouguang City, all bromine facilities in Shouguang City were temporarily closed from December 15, 2024 until February
12, 2025. In compliance with the notification, the Company ceased production at its bromine facilities during this period and resumed
operations at the bromine and crude salt factories as scheduled in February 2025.

Because many smaller producers
have not had the capital to conduct the rectification required by the government, management believes there could be some extremely attractive
acquisition opportunities in bromine. However, at the present time, all of management’s attention is focused on getting its facilities
approved and in full production. Management may consider acquisition opportunities in this segment in the future if the prices were sufficiently
attractive.

10

We secured the land for our upcoming
chemical factory and obtained the final approval regarding environmental protection assessment. Construction of the new chemical facilities
located at Bohai Marine Fine Chemical Industrial Park, commenced in June 2020. Initially, the construction was projected to last around
one year, with an additional six months for equipment installation and testing, However, due to the COVID epidemic and electrical restrictions,
the opening of the chemical factory has been postponed. The Company has received the refrigeration and air compressor units. The estimated
total cost for the relocation process is approximately $69 million. As of December 31, 2024 and 2023, the Company incurred relocation
costs in the amount of $45,584,344 and $45,584,344, respectively. Additionally, the procurement of the final equipment for our chemical
factory has been postponed until we have a better understanding of the potential for derivative bromine products. We anticipate proceeding
with the completion of its chemical factory in due course. However, in the event that the Chinese economy persists in its weakness and
if we perceives this trend to be ongoing, there is a possibility that the chemical factory could be repurposed for the production of Sodium-Ion
batteries.

In January 2017, the Company completed
the construction of the first brine water and natural gas well field in Daying County, Sichuan Province, and commenced trial production
in January 2019. On May 29, 2019, the Company received verbal notice from the government of Tianbao Town, Daying County, Sichuan Province,
mandating the need for project approval for its Daying well, encompassing the entire natural gas and brine water project. This also includes
approvals for safety production inspection, environmental protection assessment, and to solve the related land issue. Until these approvals
are obtained, the Company must temporarily suspend trial production at its natural gas well in Daying. Additionally, in compliance with
the Chinese government new policies, the Company is required to obtain an exploration license for bromine and a mining license for natural
gas. Pursuant to the Opinions of the Ministry of Natural Resources on Several Issues in Promoting the Reform of Mineral Resources Management
(Trial) promulgated by the Ministry of Natural Resources of PRC on January 9, 2020, which came into effect on May 1, 2020, privately owned
enterprises are allowed to participate in the natural gas production. The Company is engaged in ongoing discussions with the government
of Daying County regarding the establishment of a joint venture for the exploration and production of natural gas and brine products in
Sichuan.

We are not writing off any of
the goodwill related to our chemicals business. We believe the upcoming chemical factory could produce sales and profits. We believe there
may be much less capacity in the chemical industry, as many factories may be permanently closed. In addition, other competitor factories
may reduce their production capacity. We expect to have a factory that operates efficiently. Considering the above factors and our strength
with better equipment, we expect to generate sales and earnings in this segment at a level well above previous periods.

We will continue to control the
land and buildings where the old chemical factories are located. At this time, we have not considered how or if we can monetize those
assets.

In April 2022, our subsidiary,
Shouguang Hengde Salt Industry Co. Ltd, was incorporated in Shandong Province, China, specifically for crude salt production and trading.
This subsidiary was established in response to a new government policy mandating separate registrations for bromine and crude salt companies.

As of the date of this annual report,
the Company is awaiting governmental approval for Factories No. 2 and No. 10.

11

Our Business Segments

Our business operations are conducted in four segments,
bromine, crude salt, chemical products, and natural gas. We manufacture and trade bromine, crude salt and natural gas, and manufacture
and sell chemical products used in oil and gas field explorations and papermaking chemical agents, and materials for human and animal
antibiotics. We conduct all of our operations in China.

Bromine and Crude Salt

We manufacture and distribute
bromine through our wholly-owned subsidiary, Shouguang City Haoyuan Chemical Company Limited, or SCHC. Bromine is a halogen element. It
is a red volatile liquid at standard room temperature which has reactivity between chlorine and iodine. Elemental bromine is used to manufacture
a wide variety of bromine compounds used in industry and agriculture. Bromine is also used to form intermediates in organic synthesis,
which is somewhat preferable over iodine due to its lower cost. Bromine is commonly used in brominated flame retardants, fumigants, water
purification compounds, dyes, medicines and disinfectants.

The extraction of bromine in the
Shandong Province is limited by the provincial government to licensed operations. We hold one such license. As part of our business strategy,
it is our plan to continue acquiring smaller scaled and unlicensed producers and to use our bromine to expand our downstream chemical
operations.

Location of Production Sites

Our production sites are located
in the Shandong Province in northeastern China. The productive formation (otherwise referred to as the “working region”),
extends from latitude N 36°56’ to N 37°20’ and from longitude E 118°38’ to E 119°14’, in the north
region of Shouguang city, from the Xiaoqing River of Shouguang city to the west of the Dan River, bordering on Hanting District in the
east, from the main channel of “Leading the Yellow River to Supply Qingdao City Project” in the south to the coastline in
the north. The territory is classified as coastal alluvial – marine plain with an average height two to seven meters above the sea
level. The terrain is relatively flat.

12

Geological background of this region

The Shandong Province working
region is located to the east of Lubei Plain and on the south bank of Bohai Laizhou Bay. The geotectonic location bestrides on the North
China Platte (I) and north three-level structure units, from west to east including individually the North China Depression, Luxi Plate,
and Jiaobei Plate. Meanwhile, 4 V-level structure units including the Dongying Sag of Dongying Depression (IV) of North China Depression,
the Buried Lifting Area of Guangrao, Niutou sag and Buried Lifting Area of Shuanghe and are all on two V-level structure units including
Xiaying Buried Lifting Area of Weifang Depression (IV) of Luxi Plate and Chuangyi Sag, as well as on a V-level structure units of Jiaobei
Buried Lifting Area of Jiaobei Plate.

Processing of Bromine

Natural brine is a complicated
salt-water system, containing many ionic compositions in which different ions have close interdependent relationships and which can be
reunited to form many dissolved soluble salts such as sodium chloride, potassium chloride, calcium sulfate, potassium sulfate and other
similar soluble salts. The goal of natural brine processing is to separate and precipitate the soluble salts or ions away from the water.
Due to the differences in the physical and chemical characteristics of brine samples, the processing methods are varied, and can result
in inconsistency of processing and varied technical performance for the different useful components from the natural brine.

Bromine is the first component
extracted during the processing of natural brine. In natural brine, the bromine exists in the form of bromine sodium and bromine magnesium
and other soluble salts.

The bromine production process is as follows:

1. natural brine is pumped from underground through extraction wells by subaqueous pumps;

2. the natural brine then passes through transmission pipelines to storage reservoirs;

3. the natural brine is sent to the bromine refining plant where bromine is extracted
from the natural brine. In neutral or acidic water, the bromine ion is easily oxidized by adding the oxidative of chlorine, which generates
the single bromine away from the brine. Thereafter the extracted single bromine is blown out by forced air, then absorbed by sulfur dioxide
or soda by adding acid, chlorine and sulfur. Extracted bromine is stored in containers of different sizes; and

4. the wastewater from this refining process is then transported by pipeline to brine pans.

Our production feeds include (i) natural brine; (ii) vitriol;
(iii) chlorine; (iv) sulfur; and (v) coal.

Crude Salt

We also produce crude salt, which
is produced from the evaporation of the wastewater after our bromine production process. Once the brine is returned to the surface and
the bromine is removed, the remaining brine is pumped to on-site containing pools and then exposed to natural sunshine. This causes the
water to evaporate from the brine, resulting in salt being left over afterwards. 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.

Chemical Products

We produce chemical products through
our wholly-owned subsidiary, Shouguang Yuxin Chemical Industry Company Limited, or SYCI. At the present time, SYCI is closed pursuant
to the letter from government dated on November 24, 2017. It is being relocated to Bohai Marine Fine Chemical Industry Park, Shouguang
City. SYCI paid $8,846,282 for a 50-year lease of a piece of land for its new factories at Bohai Marine Fine Chemical Industrial Park
in December 2017 and leased another piece of land from the third party for its new chemical factory. We received the final approval for
our new chemical factory and started construction in June 2020.

13

Historically, SYCI concentrated
its efforts on the production and sale of chemical products that are used in oil and gas field exploration, oil and gas distribution,
oil field drilling, papermaking chemical agents, inorganic chemicals and materials that are used for human and animal antibiotics. SYCI
engaged in depth study of existing products and new product research and development at the same time. SYCI’s annual production
of oil and gas field exploration products and related chemicals was over 26,000 tons, and its production of papermaking-related chemical
products was over 5,000 tons. SYCI’s annual production capacity of materials that are used for human and animal antibiotics was
over 6,800 tons.

Sales and Marketing

We have an in-house sales staff
of 7 persons. Our customers send their orders to us first. Our in-house sales staff then attempts to satisfy these orders based on our
actual production schedules and inventories on hand. Many of our customers have a long term relationship with us. We expect this to continue
due to stable demand for mineral products, however, these relationships cannot be guaranteed in the future.

Principal Customers

We sell a substantial portion
of our products to a limited number of PRC customers. Our principal customers during 2024 were Shandong Morui Chemical Company Limited,
Shandong Brother Technology Limited, and Shouguang Weidong Chemical Company Limited. We have ongoing policies in place to ensure that
sales are made to customers who are credit-worthy.

During the year ended December
31, 2024, sales to our three largest bromine customers, based on net revenue from such customers, aggregated $1,969,624 or
approximately 35% of total net revenue from sale of bromine; and sales to our largest customer represented approximately 12%,
respectively, of total net revenue from the sale of bromine.

During the year ended December
31, 2023, sales to our three largest bromine customers, based on net revenue from such customers, aggregated $10,866,228 or approximately
40% of total net revenue from sale of bromine; and sales to our largest customer represented approximately 14%, respectively, of total
net revenue from the sale of bromine.

During each of the years ended
December 31, 2024 and 2023, sales to our three largest crude salt customers, based on net revenue from such customers, aggregated $2,049,988
and $2,971,467, respectively, or approximately 100% and 100% of total net revenue from sale of crude salt; and sales to our largest customer
represented approximately 38% and 38%, respectively, of total net revenue from the sale of crude salt.

During each of the years ended December 31, 2024 and
2023, the net revenue for the chemical products was $0.

During each of the years ended December
31, 2024 and 2023, the net revenue for the natural gas was $61,207 and $150,861.

Principal Suppliers

Our principal external suppliers
are Laizhou Shengfu Chemical Company Limited, Weifang Wanhong Chemical Company Limited, Shandong Xinlong International Trade Company Limited,
Shouguang Runfeng trading Company Limited.

During the year ended December
31, 2024 and 2023, we purchased 100% of raw materials for our bromine and crude production from our top four suppliers.

During the year ended December
31, 2024 and 2023, we did not purchase any raw materials for chemical products production. This supplier concentration makes us vulnerable
to a near-term adverse impact, should the relationships be terminated.

14

Business Strategy

Expansion of Production Capacity to Meet Demand

▼ Bromine and Crude Salt

In view of keen competition and
the trend of less bromine contraction of brine water being extracted in Shouguang City, Shandong Province, the Company intended to access
more bromine and crude salt resources by finding new underground brine water resources in the Sichuan Province. On January 30, 2015 we
announced that we had found natural gas resources under our bromine well in Sichuan Province. On November 23, 2015, the Company’s
subsidiary SCHC entered into an agreement with the People’s Government of Daying County in Sichuan Province for the exploration
and development of natural gas and brine resources (including bromine and crude salt). In January 2017, the Company completed the construction
of the first brine water and natural gas well field in Sichuan Province. Subsequently, the Company found some issues related to the water
and other potential impurities in the natural gas during trial production. 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 completed the test production at its first natural gas well in Sichuan Province and commenced trial production
in January 2019.

On May 29, 2019, the Company received
verbal notice from the government of Tianbao Town, Daying County, Sichuan Province, mandating the need for project approval for its Daying
well, encompassing the entire natural gas and brine water project. This also includes approvals for safety production inspection, environmental
protection assessment, and to solve the related land issue. Until these approvals are obtained, the Company must temporarily suspend trial
production at its natural gas well in Daying. Additionally, in compliance with the Chinese government new policies, the Company is required
to obtain an exploration license for bromine and a mining license for natural gas. Pursuant to the Opinions of the Ministry of Natural
Resources on Several Issues in Promoting the Reform of Mineral Resources Management (Trial) promulgated by the Ministry of Natural Resources
of PRC on January 9, 2020, which came into effect on May 1, 2020, privately owned enterprises are allowed to participate in the natural
gas production. The Company is engaged in ongoing discussions with the government of Daying County regarding the establishment of a joint
venture for the exploration and production of natural gas and brine products in Sichuan.

15

On September 1, 2017, the Company
received notification from the Government of Yangkou Town, Shouguang City of PRC that production at all its factories must be halted immediately.
This was required for the Company to perform rectification and improvement in compliance with the local new safety and environmental protection
requirements.

The Company has worked closely
with the county authorities to develop rectification plans for its bromine and crude salt businesses, reaching an agreement on a plan
in October 2017. During the fiscal year ended December 31, 2018, the Company incurred $16,243,677 in the rectification and improvements
of plant and equipment of the bromine and crude salt factories resulting in a cumulative amount of $34,182,329 incurred as of December
31, 2018. The Shouguang City Bromine Association, on behalf of all the bromine producers in Shouguang, initiated negotiations with the
local government agencies. The local governmental agencies acknowledged the facts that their initial requirements for the bromine industry
did not include the project, the planning and land use rights approvals, which were later introduced by the provincial government as new
requirements. The Company understood from the local government that local government were coordinating with various government agencies
to solve these three outstanding approval issues in a timely manner and that all impacted bromine plants are not allowed to commence production
prior to obtaining those approvals. In April 2019, Factory No.1, Factory No.5 and Factory No.7 (Factory no. 5 is considered part of Factory
no.7 and both are managed as one factory since 2010) resumed operations upon receipt of verbal notification from local government of Yangkou
County. Then, on May 7, 2019, the Company renamed its Subdivision Factory No. 1 to Factory No. 4; and Factory No. 5 (previously integrated
with Factory No. 7) as the new Factory No. 7.

On November
25, 2019, the government of Shouguang City issued a notice ordering all bromine facilities in Shouguang City, including the Company’s
all 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 on February 27, 2020 issued by the local governmental authority which
allows us to resume production after the winter temporary closure. Further, the Company received another approval from the Shouguang Yangkou
People’s Government dated on March 5, 2020 to resume production at its bromine factories No.1, No. 4, No.7 and No. 9 in order to
meet the needs of bromide products for epidemic prevention and control (the “March 2020 Approval”). The Company’s factories
No.7 and No.1 started trial production in middle March, 2020, and commenced commercial production on April 3, 2020.

The Company received oral notification
from the government regarding Factory No. 8, allowing it to resume production in August 2022. Factory No.8 began contributing revenue
in the fourth quarter 2022.

The Company is awaiting governmental
approval for Factories No. 2 and No. 10. To our knowledge, the government is finalizing plans for all mining areas, including flood prevention
measures. As a result, we may be required to make certain modifications to our existing wells and aqueducts prior to commencement of operations
of these factories in order to satisfy the local government's requirements. The Company completed its flood prevention project in December
2023. This project was implemented for safeguarding its bromine facilities.

Pursuant to the notification from
the government of Shouguang City, all bromine facilities in Shouguang City were temporarily closed from December 15, 2024 until February
12, 2025. In compliance with the notification, the Company ceased production at its bromine facilities during this period and resumed
preparation operations at the bromine and crude salt factories as scheduled in February 2025.

16

▼ Chemical Products

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 the Bohai Marine Fine Chemical Industrial Park (the “November
2017 Letter”). Since then, our chemical factory has been shut down. We believe this is part of the country’s efforts to improve
the development of the chemical industry, facilitate safe production and curb environmental pollution, and ensure the quality of living
environment of residents. The Company expects to cost approximately $69 million in total in connection with the relocation. The Company
incurred relocation costs in the amount of $45,584,344 as of December 31, 2024.

In January 2020, the Company received
the environmental protection approval by the government of Shouguang City, Shandong Province for the planned Yuxin Chemical factory. Construction
of the new chemical facilities at Bohai Marine Fine Chemical Industrial Park commenced in June 2020, with the bulk of the civil engineering
works completed by the end of June 2021. However, due to the supply chain issues as well as the electric restrictions in China, the delivery
of some equipment, along with the equipment installation and testing and beginning trial production at the chemical factory, was delayed.
On February 22, 2022, the Company announced that discussions with the government had led to an easing of electricity restrictions. As
a result, the Company re-engaged with its suppliers to proceed with the production and delivery of the remainder of the equipment, aiming
to finish installation and begin testing and trial production. At this stage, the Company also began preparation work for its application
for safety and environmental assessment. Additionally, the procurement of the final equipment for our chemical factory has been postponed
until we have a better understanding of the potential for derivative bromine products. We anticipate proceeding with the completion of
its chemical factory in due course. However, in the event that the Chinese economy persists in its weakness and if we perceives this trend
to be ongoing, there is a possibility that the chemical factory could be repurposed for the production of Sodium-Ion batteries.

Competition

To date, our sales have been limited
to customers within the PRC and we expect that our sales will remain primarily domestic for the immediate future. Our marketing strategy
involves developing long term ongoing working relationships with customers based on large multi-year agreements which foster mutually
advantageous relationships.

We compete with PRC domestic private
companies and state owned companies. Certain state owned and state backed competitors are more established and have more control of certain
resources in terms of pricing than we do. We compete based on price, our reputation for quality, on-time delivery, our relationship with
suppliers and our geographical proximity to natural brine deposits in the PRC for bromine, crude salt and chemical productions. Management
believes that our stable quality, manufacturing processes and plant capacity for the production of bromine, crude salt and chemical products
are key considerations in awarding contracts in the PRC.

Our principal competitors in the
bromine business are Shandong Yuyuan Group Company Limited, Shandong Haihua Group Company Limited, Shandong Dadi Salt Chemical Group Company
Limited and Shandong Haiwang Chemical Company Limited, all of which produce bromine principally for use in their chemicals businesses
and sell part of the bromine produced to customers. These companies may switch to selling bromine to the market if they no longer use
bromine in their chemical businesses.

Our principal competitors in the
crude salt business are Shandong Haiwang Chemical Company Limited, Shandong Haihua Group Company Limited, Shandong Weifang Longwei Industrial
Company Limited, Shandong Yuyuan Group Company Limited and Shandong Caiyangzi Saltworks.

Our principal competitors in the
chemical business are Beijing Shiji Zhongxing Energy Technology Co., Ltd, Yanan Chaozheng Nijiang Co., Ltd, Shandong Dacheng Pesticides
Company Limited, Binhua Group Company Limited, Dongying City Dongchen (Group) Chemical Industry Company Limited, Beijing Peikangjiaye
Technologies Limited, Shouguang Fukang Pharmaceutical Co., Ltd. Shandong Xinhua Pharmaceutical Limited by Share Ltd, Hunan Erkang Pharmaceutical
Limited by Share Ltd and Xinan Synthetic Pharmaceutical Limited by Share Ltd.

17

Government Regulation

China has been reinforcing the
environmental requirements for the entire chemical industry, demanding the closure or rectification of those factories that do not meet
the emission requirements and are highly polluting. In early 2017, the government announced the closure or relocation of those chemical
industry facilities that are close to residential areas and the new environmental law officially came into full effect in January 2018.

The following is a summary of
the principal governmental laws and regulations that are or may be applicable to our operations in the PRC. The scope and enforcement
of many of the laws and regulations described below are uncertain. We cannot predict the effect of further developments in the Chinese
legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement of laws.

In the natural resources sector,
the PRC and the various provinces have enacted a series of laws and regulations over the past 20 years, including laws and regulations
designed to improve safety and decrease environmental degradation. The “China Mineral Resources Law” declares state ownership
of all mineral resources in the PRC. However, mineral exploration rights can be purchased, sold and transferred to foreign owned companies.
Mineral resource rights are granted by the Central Government permitting recipients to conduct mineral resource activities in a specific
area during the license period. These rights entitle the licensee to undertake mineral resource activities and infrastructure and ancillary
work, in compliance with applicable laws and regulations, within the specific area covered by the license during the license period. The
licensee is required to submit a proposal and feasibility studies to the relevant authority and to pay the Central Government a natural
resources tax in an amount equal to a percent of annual crude salt sales and tones of bromine sold. Shandong Province has determined that
bromine is to be extracted only by licensed entities and we hold one of such licenses. Despite the Province desire to limit extraction
to licensed entities hundreds of smaller operations have continued to extract bromine without licenses.

The Ministry of Land and Resources
(“MLR”) is the principal regulator of mineral rights in China. The Ministry has authority to grant licenses for land-use and
exploration rights, issue permits for mineral rights and leases, oversee the fees charged for them and their transfer, and review reserve
evaluations. We are required to hold a bromine and salt production license in order to operate our bromine and salt production business
in the PRC. Our bromine and salt production license is subject to a yearly audit. If we do not successfully pass the yearly approval by
relevant government authorities, our bromine and salt production operations may be suspended until we are able to comply with the license
requirements which could have a material adverse effect on our business, financial condition and results of operations.

Human Capital Resources

Employee Profiles

As of December 31, 2024, we employed
approximately 367 full-time employees, of whom approximately 77% are with SCHC、SHSI
and DCHC, and 23% are with SYCI. Approximately 28% of our employees are management personnel and 4% are sales and procurement staff. None
of our employees are represented by a union.

Total Rewards

Our compensation program is designed
to attract and reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement
of our strategic goals and create long-term value for our stockholders. Our employees in China participate in a state pension arrangement
organized by Chinese municipal and provincial governments. We are required to contribute to the arrangement at the rate of 16% of the
average monthly salary. In addition, we are required by Chinese law to cover employees in China with other types of social insurance.
We have purchased social insurance for almost all of our employees. Expense related to social insurance was approximately $535,475 for
fiscal year 2024.

18

Health and Safety

The success of our business is
fundamentally connected to the well-being of our people. Accordingly, we are committed to the health, safety and wellness of our employees.
We provide our employees and their families with access to a variety of flexible and convenient health and welfare programs, including
benefits that support their physical and mental health by providing tools and resources to help them improve or maintain their health
status; and that offer choice where possible so they can customize their benefits to meet their needs and the needs of their families.
In response to the COVID-19 pandemic, we implemented significant operating environment changes that we determined were in the best interest
of our employees, as well as the communities in which we operate, and which comply with government regulations. This includes having the
vast majority of our employees work from home, while implementing additional safety measures for employees continuing critical on-site
work.

Talent

A core tenet of our talent system
is to both develop talent from within and supplement with external hires. This approach has yielded loyalty and commitment in our employee
base which in turn grows our business, our products, and our customers, while adding new employees and external ideas supports a continuous
improvement mindset and our goals of a diverse and inclusive workforce. Our talent acquisition team uses internal and external resources
to recruit highly skilled and talented workers in the PRC, and we encourage employee referrals for open positions.

Available Information

We make available free of charge
on or through our internet website, www.gulfresourcesinc.com, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, including exhibits, and all amendments to those reports, if any, filed or furnished pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after they are electronically filed with, or furnished
to, the Securities and Exchange Commission. The SEC maintains an Internet site that contains reports, proxy and information statements,
and other information regarding issuers like our Company that file electronically with the SEC at http://www.sec.gov. The information
contained on our website is not intended to be incorporated into this Annual Report on Form 10-K.

19