Gulf Resources, Inc.: Form 10-Q for the period ended Jun 30, 2026

The discussion below contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act. We have used words such as “believes,” “intends,” “anticipates,” “expects” and similar expressions to identify forward-looking statements. These statements are based on information currently available to us and are subject to a number of risks and uncertainties that may cause our actual results of operations, financial condition, cash flows, performance, business prospects and opportunities and the timing of certain events to differ materially from those expressed in, or implied by, these statements. Except as expressly required by the federal securities laws, we undertake no obligation to update such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances, or for any other reason.

Overview

We are a Nevada holding company which conducts operations through our wholly-owned China-based subsidiaries. Our business is conducted and reported in four segments, namely, bromine, crude salt, chemical products and natural gas.

Through our wholly-owned subsidiary, SCHC, we produce and trade bromine, and through our wholly-owned subsidiary, SHSI, we produce and trade crude salt. We are one of the largest producers of bromine in China, as measured by production output. Elemental bromine is used to manufacture a wide variety of bromine compounds used in industry and agriculture. Bromine also is used to form intermediary chemical compounds such as Tetramethylbenzidine. Bromine is commonly used in brominated flame retardants, fumigants, water purification compounds, dyes, medicines and disinfectants. Crude salt is the principal material in alkali production as well as chlorine alkali production and is widely used in the chemical, food and beverage, and other industries.

Through our wholly-owned subsidiary, SYCI, we manufacture and sell chemical products used in oil and gas field exploration, oil and gas distribution, oil field drilling, papermaking chemical agents, inorganic chemicals and materials that are used for human and animal antibiotics.

Our wholly-owned subsidiary, DCHC, was established to explore and develop natural gas and brine resources (including bromine and crude salt) in Sichuan Province, China.

Bromine and Crude Salt

As disclosed in the Company’s Current Report on Form 8-K filed on September 8, 2017, the Company received, on September 1, 2017, letters from the Yangkou County, Shouguang City government addressed to each of its subsidiaries, SCHC and SYCI, which stated that in an effort to improve the safety and environmental protection management level of chemical enterprises, the plants are requested to immediately stop production and perform rectification and improvements in accordance with the country’s new safety and environmental protection requirements. In the Company’s press release of August 11, 2017 and on its conference call of August 14, 2017, the Company addressed concerns that increased government enforcement of stringent environmental rules that were adopted in early 2017 to ensure corporations bring their facilities up to necessary standards so that pollution and other negative environmental issues are limited and remediated, could have an impact on our business in both the short and long-term. The Company also expressed that although it believed its facilities were fully compliant at the time, the Company did not know how its facilities would fare under the new rules. Teams of inspectors from the government were sent to many provinces to inspect all mining and manufacturing facilities. The local government requested that facilities be closed, so that the facilities could undergo the inspection and analysis in the most efficient manner by inspectors’ team. As a result, our facilities were closed on September 1, 2017.

The Company believes that this is another step by the government to improve the environment. It further believes the goal of the government is not to close all plants, but rather to codify the regulations related to project approval, land use, planning approval and environmental protection assessment approval so that illegal plants are not able to open in the future and so that plants close to population centers do not cause serious environmental damage. In addition, the Company believes that the Shandong provincial government wants to assure that each of its regional and county governments has applied the Notice in a consistent manner.

The Shouguang City Bromine Association, on behalf of all the bromine producers in Shouguang, initiated negotiations with the local government agencies. The local governmental agencies acknowledged the fact that their initial requirements for the bromine industry did not include the project, the planning and the land use rights approvals, which were later introduced by the provincial government as new requirements. The Company understood from the local government that local government was coordinating with various government agencies to solve these three outstanding approval issues in a timely manner and that all impacted bromine plants will not be allowed to commence production prior to obtaining those approvals. In February 2019, the Company received a notification from the local government of Yangkou County that its Factories No. 1, No. 4, No. 7 and No. 9 passed inspection and were allowed to resume operations. In April 2019, Factory No. 1 and No. 7 resumed operations.

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

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

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

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

Chemical Products

On November 24, 2017, the Company received a letter from the People’s Government of Yangkou County, Shouguang City notifying the Company that due to the new standards and regulations relating to safety production and environmental pollution, from certain local governmental departments, such as the municipal environmental protection department, the security supervision department and the fire department, its chemical enterprises would have to be relocated to a new industrial park called Bohai Marine Fine Chemical Industry Park. Although our chemical companies were in compliance with regulations, they were also close to a residential area. As a result, the government determined we should relocate to the Bohai park. Chemical companies that are not being asked to move into the park are being permanently closed. Since our factories closed, the Company has secured from the government the land use rights for its chemical plant. On January 6, 2020, the Company received the environmental protection approval by the government of Shouguang City, Shandong Province for the proposed Yuxin Chemical factory. Construction of the new chemical facilities at Bohai Marine Fine Chemical Industrial Park commenced in June 2020. Initially, the construction was projected to last around one year, with an additional six months for equipment installation and testing. However, due to the COVID epidemic and electrical restrictions, the opening of the chemical factory has been postponed. The Company has received the refrigeration and air compressor units. Additionally, the procurement of the final equipment for our chemical factory has been postponed until we have a better understanding of the potential for derivative bromine products. We anticipate proceeding with the completion of its chemical factory in due course.

Natural Gas

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

Nasdaq Compliance

On April 23, 2026 and May 26, 2026, the Company received notifications from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) stating that the Company was not in compliance with the Rule, which requires the timely filing of periodic financial reports with the Securities and Exchange Commission.

The April 23, 2026 notification related to the Company’s failure to timely file its Annual Report on Form 10-K for the fiscal year ended December 31, 2025, and the May 26, 2026 notification related to the Company’s failure to timely file its Quarterly Report on Form 10-Q for the quarter ended March 31, 2026.

On May 26, 2026, the Company received a notice from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”), indicating that, as a result of not having timely filed its quarterly report on Form 10-Q for the quarter ended March 31, 2026 (the “Form 10-Q”), and the Company remains delinquent in filing its annual report on Form 10-K for the year ended December 31, 2025 (the “Initial Delinquent Filing”), the Company is in non-compliance with Nasdaq Listing Rule 5250(c)(1), which requires timely filing all required periodic financial reports with the Securities Exchange Commission.

The Notice has no immediate effect on the listing or trading of the Company’s common stock on the Nasdaq Capital Market. As previously disclosed in the current report on Form 8-K filed by the Company on April 27, the Company must submit a plan to regain compliance with respect to these delinquent reports no later than June 22, 2026. If the plan is accepted by Nasdaq, then Nasdaq would grant the Company up to 180 calendar days from the due date of the Initial Delinquent Filing, or until October 12, 2026, to regain compliance.

On May 29, 2026, the Company issued a press release announcing its receipt of the Notice.

On June 1, 2026, the Company, following the Company’s ongoing dialogue with the staff of the United States Securities and Exchange Commission, concluded that the Company will amend its fiscal year 2024 Form 10-K (the “FY2024 Form 10-K”) and Form 10-Qs for the first, second and third quarters of 2025 (collectively, the “Q1, Q2 and Q3 2025 Form 10-Qs”) to restate the disclosures (Note 6, Note 7 and Note 12 included in the FY2024 Form 10-K and the Q1, Q2 and Q3 2025 Form 10-Qs) to revise the previous recognition of buildings without ownership certificates as fixed assets in the balance sheets and to reclassify such buildings as right-of-use (ROU) assets based on lease agreements and ASC 842 Leases, for each of the periods included in those filing, including fiscal years 2023 and 2024 in the FY2024 Form 10-K and each of the quarterly and year-to-date periods included in the Q1, Q2 and Q3 FY2025 Form 10-Qs (collectively, the “Prior Filings”). The Prior Filings should no longer be relied upon because of errors identified in such financial statements, as described above.

On June 17, 2026, the Company submitted a plan to Nasdaq to regain compliance with the Rule. On June 25, 2026, Nasdaq accepted the Company’s compliance plan and granted the Company an exception period to file the delinquent periodic reports.

The Company filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2025 on August 17, 2026, and filed its Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 on August 28, 2026.

On June 25, 2026, the Company received a written notice from Nasdaq (the “Extension Letter”) stating that it had accepted the Company’s plan to regain compliance with Nasdaq Listing Rule 5250(c)(1) (the “Rule”). Nasdaq granted the Company a plan period to regain compliance with the Rule.

On August 28, 2026, Nasdaq notified the Company that the Company had incurred an additional delinquency because it had not filed its Quarterly Report on Form 10-Q for the quarter ended June 30, 2026. Nasdaq requested that the Company submit an update to its compliance plan. On August 28, 2026, the Company submitted an updated compliance plan to Nasdaq requesting additional time to file its Quarterly Report on Form 10-Q for the quarter ended June 30, 2026.

On September 1, 2026, the Company received a written notice from Nasdaq (the “Extension Letter”) granting the Company an additional exception to regain compliance with Nasdaq Listing Rule 5250(c)(1) (the “Rule”).

On September 2, 2026, Nasdaq granted the Company an additional exception period and required the Company to file its Quarterly Report on Form 10-Q for the quarter ended June 30, 2026 on or before October 12, 2026. Nasdaq stated that, if the Company failed to file the Quarterly Report by that date, Nasdaq Staff may provide written notification that the Company’s securities are subject to delisting. The Company may have the right to appeal a delisting determination to a Nasdaq Hearings Panel.

The Nasdaq notifications and exception periods do not have an immediate effect on the listing or trading of the Company’s common stock on Nasdaq, subject to the Company’s continued compliance with the other applicable Nasdaq listing requirements.

The Company filed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2026 on September 30, 2026. As of the date of this Quarterly Report, the Company has filed the delinquent periodic reports identified in the Nasdaq notifications and is awaiting Nasdaq’s determination regarding whether the Company has regained compliance with Nasdaq Listing Rule 5250(c)(1).

There can be no assurance that Nasdaq will determine that the Company has regained compliance with the Rule, that the Company will satisfy all other applicable Nasdaq listing requirements, or that the Company’s common stock will continue to be listed on Nasdaq.

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

As a result of our acquisition of SCHC, our historical financial statements and the information presented below reflects the accounts of SCHC, SHSI ,SYCI and DCHC. The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere in this report.

On December 22, 2025 SYCI was sold.

RESULTS OF OPERATIONS

The following table presents certain information derived from the condensed consolidated statements of operations, cash flows and stockholders’ equity for the three-month and six-month periods ended June 30, 2026 and 2025.

Comparison of the Three-Month Periods Ended June 30, 2026 and 2025

Net income for the three-month period ended June 30, 2026 increased to $1,143,193 from net loss of $814,364 in the same period in 2025, mainly due to the net revenue increased to $12,886,977 for the three-month period ended June 30, 2026 as compared to $8,343,785 in the same period in 2025.

Net Revenue

The table below shows the changes in net revenue in the respective segments of the Company for the three-month period ended June 30, 2026 as compared to the same period in 2025:

Bromine segment

For the three-month periods ended June 30, 2026 and 2025, the net revenue for the bromine segment was $12,244,273 and $7,676,374, respectively. The increase of the net revenue of bromine was due to the 17% increase in tonnes sold and the 37% increase in average selling price of bromine for the three-month period ended June 30, 2026.

Crude salt segment

For the three-month periods ended June 30, 2026 and 2025, the net revenue for the crude salt segment was $642,704 and $667,411, respectively. The decrease of net revenue of crude salt was mainly due to the 4% decrease in average selling price of crude salt for the three-month period ended June 30, 2026.

Chemical products segment

For the three-month periods ended June 30, 2026 and 2025, the net revenue for the chemical products segment was nil due to the closure of our chemical factories since September 1, 2017.

Natural gas segment

For the three-month periods ended June 30, 2026 and 2025, the net revenue for the natural gas segment was nil.

Cost of Revenue

Cost of revenue reflects mainly the raw materials consumed and the direct salaries and benefits of staff engaged in the production process, electricity, depreciation and amortization of manufacturing plants and machinery and other manufacturing costs. Our cost of revenue was $10,565,684 for the three-month period ended June 30, 2026, an increase of $3,198,982 (or 43%) as compared to the same period in 2025 due to the increase of net revenue by 54% for the three-month period ended June 30, 2026 as compared to the same period in 2025.

Bromine production capacity and utilization of our factories

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

(i) Utilization ratio is calculated based on the annualized actual production volume in tonnes for the periods divided by the annual production capacity in tonnes.

Bromine segment

For the three-month periods ended June 30, 2026 and 2025, the cost of revenue for the bromine segment was $10,046,458 and $7,017,116, respectively. The increase in costs is mainly due to the increase in sales volume.

Crude salt segment

For the three-month periods ended June 30, 2026 and 2025, the cost of revenue for the crude salt segment was $519,226 and $349,586, respectively. The increase in costs is mainly due to the rise in amortization of the salt pans.

Chemical products segment

Cost of revenue for our chemical products segment for the three-month periods ended June 30, 2026 and 2025 was nil.

Natural gas segment

Cost of revenue for our natural gas segment for the three-month periods ended June 30, 2026 and 2025 was nil.

Gross Profit

Gross profit was $2,321,293, or 18% of net revenue for three-month period ended June 30, 2026, representing an increase of $1,344,210, as compared to a gross profit of $977,083, or 12% of net revenue for the same period in 2025.

Bromine segment

For the three-month period ended June 30, 2026, the gross profit margin for our bromine segment was 18%, compared to 9% in the three-month period ended June 30, 2025. The increase in gross profit margin was primarily attributable to the higher average selling price of bromine of $5,328 per ton in the three-month period ended June 30, 2026 compared to $3,892 per ton in the three-month period ended June 30, 2025. Bromine tonnes sales also increased from 1,972 tonnes for the three-month period ended June 30, 2025 to 2,298 tonnes for the three-month period ended June 30, 2026.

Crude salt segment

For the three-month period ended June 30, 2026, the gross profit margin for our crude salt segment was 19%, compared to 48% in the same period in 2025. The decrease in gross profit margin was mainly attributable to the rise in amortization of the salt pans.

Chemical products segment

For the three-month periods ended June 30, 2026 and 2025, the gross profit margin for our chemical products segment was 0%.

Natural gas segment

For the three-month periods ended June 30, 2026 and 2025, the gross profit margin for our natural gas segment was 0%.

Sales and Marketing Expenses

Sales and marketing expenses were $18,174 for the three-month period ended June 30, 2026, an increase of $3,372 (or 23%) as compared for the same period in 2025.

Direct labor and factory overheads incurred during plant shutdown

On September 1, 2017, the Company received notification from the government of Yangkou County, Shouguang City of PRC that stated that production at all its bromine and crude salt and chemical factories should be halted with immediate effect in order for the Company to perform rectification and improvement in accordance with the county’s new safety and environmental protection requirements. On November 24, 2017, the Company received a letter from the Government of Yangkou County, Shouguang City notifying the Company to relocate its two chemical production plants located in the second living area of the Qinghe Oil Extraction Plant to Bohai Park. As a result, direct labor and factory overhead costs (including depreciation of plant and machinery) in the amount of $452,949 and $727,774 incurred for the three-month periods ended June 30, 2026 and 2025, respectively, of factories that have not resumed production were presented as part of the operating expense.

General and Administrative Expenses

General and administrative expenses were $598,003 for the three-month period ended June 30, 2026, a decrease of $427,777 (or 42%) as compared to $1,025,780 for the same period in 2025. The decrease was mainly due to SYCI was sold in 2025.

Income (loss) from Operations

Income from operations was $1,252,167 for the three-month period ended June 30, 2026, compared to loss from operations of $791,273 in the same period in 2025.

Bromine segment

Income from operations from our bromine segment was $1,409,472 for the three-month period ended June 30, 2026, compared to loss from operations of $134,041 in the same period in 2025. This increase was due to the 17% increase in tonnes sold and a 37% increase in average selling price.

Crude salt segment

Loss from operations from our crude salt segment was $97,230 for the three-month period ended June 30, 2026, compared to loss from operations of $181,160 in the same period in 2025.

Chemical products segment

Loss from operations from our chemical products segment was $0 for the three-month period ended June 30, 2026, compared to loss from operations of $348,203 in the same period in 2025. The reason for the reduction was due to the sale of SYCI completed in December 2025.

Natural gas segment

Loss from operations from our natural gas segment was $40,116 for the three-month period ended June 30, 2026, compared to loss from operations of $43,255 in the same period in 2025.

Interest Income

Interest income of $18,816 mainly represented interest income from loans to third parties for the three-month period ended June 30, 2026, an increase of $17,021 as compared to the same period in 2025.

Interest Expenses

Interest expense of $124,673 represented bank interest expense and interest on finance lease for the three-month period ended June 30, 2026, an increase of $102,999 as compared to the same period in 2025.

Other Expense, Net

For the three-month period ended June 30, 2026, other expense, net decreased from $3,212 to $3,117 compared with the same period of 2025, reflecting a 3% reduction.

Net Income (loss)

Net income was $1,143,193 for the three-month period ended June 30, 2026, compared to a net loss of $814,364 in the same period in 2025.

Comparison of the Six-Month Periods Ended June 30, 2026 and 2025

Net loss for the six-month period ended June 30, 2026 decreased to $2,783,188 from $5,432,824 in the same period in 2025, mainly due to the net revenue increased to $15,255,603 for the six-month period ended June 30, 2026 as compared to $9,948,232 in the same period in 2025.

Net Revenue

The table below shows the changes in net revenue in the respective segments of the Company for the six-month period ended June 30, 2026 as compared to the same period in 2025:

Bromine segment

For the six-month periods ended June 30, 2026 and 2025, the net revenue for the bromine segment was $14,494,223 and $9,158,243, respectively. The increase of the net revenue of bromine was due to the 16% increase in tonnes sold and the 37% increase in average selling price of bromine for the six-month period ended June 30, 2026.

Crude salt segment

For the six-month periods ended June 30, 2026 and 2025, the net revenue for the crude salt segment was $761,380 and $789,989, respectively. The decrease of net revenue of crude salt was mainly due to the 4% decrease in average selling price of crude salt for the six-month period ended June 30, 2026.

Chemical products segment

For the six-month periods ended June 30, 2026 and 2025, the net revenue for the chemical products segment was nil due to the closure of our chemical factories since September 1, 2017.

Natural gas segment

For the six-month periods ended June 30, 2026 and 2025, the net revenue for the natural gas segment was nil.

Cost of Revenue

Cost of revenue reflects mainly the raw materials consumed and the direct salaries and benefits of staff engaged in the production process, electricity, depreciation and amortization of manufacturing plants and machinery and other manufacturing costs. Our cost of revenue was $12,919,096 for the six-month period ended June 30, 2026, an increase of $3,954,930 (or 44%) as compared to the same period in 2025 due to the increase of net revenue by 53% for the six-month period ended June 30, 2026 as compared to the same period in 2025.

Bromine production capacity and utilization of our factories

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

(i) Utilization ratio is calculated based on the annualized actual production volume in tonnes for the periods divided by the annual production capacity in tonnes.

Bromine segment

For the six-month periods ended June 30, 2026 and 2025, the cost of revenue for the bromine segment was $12,329,784 and $8,550,340, respectively. The increase in costs is mainly due to the increase in sales volume.

Crude salt segment

For the six-month periods ended June 30, 2026 and 2025, the cost of revenue for the crude salt segment was $589,312 and $413,826, respectively. The increase in costs is mainly due to the rise in amortization of the salt pans.

Chemical products segment

Cost of revenue for our chemical products segment for the six-month periods ended June 30, 2026 and 2025 was nil.

Natural gas segment

Cost of revenue for our natural gas segment for the six-month periods ended June 30, 2026 and 2025 was nil.

Gross Profit

Gross profit was $2,336,507, or 15% of net revenue for six-month period ended June 30, 2026, representing an increase of $1,352,441, as compared to a gross profit of $984,066, or 10% of net revenue for the same period in 2025.

Bromine segment

For the six-month period ended June 30, 2026, the gross profit margin for our bromine segment was 15%, compared to 7% in the six-month period ended June 30, 2025. The increase in gross profit margin was primarily attributable to the higher average selling price of bromine of $5,265 per ton in the six-month period ended June 30, 2026 compared to $3,856 per ton in the six-month period ended June 30, 2025. Bromine tonnes sales also increased from 2,375 tonnes for the six-month period ended June 30, 2025 to 2,753 tonnes for the six-month period ended June 30, 2026.

Crude salt segment

For the six-month period ended June 30, 2026, the gross profit margin for our crude salt segment was 23%, compared to 48% in the same period in 2025. The decrease in gross profit margin was mainly attributable to a reduction in revenue and a notable increase in amortization costs related to the newly purchased salt pan, which caused the cost of sales to grow more than the revenue contraction, resulting in a lower gross margin.

Chemical products segment

For the six-month periods ended June 30, 2026 and 2025, the gross profit margin for our chemical products segment was 0%.

Natural gas segment

For the six-month periods ended June 30, 2026 and 2025, the gross profit margin for our natural gas segment was 0%.

Sales and Marketing Expenses

Sales and marketing expenses were $23,622 for the six-month period ended June 30, 2026, an increase of $3,767 (or 19%) as compared for the same period in 2025.

Direct labor and factory overheads incurred during plant shutdown

On September 1, 2017, the Company received notification from the government of Yangkou County, Shouguang City of PRC that stated that production at all its bromine and crude salt and chemical factories should be halted with immediate effect in order for the Company to perform rectification and improvement in accordance with the county’s new safety and environmental protection requirements. On November 24, 2017, the Company received a letter from the Government of Yangkou County, Shouguang City notifying the Company to relocate its two chemical production plants located in the second living area of the Qinghe Oil Extraction Plant to Bohai Park. As a result, direct labor and factory overhead costs (including depreciation of plant and machinery) in the amount of $3,196,211 and $3,953,582 incurred for the six-month periods ended June 30, 2026 and 2025, respectively, of factories that have not resumed production were presented as part of the operating expense.

General and Administrative Expenses

General and administrative expenses were $1,921,104 for the six-month period ended June 30, 2026, a decrease of $531,685 (or 22%) as compared to $2,452,789 for the same period in 2025. The decrease was mainly due to SYCI was sold.

Loss from Operations

Loss from operations was $2,804,430 for the six-month period ended June 30, 2026, compared to loss from operations of $5,442,160 in the same period in 2025.

Bromine segment

Loss from operations from our bromine segment was $1,658,306 for the six-month period ended June 30, 2026, compared to loss from operations of $3,508,547 in the same period in 2025. This decrease was due to the 16% increase in tonnes sold and a 37% increase in average selling price.

Crude salt segment

Loss from operations from our crude salt segment was $824,909 for the six-month period ended June 30, 2026, compared to loss from operations of $768,969 in the same period in 2025. The main reason was due to the rise in amortization of the salt pans.

Chemical products segment

Loss from operations from our chemical products segment was $0 for the six-month period ended June 30, 2026, compared to loss from operations of $710,095 in the same period in 2025. The reason for the reduction was due to the sale of SYCI completed in December 2025.

Natural gas segment

Loss from operations from our natural gas segment was $71,925 for the six-month period ended June 30, 2026, compared to loss from operations of $88,099 in the same period in 2025.

Interest Income

Interest income of $272,476 mainly represented interest income from bank and loans to third parties for the six-month period ended June 30, 2026 an increase of $268,252 as compared to the same period in 2025.

Interest Expenses

Interest expense of $248,117 represented bank interest expense and interest on finance lease for the six-month period ended June 30, 2026, an increase of $204,721 as compared to the same period in 2025.

Other Expense, Net

For the six-month period ended June 30, 2026, other expense, net decreased from $3,212 to $3,117 compared with the same period of 2025, reflecting a 3% reduction.

Net Loss

Net loss was $2,783,188 for the six-month period ended June 30, 2026, compared to a net loss of $5,484,544 in the same period in 2025.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2026, cash and cash equivalents were $9,189,231 as compared to $3,793 as of December 31, 2025. The components of this increase of $9,185,438 are reflected below.

Statement of Cash Flows

For the six-month period ended June 30, 2026, we met our working capital and capital investment requirements by using cash on hand.

Net Cash Used In Operating Activities

During the six-month period ended June 30, 2026, cash flow used in operating activities of approximately $4.24 million was mainly due to a net loss of $2.78 million, an increase in accounts receivable of $12.02 million, offset by a non-cash adjustment related to depreciation and amortization of property, plant and equipment of $6.80 million, amortization of finance lease right-of-use asset of $1.48 million, an increase in accounts payable and accrued expenses of $1.35 million and a decrease in prepayment and deposits of $1.08 million.

During the six-month period ended June 30, 2025, cash flow used in operating activities of approximately $2.14 million was mainly due to a net loss of $5.48 million, an increase in accounts receivable of $2.58 million, an increases in prepayment and deposits of $2.33 million, and offset by a non-cash adjustment related to depreciation and amortization of property, plant and equipment of $6.45 million, amortization of finance lease right-of-use asset of $1.55 million.

Accounts receivable

Cash collections on our accounts receivable had a major impact on our overall liquidity. The following table presents the aging analysis of our accounts receivable as of June 30, 2026 and December 31, 2025.

The overall accounts receivable balance as of June 30, 2026 increased by $12,205,707, as compared to those of December 31, 2025. We have policies in place to ensure that sales are made to customers with an appropriate credit history. We perform ongoing credit evaluation on the financial condition of our customers.

Inventories

Our inventory consists of the following:

42

The net inventory level as of June 30, 2026 increased by $252,104, as compared to the net inventory level as of December 31, 2025.

Raw materials increased by $78,265 as of June 30, 2026 as compared to December 31, 2025.

Our finished goods increased by $173,839 as of June 30, 2026 as compared to December 31, 2025.

Net Cash Provided By / (Used In) Investing Activities

During the six-months ended June 30, 2026, net cash provided by investing activities was $12.75 million, mainly attributable to repayments received on loans to third parties of $14.44 million, offset by purchases of fixed assets of $1.70 million.

We have no investing activities for the six-month period ended June 30, 2025.

Net Cash Provided By/ (Used In) Financing Activities

For the six-month period ended June 30, 2026, net cash provided by financing activities was $0.28 million, attributable to proceeds from the issuance of units pursuant to a private placement of $0.56 million, offset by $0.27 million of principal payments for obligations under finance leases.

For the six-month period ended June 30, 2025, we used $0.3 million to fulfil finance lease obligations.

We believe that our available funds and cash flows generated from operations will be sufficient to meet our anticipated ongoing operating needs and our obligations as they become due in the next twelve (12) months.

We had available cash of approximately $9,189,231 at June 30, 2026, all of which is in highly liquid current deposits earning no or little interest. We do not anticipate paying cash dividends in the foreseeable future.

We intend to continue to focus our efforts on the activities of SCHC, SHSI and DCHC as these segments continue to expand within the Chinese market.

We may not be able to identify, successfully integrate or profitably manage any businesses or business segment we may acquire, or any expansion of our business. An expansion may involve a number of risks, including possible adverse effects on our operating results, diversion of management’s attention, inability to retain key personnel, risks associated with unanticipated events, risks associated with the pandemic and the financial statement effect of potential impairment of acquired intangible assets, any of which could have a materially adverse effect on our condition and results of operations. In addition, if competition for acquisition candidates or operations were to increase, the cost of acquiring businesses could increase materially. We may effect an acquisition with a target business which may be financially unstable, under-managed, or in its early stages of development or growth. Our inability to implement and manage our expansion strategy successfully may have a material adverse effect on our business and future prospects.

Contractual Obligations and Commitments

We have no significant contractual obligations not fully recorded on our consolidated balance sheets or fully disclosed in the notes to our consolidated financial statements. Additional information regarding our contractual obligations and commitments as at June 30, 2026 is provided in the notes to our consolidated financial statements. See “Notes to Condensed Consolidated Financial Statements”.

Material Off-Balance Sheet Arrangements

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

Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and this requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We base its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions. We have identified the following critical accounting policies and estimates used by us in the preparation of our financial statements: accounts receivable and allowance for doubtful accounts, inventories and allowance for obsolescence, assets retirement obligation, property, plant and equipment, recoverability of long-lived assets, mineral rights, leases, revenue recognition, income taxes, and loss contingencies. These policies and estimates are described in the Company’s Form 10-Q for the six months ended June 30, 2026.

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).

(a) Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined under Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and, in reaching a reasonable level of assurance, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

We have carried out an evaluation, as required by Rule 13a-15(d) under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2026.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2026, our disclosure controls and procedures were not effective at the reasonable assurance level because the material weaknesses in our internal control over financial reporting described in Item 4(b) below had not been remediated as of June 30, 2026. As described in Item 4(b), those material weaknesses relate to (i) insufficient personnel with appropriate levels of accounting knowledge and experience to address complex U.S. GAAP accounting issues and to prepare and review financial statements and related disclosures under U.S. GAAP, (ii) ineffective oversight of our financial reporting and internal control by those charged with governance, and (iii) inadequate design of internal control over the preparation of the financial statements being audited. Those deficiencies affected our ability to accumulate and communicate information to our management, including our Chief Executive Officer and Chief Financial Officer, on a timely basis so as to permit timely decisions regarding required disclosure.

Notwithstanding the conclusion described above, our management believes, based on the procedures described below and the additional procedures we performed in connection with the preparation of this Amendment, that the consolidated financial statements and other financial information included in our Quarterly Report on Form 10-Q for the three months period ended June 30, 2026 fairly present, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented.

Since the material weaknesses described above were identified, our management has implemented, and continues to implement, the compensating measures and remediation actions described in Item 4(b) below. These measures are designed to provide additional assurance regarding the accuracy and completeness of our disclosures while the material weaknesses remain unresolved. These measures do not, and are not intended to, constitute a remediation of the material weaknesses, and management does not expect that they will prevent or detect all errors or all instances of fraud.

(b) Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting refers to the process designed by, or under the supervision of, our principal executive officer and principal financial officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

(1) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and

(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design safeguards into the process to reduce, though not eliminate, this risk.

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.

Management has used the framework set forth in the report entitled “Internal Control — Integrated Framework” published by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), known as COSO, to evaluate the effectiveness of our internal control over financial reporting.

Based on that evaluation, management has concluded that the Company’s internal control over financial reporting was not effective as of June 30, 2026, due to the material weaknesses described below.

In preparing our consolidated financial statements for the three months period ended June 30, 2026, our management identified material weaknesses in our internal control over financial reporting, as defined in the standards established by the Public Company Accounting Oversight Board of the United States, and other significant deficiencies. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The material weaknesses identified are as follows: (i) insufficient personnel with appropriate levels of accounting knowledge and experience to address complex U.S. GAAP accounting issues and to prepare and review financial statements and related disclosures under U.S. GAAP; (ii) ineffective oversight of our financial reporting and internal control by those charged with governance; and (iii) inadequate design of internal control over the preparation of the financial statements being audited.

These material weaknesses remained as of June 30, 2026. As a result of inherent limitations, our internal control over financial reporting may not prevent or detect misstatements, errors or omissions.

Remediation of Material Weaknesses. To remediate the material weaknesses identified above, we have undertaken, and will continue to undertake, steps to strengthen our internal control over financial reporting, including:

(i) hiring additional qualified resources, including a financial controller equipped with relevant U.S. GAAP and SEC reporting experience and qualifications, to strengthen the financial reporting function and to establish a financial and system control framework;

(ii) implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel;

(iii) establishing effective oversight and clarifying reporting requirements for non-recurring and complex transactions to ensure that our consolidated financial statements and related disclosures are accurate, complete and in compliance with SEC reporting requirements;

(iv) engaging external accounting advisors and consultants to review complex and non-recurring transactions on a contemporaneous basis;

(v) establishing an internal audit function and reporting lines directly to the Audit Committee of our Board of Directors; and (vi) enhancing the Audit Committee’s oversight of the financial reporting process, including a defined review calendar with respect to the financial statement close process, the review of significant accounting judgments and estimates, and the review of related-party transactions.

However, these measures had not been fully implemented as of June 30, 2026, and we have concluded that the material weaknesses in our internal control over financial reporting had not been remediated as of June 30, 2026.Management will consider the material weaknesses remediated only when the relevant controls have been designed and implemented, have operated for a period of time sufficient for management to conclude, through testing, that such controls are operating effectively, and when no additional material weaknesses or significant deficiencies have been identified in the relevant processes. We expect the remediation measures described above to be substantially implemented during the fiscal year ending December 31, 2026, although we can provide no assurance that these measures will be completed within that period. The Audit Committee of our Board of Directors has been, and will continue to be, actively involved in overseeing the implementation of these remediation measures and will receive regular updates on their status.

(c) Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months period ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

(d) Attestation Report of the Registered Public Accounting Firm

This Amendment does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. As a smaller reporting company, our management’s report is not subject to attestation by our registered public accounting firm.

Investing in our common stock involves a high degree of risk. Before you invest you should carefully review our Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in Item 2 of Part I of this Quarterly Report on Form 10-Q, our consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and our consolidated financial statements and related notes, as well as our Management’s Discussion and Analysis of Financial Condition and Results of Operations and the other information in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. Readers should carefully review risks described in other documents we file from time to time with the Securities and Exchange Commission.

Our failure to timely file periodic reports has resulted in non-compliance with Nasdaq Listing Rule 5250(c)(1), and our common stock may be subject to delisting.

We failed to timely file our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026. As a result, Nasdaq notified us that we were not in compliance with Nasdaq Listing Rule 5250(c)(1), which requires the timely filing of periodic financial reports with the Securities and Exchange Commission.

We filed our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 on August 17, 2026 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 on August 28, 2026. However, because we had not filed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, Nasdaq notified us that we had incurred an additional delinquency. Nasdaq granted us an exception period requiring us to file this Quarterly Report on or before October 12, 2026.

Although we filed this Quarterly Report within the exception period granted by Nasdaq, there can be no assurance that Nasdaq will determine that we have regained compliance with Nasdaq Listing Rule 5250(c)(1), or that we will satisfy all other applicable Nasdaq continued listing requirements. If Nasdaq determines that our securities are subject to delisting, we may be required to appeal the determination to a Nasdaq Hearings Panel. There can be no assurance that any appeal would be successful or that Nasdaq would continue the listing of our common stock during the appeal process.

A delisting of our common stock from Nasdaq could materially reduce the liquidity and market price of our common stock, limit the availability of market quotations, result in our common stock being treated as a “penny stock,” increase transaction costs for investors, limit our ability to raise capital and adversely affect our business and financial condition.

Risks Related to Doing Business in China

Because all of our operations are in China, our business is subject to the complex and rapidly evolving laws and regulations there. 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.

As a business operating in China, we are subject to the laws and regulations of the PRC, which can be complex and evolve rapidly. The PRC government has the power to exercise significant oversight and discretion over the conduct of our business, and the regulations to which we are subject may change rapidly and with little notice to us or our shareholders. As a result, the application, interpretation, and enforcement of new and existing laws and regulations in the PRC are often uncertain. In addition, these laws and regulations may be interpreted and applied inconsistently by different agencies or authorities, and inconsistently with our current policies and practices. New laws, regulations, and other government directives in the PRC may also be costly to comply with, and such compliance or any associated inquiries or investigations or any other government actions may:

• delay or impede our development;
• result in negative publicity or increase our operating costs;
• required significant management time and attention; and
• subject us to remedies, administrative penalties and even criminal liabilities that may harm our business, including fines assessed for our current or historical operations, or demands or orders that we modify or even cease our business practices.

The promulgation of new laws or regulations, or the new interpretation of existing laws and regulations, in each case that restrict or otherwise unfavorably impact the ability or manner in which we conduct our business and could require us to change certain aspects of our business to ensure compliance, which could decrease demand for our products, reduce revenues, increase costs, require us to obtain more licenses, permits, approvals or certificates, or subject us to additional liabilities. To the extent any new or more stringent measures are required to be implemented, our business, financial condition and results of operations could be adversely affected as well as materially decrease the value of our Common Stock.

The Chinese government exerts substantial influence over the manner in which we must conduct our business activities. We are currently not required to obtain approval from Chinese authorities to list on U.S exchanges, however, if our holding company or subsidiaries were required to obtain approval or filing in the future and were denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange, which would materially affect the interest of the investors.

The Chinese government has exercised and can continue to exercise substantial control to intervene on virtually every sector of the Chinese economy through regulation and state ownership, and as a result, it can influence the manner in which we must conduct our business activities and effect material changes in our operations or the value of the common stock we are registering in this resale. Under the current government leadership, the government of the PRC has been pursuing reform policies which have adversely affected China-based operating companies whose securities are listed in the U.S., with significant policies changes being made from time to time without notice. There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including, but not limited to, the laws and regulations governing our business, or the enforcement and performance of our contractual arrangements with borrowers in the event of the imposition of statutory liens, death, bankruptcy or criminal proceedings. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, environmental regulations, land use rights, property and other matters. The central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditure and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.

Given recent statements by the Chinese government indicating an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, any such action could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or become worthless.

Recently, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Severely Cracking Down on Illegal Securities Activities According to Law, or the Opinions, which was made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems, will be taken to deal with the risks and incidents of China-concept overseas listed companies. As of the date hereof, we have not received any inquiry, notice, warning, or sanctions from PRC government authorities in connection with the Opinions.

On June 10, 2021, the Standing Committee of the National People’s Congress of China, or the SCNPC, promulgated the PRC Data Security Law, which took effect in September 2021. The PRC Data Security Law imposes data security and privacy obligations on entities and individuals carrying out data activities, and introduces a data classification and hierarchical protection system based on the importance of data in economic and social development, and the degree of harm it will cause to national security, public interests, or legitimate rights and interests of individuals or organizations when such data is tampered with, destroyed, leaked, illegally acquired or used. The PRC Data Security Law also provides for a national security review procedure for data activities that may affect national security and imposes export restrictions on certain data an information.

In early July 2021, regulatory authorities in China launched cybersecurity investigations with regard to several China-based companies that are listed in the United States. The Chinese cybersecurity regulator announced on July 2 that it had begun an investigation of Didi Global Inc. (NYSE: DIDI) and two days later ordered that the Company’s app be removed from smartphone app stores. On July 5, 2021, the Chinese cybersecurity regulator launched the same investigation on two other Internet platforms, China’s Full Truck Alliance of Full Truck Alliance Co. Ltd. (NYSE: YMM) and Boss of KANZHUN LIMITED (Nasdaq: BZ). On July 24, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly released the Guidelines for Further Easing the Burden of Excessive Homework and Off-campus Tutoring for Students at the Stage of Compulsory Education, pursuant to which foreign investment in such firms via mergers and acquisitions, franchise development, and variable interest entities are banned from this sector.

On August 17, 2021, the State Council promulgated the Regulations on the Protection of the Security of Critical Information Infrastructure, or the Regulations, which took effect on September 1, 2021. The Regulations supplement and specify the provisions on the security of critical information infrastructure as stated in the Cybersecurity Review Measures. The Regulations provide, among others, that protection department of certain industry or sector shall notify the operator of the critical information infrastructure in time after the identification of certain critical information infrastructure.

On August 20, 2021, the SCNPC promulgated the Personal Information Protection Law of the PRC, or the Personal Information Protection Law, which took effect in November 2021. As the first systematic and comprehensive law specifically for the protection of personal information in the PRC, the Personal Information Protection Law provides, among others, that (i) an individual’s consent shall be obtained to use sensitive personal information, such as biometric characteristics and individual location tracking, (ii) personal information operators using sensitive personal information shall notify individuals of the necessity of such use and impact on the individual’s rights, and (iii) where personal information operators reject an individual’s request to exercise his or her rights, the individual may file a lawsuit with a People’s Court.

As such, the Company’s business segments may be subject to various government and regulatory interference in the provinces in which they operate. The Company could be subject to regulation by various political and regulatory entities, including various local and municipal agencies and government sub-divisions. The Company may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure to comply. Additionally, the governmental and regulatory interference could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.

Furthermore, it is uncertain when and whether the Company will be required to obtain permission from the PRC government to list on

U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied or rescinded. Although the Company is currently not required to obtain permission from any of the PRC federal or local government to obtain such permission and has not received any denial to list on the U.S. exchange, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to its business or industry.

On February 17, 2023, the CSRC promulgated Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies (the “Overseas Listing Trial Measures”) and five relevant guidelines, which became effective on March 31, 2023.According to the Overseas Listing Trial Measures, PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure with the CSRC and report relevant information. The Overseas Listing Trial Measures provides that an overseas listing or offering is explicitly prohibited, if any of the following: (1) such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (2) the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance with law; (3) the domestic company intending to make the securities offering and listing, or its controlling shareholder(s) and the actual controller, have committed relevant crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three years; (4) the domestic company intending to make the securities offering and listing is currently under investigations for suspicion of criminal offenses or major violations of laws and regulations, and no conclusion has yet been made thereof; or (5) there are material ownership disputes over equity held by the domestic company’s controlling shareholder(s) or by other shareholder(s) that are controlled by the controlling shareholder(s) and/or actual controller.

The Overseas Listing Trial Measures also provides that if the issuer meets both the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed as indirect overseas offering by PRC domestic companies: (1) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its unaudited consolidated financial statements for the most recent fiscal year is accounted for by domestic companies; and (2) the issuer’s main business activities are conducted in China, or its main place(s) of business are located in China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in China. Where an issuer submits an application for initial public offering to competent overseas regulators, such issuer must file with the CSRC within three business days after such application is submitted. In addition, the Overseas Listing Trial Measures provide that the direct or indirect overseas listings of the assets of domestic companies through one or more acquisitions, share swaps, transfers or other transaction arrangements shall be subject to filing procedures in accordance with the Overseas Listing Trial Measures. The Overseas Listing Trial Measures also requires subsequent reports to be filed with the CSRC on material events, such as change of control or voluntary or forced delisting of the issuer(s) who have completed overseas offerings and listings.

At a press conference held for these new regulations (“Press Conference”), officials from the CSRC clarified that the domestic companies that have already been listed overseas on or before March 31, 2023 shall be deemed as existing issuers (the “Existing Issuers”). Existing Issuers are not required to complete the filling procedures immediately, and they shall be required to file with the CSRC upon occurrences of certain subsequent matters such as follow-on offerings of securities. According to the Overseas Listing Trial Measures and the Press Conference, the existing domestic companies that have completed overseas offering and listing before March 31, 2023, such as us, shall not be required to perform filing procedures for the completed overseas securities issuance and listing. However, from the effective date of the regulation, any of our subsequent securities offering in the same overseas market or subsequent securities offering and listing in other overseas markets shall be subject to the filing requirement with the CSRC within three working days after the offering is completed or after the relevant application is submitted to the relevant overseas authorities, respectively. If it is determined that any approval, filing or other administrative procedures from other PRC governmental authorities is required for any future offering or listing, we cannot assure you that we can obtain the required approval or accomplish the required filings or other regulatory procedures in a timely manner, or at all. If we fail to fulfill filing procedure as stipulated by the Trial Measures or offer and list securities in an overseas market in violation of the Trial Measures, the CSRC may order rectification, issue warnings to us, and impose a fine of between RMB1,000,000 and RMB10,000,000. Persons-in-charge and other persons that are directly liable for such failure shall be warned and each imposed a fine from RMB500,000 to RMB5,000,000. Controlling shareholders and actual controlling persons of us that organize or instruct such violations shall be imposed a fine from RMB1,000,000 and RMB10,000,000.

On February 24, 2023, the CSRC published the Provisions on Strengthening the Confidentiality and Archives Administration Related to the Overseas Securities Offering and Listing by Domestic Enterprises (the “Provisions on Confidentiality and Archives Administration”), which came into effect on March 31, 2023. The Provisions on Confidentiality and Archives Administration requires that, in the process of overseas issuance and listing of securities by domestic entities, the domestic entities, and securities companies and securities service institutions that provide relevant securities service shall strictly implement the provisions of relevant laws and regulations and the requirements of these provisions, establish and improve rules on confidentiality and archives administration. Where the domestic entities provide with or publicly disclose documents, materials or other items related to the state secrets and government work secrets to the relevant securities companies, securities service institutions, overseas regulatory authorities, or other entities or individuals, the companies shall apply for approval of competent departments with the authority of examination and approval in accordance with law and report the matter to the secrecy administrative departments at the same level for record filing. Where there is unclear or controversial whether or not the concerned materials are related to state secrets, the materials shall be reported to the relevant secrecy administrative departments for determination. However, there remain uncertainties regarding the further interpretation and implementation of the Provisions on Confidentiality and Archives Administration.

As of the date of this report, we and our PRC subsidiaries have obtained the requisite licenses and permits from the PRC government authorities that are material for the business operations of our PRC subsidiaries. In addition, as of the date of this report, we and our PRC subsidiaries are not required to obtain approval or permission from the CSRC or the CAC or any other entity that is required to approve our PRC subsidiaries’ operations or required for us to offer securities to foreign investors under any currently effective PRC laws, regulations, and regulatory rules. If it is determined that we are subject to filing requirements imposed by the CSRC under the Overseas Listing Regulations or approvals from other PRC regulatory authorities or other procedures, including the cybersecurity review under the revised Cybersecurity Review Measures, for our future offshore offerings, it would be uncertain whether we can or how long it will take us to complete such procedures or obtain such approval and any such approval could be rescinded. Any failure to obtain or delay in completing such procedures or obtaining such approval for our offshore offerings, or a rescission of any such approval if obtained by us, would subject us to sanctions by the CSRC or other PRC regulatory authorities for failure to file with the CSRC or failure to seek approval from other government authorization for our offshore offerings. These regulatory authorities may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from our offshore offerings into China or take other actions that could materially and adversely affect our business, financial condition, results of operations, and prospects, as well as the trading price of our common stock. The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to halt our offshore offerings before settlement and delivery of the securities offered. Consequently, if investors engage in market trading or other activities in anticipation of and prior to settlement and delivery, they do so at the risk that settlement and delivery may not occur. In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for our prior offshore offerings, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our common stock.

In addition, on December 28, 2021, the CAC, the National Development and Reform Commission (“NDRC”), and several other administrations jointly issued the revised Measures for Cybersecurity Review, or the Revised Review Measures, which became effective and has replaced the existing Measures for Cybersecurity Review on February 15, 2022. According to the Revised Review Measures, if an “online platform operator” that is in possession of personal data of more than one million users intends to list in a foreign country, it must apply for a cybersecurity review. Based on a set of Q&A published on the official website of the State Cipher Code Administration in connection with the issuance of the Revised Review Measures, an official of the said administration indicated that an online platform operator should apply for a cybersecurity review prior to the submission of its listing application with non-PRC securities regulators. Given the recency of the issuance of the Revised Review Measures and their pending effectiveness, there is a general lack of guidance and substantial uncertainties exist with respect to their interpretation and implementation. For example, it is unclear whether the requirement of cybersecurity review applies to follow-on offerings by an “online platform operator” that is in possession of personal data of more than one million users where the offshore holding company of such operator is already listed overseas. Furthermore, the CAC released the draft of the Regulations on Network Data Security Management in November 2021 for public consultation, which among other things, stipulates that a data processor listed overseas must conduct an annual data security review by itself or by engaging a data security service provider and submit the annual data security review report for a given year to the municipal cybersecurity department before January 31 of the following year. If the draft Regulations on Network Data Security Management are enacted in the current form, we, as an overseas listed company, will be required to carry out an annual data security review and comply with the relevant reporting obligations.

If the Chinese government chooses to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, such action could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.

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. PRC has recently proposed new rules that would require companies collecting or holding large amounts of data to undergo a cybersecurity review prior to listing in foreign countries, a move that would significantly tighten oversight over China-based internet giants. On January 4, 2022, the Cyberspace Administration of China, or CAC, issued the revised Measures on Cyberspace Security Review (the “Revised Measures”), which came into effect on February 15, 2022. Under the Revised Measures, any “network platform operator” controlling personal information of no less than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review. Pursuant to the Revised Measures, companies holding data on more than 1 million users must now apply for cybersecurity approval when seeking listings in other nations due to the risk that such data and personal information could be “affected, controlled, and maliciously exploited by foreign governments.”

Our business belongs to the chemical industry in China, which does not involve the collection of user data, implicate cybersecurity, or involve any other type of restricted industry. Based on the advice of PRC counsel and our understanding of currently applicable PRC laws and regulations, listing of our common stock in the U.S. is not subject to the review or prior approval of the Cyberspace Administration of China (the “CAC”) or the China Securities Regulatory Commission (the “CRSC”). Uncertainties still exist, however, due to the possibility that laws, regulations, or policies in the PRC could change rapidly in the future. Any future action by the PRC government expanding the categories of industries and companies whose foreign securities offerings are subject to review by the CRSC or the CAC 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.

The occurrence of security breaches and cyber-attacks could negatively impact our business.

Information technology systems are important to our business and operations. We are subject to attempts to compromise our security and information systems, including denial of service attacks, viruses, malicious software or ransomware, and exploitations of system flaws or weaknesses. Error or malfeasance or other irregularities may also result in the failure of our or our third-party service providers’ cybersecurity measures and may give rise to a cybersecurity incident. The techniques used to conduct security breaches and cyber-attacks, as well as the sources and targets of these attacks, change frequently and may not be recognized until launched against us or our third-party service providers. We or our third-party service providers may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks. The primary risks that could directly result from the occurrence of security breaches and cyber-attacks include operational interruption, financial losses, personal information leakage and non-compliance. The occurrence of such incidents could negatively impact our business operations and our relationships with customers and employees, and damage our reputation. If we or our third-party service providers are unable to avert security breaches and cyber- attacks, we could incur significantly higher costs, including remediation costs to repair damage caused by the breach, costs to deploy additional personnel and network protection technologies, train employees and engage third-party experts and consultants, as well as litigation costs resulting from the incident. These costs, which could be material, could adversely impact our results of operations in the period in which they are incurred and may not meaningfully limit the success of future attempts to breach our information technology systems.

Uncertainties with respect to the PRC legal system could adversely affect us.

The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have limited precedential value.

In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters generally. The overall effect of legislation over the past three decades has significantly enhanced the protections afforded to various forms of foreign investments in the PRC. However, the PRC has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in the PRC. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy. These uncertainties may affect our judgment on the relevance of legal requirements and our ability to enforce our contractual rights or tort claims. In addition, these regulatory uncertainties may be exploited through unmerited or frivolous legal actions or threats in attempts to extract payments or benefits from us.

Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have a retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until some time after the violation. In addition, any administrative and court proceedings in the PRC may be protracted, resulting in substantial costs and diversion of resources and management attention.

If the Chinese government were to impose new requirements for approval from the PRC Authorities to issue our common stock to foreign investors or list on a foreign exchange, such action could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.

We face various legal and operational risks and uncertainties associated with having our operations in China and the complex and evolving PRC laws and regulations. The PRC government has significant authority in regulating our operations and may intervene or influence our operations at any time, which could result in a material adverse change in our operations and the value of our securities. The PRC government has recently indicated its intent to exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers. Such actions could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. The General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the “Opinions on Severely Cracking Down on Illegal Securities Activities According to Law,” or the Opinions, which were made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Given the current PRC regulatory environment, it is uncertain when and whether we or our PRC subsidiaries, will be required to obtain permission from the PRC government to list on U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied or rescinded. We have been closely monitoring regulatory developments in China regarding any necessary approvals from the CSRC or other PRC governmental authorities required for overseas listings. As of the date of this annual report, we have not received any inquiry, notice, warning, sanctions or regulatory objection to listing on U.S. exchange from the CSRC or other PRC governmental authorities. However, there remains significant uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities. For more details, see “Item 1A. Risk Factors - Risks Related to Doing Business in China”

On February 17, 2023, the CSRC released the Trial Administrative 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. Currently, we and our PRC subsidiaries are not required to file for a cybersecurity review by the Cyberspace Administration of China, or the CAC, for our past issuance of securities to investors and maintaining our listing status on the Nasdaq, since our company already listed on Nasdaq before promulgation of the Trial Measures is not required to file for a cybersecurity review by the CAC to maintain our listing status on the Nasdaq Stock Market LLC, or the Nasdaq on which our securities have been listed. Even though we are not required to complete the filing procedures with the CSRC for our historical issuance of securities, we may be required by the Trial Measures to file with the CSRC in connection with future securities offerings and listings outside of mainland China, including follow-on offerings, issuance of convertible bonds, offshore relisting after going-private transactions, and other equivalent offering activities. There remain substantial uncertainties about the interpretation, application and implementation of the laws and regulations relating to the CSRC filing and CAC cybersecurity review. If we fail to obtain any requisite approvals with respect to future offerings ofour equity securities to foreign investors, or if we inadvertently conclude that such permissions or approvals are not required, or if the applicable laws, regulations or interpretations thereof change and we become subject to the requirement of additional permissions or approvals in the future, our ability to execute our financing and equity offering plans may be significantly limited or completely hindered. Any lack of or failure to maintain requisite approvals, licenses or permits applicable to us or our PRC subsidiaries may have a material adverse impact on our business, results of operations, financial condition and prospects, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, and cause the value of our securities to significantly decline or become worthless.

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.

The Holding Foreign Companies Accountable Act, or HFCAA, was enacted on December 18, 2020, as amended by the Consolidated Appropriations Act, 2023. The HFCAA states if the SEC determines that a company has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit such ordinary shares from being traded on a national securities exchange or in the over-the-counter trading market in the U.S.

The Holding Foreign Companies Accountable Act, or HFCAA, was enacted on December 18, 2020, as amended by the Consolidated Appropriations Act, 2023. The HFCAA states if the SEC determines that a company has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit such ordinary shares from being traded on a national securities exchange or in the over-the-counter trading market in the U.S.

On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCAA. A company will be required to comply with these rules if the SEC identifies it as having a “non inspection” year under a process to be subsequently established by the SEC. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which was signed into law on December 29, 2022, 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.

As of the date of this annual report, the PCAOB has not issued any new determination that it is unable to inspect or investigate completely registered public accounting firms headquartered in any jurisdiction. As a result, we do not expect to be identified as a “Commission-Identified Issuer” under the HFCAA for the fiscal year ended December 31, 2024, after we filed our annual report on Form 10-K for such fiscal year. On December 29, 2022, the Consolidated Appropriations Act, 2023, was signed into law, which amended the HFCAA (i) to reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two, and (ii) so that any foreign jurisdiction could be the reason why the PCAOB does not have complete access to inspect or investigate a company’s auditors. As it was originally enacted, the HFCAA applied only if the PCAOB’s inability to inspect or investigate because of a position taken by an authority in the foreign jurisdiction where the relevant public accounting firm is located. As a result of the Consolidated Appropriations Act2023, the HFCAA now also applies if the PCAOB’s inability to inspect or investigate the relevant accounting firm is due to a position taken by an authority in any foreign jurisdiction. The denying jurisdiction does not need to be where the accounting firm is located. However, whether the PCAOB will be able to continue to conduct inspections and investigations completely to its satisfaction of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong are subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control, including positions taken by authorities of the PRC. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions. If PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland China and Hong Kong and we continue to use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the SEC, we would be identified as a Commission-Identified Issuer following the filing of the annual report on Form 10-K for the relevant fiscal year. There can be no assurance that we would not be identified as a Commission-Identified Issuer for any future fiscal year, and if we were identified for two consecutive years, we would become subject to the prohibition on trading under the HFCAA.

Our auditor, GGF CPA LTD, Certified Public Accountants, the independent registered public accounting firm that issued the audit report included in our annual report, an auditor of companies that are traded publicly in the United States and a China-based accounting firm registered with the PCAOB, 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 based in the China and is subject to inspection by the PCAOB on a regular basis.

However, 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.

Because the majority of our operations are in mainland China and our auditor has been located in mainland China, a jurisdiction where the U.S. Public Company Accounting Oversight Board (“PCAOB”) is currently unable to conduct inspections without the approval of Chinese authorities, there have been concerns regarding oversight of the audits of our financial statements filed with the SEC. If the PCAOB continues to be unable to inspect our audit firm in the PRC for three consecutive years, the HFCAA requires the SEC to prohibit the trading of our securities on a national securities exchange, including Nasdaq, or on over-the- counter markets in the United States.

In addition, the U.S. Senate and U.S. House of Representatives have each passed bills, which, if enacted, would decrease the number of non-inspection years from three consecutive years to two, thus reducing the time period before our securities may be prohibited from trading on a U.S. securities exchange or delisted from Nasdaq. The foregoing could adversely affect the market price of our securities and our ability to raise capital effectively.

Auditors of companies that are registered with the SEC and traded publicly in the United States, including our independent registered public accounting firm, are required to be registered with the PCAOB and to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United States and applicable professional standards. Because our current auditor is located in mainland China, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of Chinese authorities, our auditor is not currently inspected by the PCAOB.

PCAOB inspections of auditors located outside of mainland China and Hong Kong have at times identified deficiencies in those auditors’ audit procedures and quality control procedures, which may be addressed as part of the PCAOB’s inspection process to improve future audit quality. The lack of PCAOB inspections of audit work undertaken in mainland China and Hong Kong prevents the PCAOB from regularly evaluating our auditor’s audits and its quality control procedures. As a result, investors are deprived of the benefits of PCAOB inspections, which could result in limitations or restrictions on our access to the U.S. capital markets.

Furthermore, in recent years, the U.S. Congress and regulatory authorities have continued to express concerns about challenges in their oversight of financial statement audits of U.S.-listed companies with significant operations in China. As part of this continued focus on access to audit and other information currently protected by national law, in particular under Chinese law, the United States enacted the HFCAA in December 2020. The HFCAA requires the SEC to identify issuers that have filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB has determined it is unable to inspect or investigate completely because of a restriction imposed by a non-U.S. authority in the auditor’s local jurisdiction (a “Commission-Identified Issuer”). Under the HFCAA, if the SEC conclusively identifies an issuer as a Commission-Identified Issuer for three consecutive years, the SEC is required to prohibit the trading of the issuer’s securities on a national securities exchange or through any other method that is within the jurisdiction of the SEC to regulate, including over-the counter markets in the United States. Our securities may be prohibited from trading on the Nasdaq or other U.S. stock exchanges if our auditor is not inspected by the PCAOB for three consecutive years, and this ultimately could result in our securities being delisted.

Furthermore, in June 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (“AHFCAA”),which, if enacted, would amend the HFCAA and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years (as opposed to the three years under the HFCAA). In February 2022, the U.S. House of Representatives passed the America Creating Opportunities for Manufacturing Pre-Eminence in Technology and Economic Strength (COMPETES) Act of 2022 (the “America COMPETES Act”), which similarly would amend the HFCAA to shorten the number of non-inspection years from three years to two years. The America COMPETES Act, however, includes a broader range of legislation than the AHFCA Act in response to the U.S. Innovation and Competition Act passed by the U.S. Senate in 2021. The U.S. House of Representatives and the U.S. Senate will need to agree on amendments to these respective bills to allow the legislature to pass their amended bills before the President can sign the bill into law. It is unclear if or when either of these bills will be signed into law.

In September 2021, the PCAOB adopted PCAOB Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable Act, which provides a framework for the PCAOB to use when determining whether the PCAOB is unable to inspect or investigate completely a registered public accounting firm located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction for the purposes of the HFCAA. PCAOB Rule 6100 establishes the manner of the PCAOB’s determinations; the factors the PCAOB will evaluate and the documents and information it will consider when assessing whether a determination is warranted; the form, public availability, effective date, and duration of such determinations; and the process by which the PCAOB will reaffirm, modify or vacate any such determinations. In November 2021, the SEC announced that it had approved Rule6100. In December 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements int he HFCAA for Commission-Identified Issuers, which became effective on January 10, 2022. In addition, the PCAOB issued a Determination Report, pursuant to PCAOB Rule 6100, which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong because of positions taken by Chinese authorities in those jurisdictions. The SEC began to identify Commission- Identified Issuers for fiscal years beginning after December 18, 2020. A Commission-Identified Issuer will be required to comply with the submission and disclosure requirements in the annual report for each year in which it was so identified. If an issuer is identified as a Commission-Identified Issuer based on its annual report for the fiscal year ended December 31, 2021, the issuer will be required to comply with the submission or disclosure requirements in its annual report for the fiscal year ended December 31, 2022. If we are identified as a Commission-Identified Issuer that uses an auditor not subject to PCAOB inspection for three consecutive years, or, if the AHFCAA or the America COMPETES Act is passed, two consecutive years, our securities may be delisted from Nasdaq as a result. Delisting of our securities would force holders of our securities to sell their securities. Further, we may be prohibited from listing our securities on another U.S. securities exchange, making our shares harder to trade for the investors, potentially reducing demand and lowering our share price. The market price of our securities could be adversely affected as a result of anticipated negative impacts of such legislative or executive actions upon, as well as negative investor sentiment toward, companies with significant operations in mainland China and Hong Kong that are listed in the United States, regardless of whether such actions are implemented and regardless of our actual operating performance.

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