Company: GURE
Filing Date: 2025-08-13
Form Type: 10-Q
Source: 0001193805-25-001184
Chunk: 19

Company: GULF RESOURCES, INC.
Filing Date: 2025-08-13
Form: 10-Q
Item: Item 1
Chunk 19
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 cash flows is translated at average rate during the reporting period, with the exception of the consideration paid for
the acquisition of business which is translated at historical rates.

(n)  Foreign
Operations

All of the Company’s operations and assets
are located in PRC.  The Company may be adversely affected by possible political or economic events in this country.  The
effect of these factors cannot be accurately predicted.

(o)  Inventories

Inventories are stated at the lower of cost, determined
on a first-in first-out cost basis, or net realizable value. Costs of work-in-progress and finished goods comprise direct materials, direct
labor and an attributable portion of manufacturing overhead. Net realizable value is based on estimated selling price less costs to complete
and selling expenses.

(p)  Leases

The Company determines if an arrangement is a
lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities
in the consolidated balance sheets. Finance leases are included in finance lease ROU assets and finance lease liabilities in the consolidated
balance sheets.

ROU assets represent the Company’s right
to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising
from the lease. Operating lease and finance lease ROU assets and liabilities are recognized at January 1, 2019 based on the present value
of lease payments over the lease term discounted using the rate implicit in the lease. In cases where the implicit rate is not readily
determinable, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the
present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company does not recognize operating lease
ROU assets and liabilities arising from lease arrangements with lease term of twelve months or less.

    11 

GULF RESOURCES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2025

 (Expressed in U.S. dollars)

(UNAUDITED)

(q)  Stock-based
Compensation

Stock-based awards issued to employees are recorded
at their fair values estimated at grant date using the Black-Scholes model and the portion that is ultimately expected to vest is recognized
as compensation cost over the requisite service period. Consistent with the accounting