☒ ~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.~~

☐~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.~~

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File to be submitted posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

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

As of ~~November 10, 2021,~~May 13, 2022, the registrant had ~~31,811,523~~32,039,035 shares of common stock issued and ~~outstanding.~~outstanding

Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements include, among others, those statements including the words “believes”, “anticipates”, “expects”, “intends”, “estimates”, “plans” and words of similar import. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Forward-looking statements are based on our current expectations and assumptions regarding our business, potential target businesses, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include changes in local, regional, national or global political, economic, business, competitive, market (supply and demand) and regulatory conditions.

A description of these and other risks and uncertainties that could affect our business appears in the section captioned “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 which we filed with the Securities and Exchange Commission (“SEC”) on April 15, 2022 (the “Annual Report”). The risks and uncertainties described under “Risk Factors” are not exhaustive.

Given these uncertainties, readers of this Quarterly Report on Form 10-Q (“Quarterly Report”) are cautioned not to place undue reliance on such forward-looking statements. We disclaim any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States and the rules of the SEC, and should be read in conjunction with the audited financial statements and notes thereto contained in our Annual Report, as updated in subsequent filings we have made with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~Notes to Condensed Consolidated Financial Statements (Unaudited)

Wetouch Technology Inc. (“Wetouch”, or the “Company”), ~~or “we”~~formerly known as Gulf West Investment Properties, Inc., was originally incorporated in August 1992, under the laws of the state of Nevada.

On October 9, 2020, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) with Wetouch Holding Group Limited (“BVI Wetouch”) and all the shareholders of BVI Wetouch (each, a “BVI Shareholder” and collectively the “BVI Shareholders”), to acquire all the issued and outstanding capital stock of BVI Wetouch in exchange for the issuance to the BVI Shareholders an aggregate of 28,000,000 shares of our common stock (the “Reverse Merger”). In the Reverse Merger, each ordinary share of BVI Wetouch was exchanged for 2,800 shares of common stock of Wetouch. Immediately after the closing of the Reverse Merger on October 9, 2020, we had a total of 31,396,394 issued and outstanding shares of common stock. As a result of the Reverse Merger, BVI Wetouch is now our wholly-owned subsidiary.

Wetouch Holding Group Limited (“BVI Wetouch”), is a holding company ~~that~~whose only asset, held through a subsidiary, is ~~incorporated in Nevada, United States. Through a reverse merger and a series~~100% of ~~transactions, Wetouch acquired~~ ~~100% equity interest~~the registered capital of Sichuan Wetouch Technology Co., Ltd. (“Sichuan Wetouch”).

For accounting purpose, the acquisition was accounted for as a reverse acquisition with Wetouch (the legal acquirer) identified as the accounting acquiree and Sichuan Wetouch (the legal acquiree) identified as the accounting acquirer. Sichuan Wetouch is, a limited liability company ~~established~~organized under the laws of the People’s Republic of China (“~~PRC”~~China” or “PRC”).

Sichuan Wetouch ~~through its subsidiaries,~~ is primarily engaged in the business of research development, manufacture, ~~and~~ distribution of touchscreen displays to customers both in PRC and ~~overseas through its subsidiaries.~~overseas. The touchscreen products, which are manufactured by the Company, are primarily for use in the computer components.

The ~~Company’s operations are primarily conducted through its subsidiaries~~Reverse Merger was accounted for as a recapitalization effected by a share exchange, wherein BVI Wetouch is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of BVI Wetouch have been brought forward at their book value and no goodwill has been recognized. The number of shares, par value amount, and additional paid-in capital in the ~~PRC. The Company’s other subsidiaries in British Virgin Islands (“BVI”), and Hong Kong, do not have significant operations.~~prior years are retrospectively adjusted according.

Wetouch Holding Group Limited (“BVI Wetouch”)~~), is~~ was incorporated under the ~~sole stockholder~~laws of British Virgin Islands on August 14, 2020. It became the holding company of Hong Kong Wetouch Electronics Technology Limited (“Hong Kong Wetouch”) ~~and~~ on September 11, 2020.

Hong Kong Wetouch Technology Limited (“HK Wetouch”)., was incorporated as a holding company under the laws of Hong Kong Special Administrative Region (“SAR”) on December 3, 2020. On March 2, 2021, HK Wetouch acquired all shares of Hong Kong Vtouch. Due to the fact that Hong Kong Wetouch and HK Wetouch are both under the same sole stockholder, the acquisition is accounted for under common control.

~~Pursuant~~In June 2021, Hong Kong Wetouch completed its dissolution process pursuant to ~~local PRC government guidelines on local environmental issues and~~ the ~~national overall plan,~~ minutes of its special shareholder meeting.

Sichuan Wetouch ~~is under~~Technology Co. Ltd. (“Sichuan Wetouch”) was formed on May 6, 2011 in the ~~government directed relocation order to relocate no later than December 31, 2021~~People’s Republic of China (“PRC”) and ~~received compensation accordingly.~~became Wholly Foreign-Owned Enterprise in PRC on February 23, 2017. On July 19, 2016, Sichuan Wetouch was 100% held by HK Wetouch.

On December 30, 2020, Sichuan Vtouch Technology Co., Ltd. (“Sichuan Vtouch”) was incorporated in Chengdu, Sichuan, under the laws of the People’s Republic of ~~China in~~China.

In March 2021, pursuant to local PRC government guidelines on local environmental issues and the national overall plan, Sichuan Wetouch was under the government directed relocation order, and started its dissolution process which is estimated to ~~take~~be completed by the second quarter of 2022. Sichuan Vtouch took over the operating business of Sichuan ~~Wetouch, with HK Wetouch as its sole shareholder.~~Wetouch.

~~On March 2, 2021,~~As a result of the above restructuring, HK Wetouch ~~acquired all shares~~became the sole shareholder of ~~Hong Kong Wetouch. Due to the fact that Hong Kong Wetouch and HK Wetouch are both under the same sole stockholder, the acquisition is accounted for under common control.~~Sichuan Vtouch.

~~On June 18, 2021, Hong Kong Wetouch started its dissolution process pursuant to the minutes of its special shareholder meeting.~~

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted as permitted by rules and regulations of the United States Securities and Exchange Commission (“SEC”). The condensed consolidated balance sheet as of December 31, ~~2020~~2021 was derived from the audited consolidated financial statements of Wetouch. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated balance sheet of the Company as of December 31, ~~2020,~~2021, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended.

In the opinion of the management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the financial position as of ~~September 30, 2021,~~March 31, 2022, the results of operations and cash flows for the ~~nine-month~~three-month periods ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ have been made. However, the results of operations included in such financial statements may not necessary be indicative of annual results.

The preparation of condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the related disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

On an ongoing basis, management evaluates the Company’s estimates, including those related to the bad debt allowance, fair values of financial instruments, intangible assets and property and equipment, income taxes, and contingent liabilities, among others. The Company bases its estimates on assumptions, both historical and forward looking, that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

For a detailed discussion about Wetouch’s significant accounting policies, refer to Note 2 — “Summary of Significant Accounting Policies,” in Wetouch’s consolidated financial statements included in ~~the~~ Company’s ~~2020~~2021 audited consolidated financial statements. During the three-month ~~and nine-month~~ periods ended ~~September 30, 2021,~~March 31, 2022, there were no significant changes made to Wetouch significant accounting policies.

The Company’s accounts receivable primarily includes balance due from customers when the Company’s products are sold and delivered to customers.

Depreciation expense was ~~US$~~$~~2,477~~2,622 and $~~244,592~~260,943 for the three-month period ~~September 30,~~ended March 31, 2022 and 2021, ~~and 2020, respectively, and $263,873~~ ~~and $725,708~~ ~~for the nine-month period ended September 30, 2021 and 2020,~~ respectively.

Pursuant to local PRC government guidelines on local environment issues and the national overall plan, Sichuan Wetouch is under the government directed relocation order to relocate no later than December 31, 2021 and received compensation accordingly. On March 18, 2021, pursuant to the agreement with the local government and an appraisal report issued by a mutual agreed appraiser, Sichuan Wetouch received a compensation of RMB115.2 million ($~~17.9~~18.2 million) (“Compensation Funds”) for the withdrawal of the right to use of state-owned land and the demolition of all buildings, facilities, equipment and all other appurtenances on the land. During the ~~nine-month period~~year ended ~~September 30,~~December 31, 2021, the Company recorded a gain of $~~7,625,279~~7,611,646 for the asset ~~disposal including intangible assets.~~disposal.

On March 16, 2021, in order to minimize interruption of our business, Sichuan Vtouch entered into a leasing agreement with Sichuan Renshou Shigao Tianfu Investment Co., Ltd., a limited company owned by the local government, to lease the property, and all buildings, facilities and equipment thereon (“Demised Properties) of Sichuan Wetouch, commencing from April 1, 2021 until December 31, 2021 at a monthly rent of RMB300,000 ($~~46,367~~47,261) , and renewed on December 31, 2022 at a monthly rent of RMB 400,000 ($63,015) from January 1, 2022 till October 31, 2022 for the use of the Demised Properties.

~~Amortization expense was nil and $14,653~~ ~~for the three-month period ended September 30, 2021 and 2020, respectively, and $113,562~~ ~~and $43,471~~ for the nine-month period ended September 30, 2021 and 2020, respectively. The Company accelerated the amortization expense for the three-month period ended March 31, 2021 due to the relocation pursuit to the Compensation Fund agreement with the local government. See Note 4. As the Company plans to deregister Sichuan Wetouch and the newly set up Sichuan Vtouch will use new techniques with new equipment, the Company estimates no remaining useful life for the existing patents.

~~The~~During the three-month period ended March 31, 2021, the Company ~~sells~~sold capacitive touchscreens to Chengdu Wetouch and Meishan Wetouch from time to time. There ~~are~~were no written agreements between the Company and Meishan Wetouch. Mr. Guangde Cai, Chairman and director of the Company and our indirect majority shareholder, owns 94% and 95% of Chengdu Wetouch and Meishan Wetouch, respectively.

Amounts due to related parties are as follows:

SCHEDULE OF RELATED PARTY TRANSACTIONS

Relationship
September 30,
2021

December 31,
2020
Note
Chengdu Wetouch Technology Co., Ltd (“Chengdu Wetouch”) 94% owned by Mr. Guangde Cai & 2% by Mr. Shengyong Li $ - $ 134,616 Operating expense paid on behalf of the Company
Meishan Vtouch Electronics
Technology Co., Ltd. 95% owned by Mr. Guangde Cai and 5% by Chengdu Wetouch - 68,402 Operating expense paid on behalf of the Company
Chengdu Vtouch Intelligence Science & Technology Co., Ltd. 100% owned by HK Vtouch Holding Group Co., Ltd. - - Operating expenses paid on behalf of the Company
Mr. Guangde Cai Chairman and CEO of the Company - 326,042 Payable to employee
Total $ - $ 529,060

	Relationship	March 31, 2022		December 31, 2021		Note
Mr. Zongyi Lian	President and CEO of the Company	$	1,811	$	1,802	Payable to employee
Mr. Guangde Cai	Chairman of the Company		33,022		32,867	Payable to employee
Total		$	34,833	$	34,669

F-8

NOTE ~~8 -~~7 — INCOME TAXES

Wetouch

Wetouch Technology Inc. is subject to a tax rate of 2121%% per beginning 2018, and files a U.S. federal income tax return.

BVI Wetouch

Under the current laws of the British Virgin Islands, BVI Wetouch, ~~subsidiary~~subsidiaries of Wetouch, is not subject to tax on its income or capital gains. In addition, no British Virgin Islands withholding tax will be imposed upon the payment of dividends by the Company to its shareholders.

Hong Kong

HK Wetouch is incorporated in Hong Kong and is subject to profit taxes in Hong Kong at a progressive rate of 16.5%.

~~F-9~~

PRC

Sichuan Wetouch and Sichuan Vtouch files income tax returns in the PRC. Effective from January 1, 2008, the PRC statutory income tax rate is 25% according to the Corporate Income Tax (“CIT”) Law which was passed by the National People’s Congress on March 16, 2007.

Under PRC CIT Law, domestic enterprises and Foreign Investment Enterprises (“FIEs”) are usually subject to a unified 25% enterprise income tax rate while preferential tax rates, tax holidays and even tax exemption may be granted on a case-by-case basis by local government as preferential tax treatment to High and New Technology Enterprises (“HNTEs”). Under this preferential tax treatment, HNTEs are entitled to an income tax rate of 15%, subject to a requirement that they re-apply for their HNTE status every three years. Pursuant to an approval from the local tax authority in October 2017, Sichuan Wetouch became a qualified enterprise located in the western region of the PRC, entitled it to a preferential income tax rate of 15% from October 11, 2017 to October 11, 2020.

On October 21, 2020, Sichuan Wetouch was granted on a case-by-case basis by Sichuan Provincial government as preferential tax treatment High and New Technology Enterprises (“HNTEs”), entitled to a reduced income tax rate of 15% beginning October 21, 2020 until October 20, ~~2023.~~2023.

Sichuan Vtouch is entitled to 25% of income tax rate.

The effective income tax rates for the ~~nine-month~~three-month periods ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were ~~20.6~~28.1% and ~~12.2~~13.9%, respectively. The effective income tax rate for the ~~nine-month~~three-month period ended ~~September 30,~~March 31, 2022 and 2021 differs from the PRC statutory income tax rate of 25% primarily due to non deductible expenses of $160,443 resulting from gain of changes in fair value of Common Stock Purchase Warrants for the three-month periods ended March 31, 2022, and Sichuan Wetouch’s preferential income tax ~~rate.~~rate for the same period of the last year, respectively.

The estimated effective income tax rate for the year ended December 31, ~~2021~~2022 would be similar to actual effective tax rate of the ~~nine-month~~three-month periods ended ~~September 30, 2021.~~March 31, 2022.

F-9

NOTE 9-8— ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

SCHEDULE OF ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

	September 30, 2021		December 31, 2020		March 31, 2022		December 31, 2021
Advance from customers	$	132,521	$	9,493	$	77,123	$	59,111
Accrued payroll and employee benefits		99,194		105,801		99,826		99,342
Other tax payable (i)		-		325,719
Accrued interest expenses						64,311		20,795
Other tax payables (i)						332,183		-
Others (ii)		92,600		62,442		202,758		131,159
Accrued expenses and other current liabilities	$	324,315	$	503,455	$	776,201	$	310,407

(i)

Other tax payables are mainly value added tax payable.

(ii)

Others mainly represent accrued employee reimbursement payable and other accrued miscellaneous operating expenses.

NOTE ~~10-~~9 – ~~DEFERRED GRANTS~~CONVERTIBLE PROMISSORY NOTES PAYABLE

~~On January 14, 2013~~a) Convertible promissory notes

In October, November, and ~~January~~December 2021, the Company, issued seven (7) convertible promissory notes of US$2,250,000 aggregate principal amount, due in one year (the ‘Notes’) with issuance price discounted 90.0%. The Notes bear interest at a rate of 8.0% per annum, payable in one year and will mature on October 27, ~~2014, Sichuan Wetouch received RMB~~November 5, November 16, November 29 and December 2 of 2022. Net proceeds after debt issuance costs and debt discount were approximately US$~~11.2~~1,793,000. Debt issuance costs in the amount of US$162,000 ~~million (equivalent to US$1.8~~ ~~million)~~are recorded as deferred charges and ~~RMB4.8~~ ~~million (equivalent to US$0.8~~ ~~million) government subsidies, respectively, from Sichuan Provincial Government~~included in ~~supporting~~ the ~~initial set-up~~other current assets on the consolidated balance sheet. The debt discount and ~~construction of its production facility. The Company completed~~debt issuance costs are amortized into interest expense using the ~~construction~~effective interest method over the terms of the ~~plant in June 2013 and there were no other unfulfilled conditions and/or other contingencies attaching to government assistance which has been recognized as income.~~Notes.

~~Since the funding is related to the construction~~The details of ~~long-term assets, the amounts were recognized~~convertible notes are as government grant, which is included in deferred grants on the consolidated balance sheets, and to be recognized as other income in the consolidated statements of comprehensive income (loss) over the periods and in the proportions in which depreciation expense on the long-term assets is recognized.follows:

~~During~~Unless the ~~nine-month period ended September 30, 2021,~~Notes are converted, the principal amounts of the Notes, and accrued interest at the rate of 8% per annum, are payable on the one-year anniversary of the issuance of the Notes (the “Maturity Date”). If the Company ~~recognized~~fails to satisfy its loan obligation by the ~~remaining balance~~Maturity Date, the default interest rate will be 16%.

The Lenders have the right to convert any or all of ~~deferred grant as income due~~the principal and accrued interest on the Notes into shares of common stock of the Company on the earlier of (i) 180 calendar days after the issuance date of the Notes or (ii) the closing of a listing for trading of the common stock of the Company on a national securities exchange offering resulting in gross proceeds to the ~~government directed relocation order disclosed~~Company of $15,000,000 or more (an “Uplist Offering”). If the Company closes an Uplist Offering on or before the 180^th calendar date after the issuance date of the Notes, the conversion price shall be 70% of the per share offering price in ~~Note 4.~~the Uplist Offering; otherwise, the conversion price is $0.75 per share.

Subject to customary exceptions, if the Company issues shares or any securities convertible into shares of common stock at an effective price per share lower than the conversion price of the Notes, the conversion rate of the Notes shall be reduced to such lower price.

Until the Notes are either paid or converted in their entirety, the Company agreed with the Lenders not to sell any securities convertible into shares of common stock of the Company (i) at a conversion price that is based on the trading price of the stock or (ii) with a conversion price that is subject to being reset at a future date or upon an event directly or indirectly related to the business of the Company or the market for the common stock. The Company also agreed to not issue securities at a future determined price.

F-10

The Lenders have the right to require the Company to repay the Notes if the Company receives cash proceeds, including proceeds from customers and the issuance of equity (including in the Uplist Offering). If the Company prepays the Notes prior to the Maturity Date, the Company shall pay a 10% prepayment penalty.

For the three-month period ended March 31, 2022, the Company recognized interest expenses of the Notes in the amount of US$56,172.

The following is the summary of outstanding promissory notes as of March 31, 2022:

SUMMARY OF OUTSTANDING PROMISSORY NOTES

	Interest rate			Principal Amount			Net Proceeds		Warrants Shares		Maturity Date
Convertible Note- Talos Victory (Note 9 (b))		8	%	$	250,000		$	197,000		200,000	October 27, 2022
Convertible Note-Mast Hill (Note 9 (b))		8	%		750,000			601,000		600,000	November 5, 2022
Convertible Note-First Fire (Note 9 (b))		8	%		250,000			197,000		200,000	November 16, 2022
Convertible Note-LGH Note 9 (b))		8	%		250,000			207,000		200,000	November 24, 2022
Convertible Note -Fourth Man (Note 9 (b))		8	%		250,000			197,000		200,000	November 29, 2022
Convertible Note-Jeffery Street Note 9 (b))		8	%		250,000			197,000		200,000	December 2, 2022
Convertible Note -Blue Lake Note 9 (b))		8	%		250,000			197,000		200,000	December 2, 2022
Total					2,250,000			1,793,000		1,800,000
Debt Discounts					(225,000	)
Amortization of discounts for the year ended December 31, 2021					5,550
Convertible promissory notes payable as of December 31, 2021					2,030,550
Amortization of discounts for the three-month period ended March 31, 202					6,185
Convertible promissory notes payable as of March 31,2022				$	2,036,735

*The Company prepaid $10,000 legal deposit for each note till the repayment of the notes.

F-11

b) Warrants

Accounting for Warrants

In connection with the issuance of a convertible promissory notes (see Note 11 (a) in October, November and December, 2021, the Company also issued seven (7) three-year warrant (the “ Warrant”) to purchase an aggregate of 1,800,000 shares of the Company’s common stock (the “ Warrant Shares”).

The Warrants issued to the Lenders granted each of the Lenders the right to purchase up to 200,000 shares of common stock of the Company at an exercise price of $1.25 per share. However, if the Company closes an Uplist Offering on or before the 180^th calendar date after the issuance date of the Warrants, then the exercise price shall be 125% of the offering price of a share in the Uplist Offering. If the adjusted exercise price as a result of the Uplist Offering is less than $1.25 per share, then the number of shares for which the Warrants are exercisable shall be increased such that the total exercise price, after taking into account the decrease in the per share exercise price, shall be equal to the total exercise price prior to such adjustment.

The Lenders have the right to exercise the Warrants on a cashless basis if the highest traded price of a share of common stock of the Company during the 150 trading days prior to exercise of the Warrants exceeds the exercise price, unless there is an effective registration statement of the Company which covers the resale of the Lenders.

If the Company issues shares or any securities convertible into shares at an effective price per share lower than the exercise price of the Warrants, the exercise price of the Warrants shall be reduced to such lower price, subject to customary exceptions.

The Lenders may not convert the Notes or exercise the Warrants if such conversion or exercise will result in each of the Lenders, together with any affiliates, beneficially owning in excess of 4.9% of the Company’s outstanding common stock immediately after giving effect to such exercise unless the Lenders notify the Company at least 61 days prior to such exercise.

The fair values of these warrants as of March 31, 2022 were calculated using the Black-Scholes option-pricing model with the following assumptions:

SCHEDULE OF FAIR VALUE OF WARRANTS

												March 31, 2022
	Volatility (%)			Expected dividends yield (%)			Weighted average expected life (year)		Risk-free interest rate (%) (per annum)			Common stock purchase warrants liability as of December 31, 2021(US$)		Changes of fair value of common stock purchase warrants liability (- (gains)/+ losses(US$)			Common stock purchase warrants liability as of March 31, 2022 (US$)
Convertible Note- Talos Victory (Note 9 (a))		204.5	%	$	0.0	%	$	2.6		2.28	%		124,756		(17,780	)		106,976
Convertible Note-Mast Hill (Note 9 (a))		204.5	%		0.0	%		2.6		2.28	%		375,156		(53,401	)		321,754
Convertible Note-First Fire (Note 9 (a))		204.5	%		0.0	%		2.6		2.28	%		125,408		(17,827	)		107,582
Convertible Note-LGH Note 9 (a))		204.5	%		0.0	%		2.7		2.28	%		125,664		(17,846	)		107,818
Convertible Note -Fourth Man (Note 9 (ab))		204.5	%		0.0	%		2.7		2.28	%		125,821		(17,857	)		107,962
Convertible Note-Jeffery Street Note 9 (a))3,054		204.5	%		0.0	%		2.7		2.28	%		125,915		(17,866	)		108,050
Convertible Note -Blue Lake Note 9 (a))		204.5	%		0.0	%		2.7		2.28	%		125,915		(17,866	)		108,050
Total										Total			1,128,635		(160,443	)		968,192

(c) Registration Rights Agreements

Pursuant to the terms of the Registration Rights Agreement dated as of contract date of each convertible promissory note, 2021, executed between the Company and Lender, the Registration Rights Agreement dated as of each contract date, executed between the Company and Lenders, the Company agreed to file a registration statement with the Securities and Exchange Commission to register the shares of common stock underlying the Notes and the shares issuable upon exercise of the Warrants within sixty days from the date of each Registration Rights Agreement. The Company also granted the Lenders piggyback registration rights on such shares pursuant to the Purchase Agreements.

F-12

NOTE 10— SHAREHOLDERS’ EQUITY

Ordinary Shares

The Company’s authorized number of ordinary shares was 300,000,000 shares with par value of $0.001.

On December 22,2020, the Company issued 103,610 shares of common stock to The Crone Law Group, P.C. or its designees for legal services (see Note 11).

On January 1, 2021, the Company issued an aggregate of 310,830 shares to a third party service provider for consulting services that had been rendered.

As of March 31, 2022, the Company had 31,811,523 issued and outstanding shares.

NOTE 11- SHARE BASED COMPENSATION

AsThe Company applied ASC 718 and related interpretations in accounting for measuring the cost of ~~September 30, 2021,~~share-based compensation over the period during which the consultants are required to provide services in exchange for the issued shares. The fair value of above award was estimated at the grant date using Black-Scholes model for pricing the share compensation expenses.

On December 22, 2020, the Board of Directors of the Company ~~had~~authorized the issuance of an aggregate of ~~841,440~~103,610 shares and 210,360 warrants ~~outstanding with i) weighted average exercise price~~to The Crone Law Group, P.C. or its designees for legal services that had been rendered. The five-year warrants are exercisable at one cent per share.

The shares of $~~0.01~~103,610~~; ii) weighted average remaining contractual~~ were vested on December 22, 2020 and 0 warrants were exercised. The fair value of above award was estimated at the grant date using Black-Scholes model for pricing the share compensation expenses. The fair value of the Black-Scholes model includes the following assumptions: expected life of ~~4.45~~2.5 ~~years;~~years, expected dividend rate of 0%, volatility of 43.5% and ~~iii) aggregate intrinsic value~~an average interest rate of $~~3.4~~0.11 ~~million.~~%.

��

On January 1, 2021, the Board of Directors of the Company authorized the issuance of an aggregate of 310,830 shares and 631,080 warrants to a third party service provider for consulting services that had been rendered. The five-year warrants are exercisable at one cent per share.

The Company awards common stock and stock options to employees, consultants, and directors as compensation for their services, and accounts for its stock option awards to employees, consultants, and directors pursuant to the provisions of ASC 718, Stock Compensation. The fair value of each option award is estimated on the date of grant using the Black-Scholes Merton valuation model. The Company recognizes the fair value of each option as compensation expense ratably using the straight-line attribution method over the service period, which is generally the vesting period.

The 310,830 shares of common stock and 631,080 warrants were vested on January 1, 2021 and no warrants were exercised. The fair value of above award was estimated at the grant date using Black-Scholes model for pricing the share compensation expenses. The fair value of the Black-Scholes model includes the following assumptions: expected life of ~~2.5~~2.0 years, expected dividend rate of 0%, volatility of ~~51.3~~204.5% and an average interest rate of ~~0.12~~2.4%.

As of March 31, 2022, the Company had 841,440 warrants outstanding related to above mentioned services with i) weighted average exercise price of $0.01; ii) weighted average remaining contractual life of 1.25 years; and iii) aggregate intrinsic value of $0.6 million

For the three-month periods ~~and nine-month periods~~ ended ~~September 30,~~March 31, 2022 and 2021, the Company recognized relevant share-based compensation expense of nil and $1,041,281 for the vested shares, and nil and $2,107,825 for the warrants, respectively.

F-13

NOTE 12- RISKS AND UNCERTAINTIES

Credit Risk – The carrying amount of accounts receivable included in the balance sheet represents the Company’s exposure to credit risk in relation to its financial assets. No other financial asset carries a significant exposure to credit risk. The Company performs ongoing credit evaluations of each customer’s financial condition. The Company maintains allowances for doubtful accounts and such allowances in the aggregate have not exceeded management’s estimates.

The Company has its cash in bank deposits primarily at state owned banks located in the PRC. Historically, deposits in PRC banks have been secured due to the state policy of protecting depositors’ interests. The PRC promulgated a Bankruptcy Law in August 2006, effective June 1, 2007, which contains provisions for the implementation of measures for the bankruptcy of PRC banks. The bank deposits with financial institutions in the PRC are insured by the government authority for up to RMB500,000.

Interest Rate Risk – The Company is exposed to the risk arising from changing interest rates, which may affect the ability of repayment of existing debts and viability of securing future debt instruments within the PRC.

Currency Risk - A majority of the Company’s revenue and expense transactions are denominated in RMB and a significant portion of the Company’s assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances in currencies other than RMB by the Company in China must be processed through the PBOC or other China foreign exchange regulatory bodies which require certain supporting documentation in order to affect the remittance.

~~The following table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report:~~

~~SCHEDULE OF CURRENCY EXCHANGE RATE~~

	September 30, 2021	December 31, 2020
~~Year-end spot rate~~	~~US$~~1~~=RMB~~ ~~6.4434~~	~~US$~~1~~=RMB~~ ~~6.5250~~
~~Average rate~~	~~US$~~1~~=RMB~~ ~~6.4701~~	~~US$~~1~~=RMB~~ ~~6.9042~~

~~And average rate for September 30, 2021 is US$=RMB6.4701~~

~~F-11~~

Concentrations - The Company sells its products primarily through direct customers in the PRC and to some extent, the overseas customers in European countries and East Asia such as South Korea and ~~Taiwan (Refer to Note 12). Sales to customers individually exceeded~~ 10~~% of the Company’s revenues for the three and nine month periods ended September 30, 2021 and 2020, are as follows:~~

Taiwan.

For the three-month periods ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, five~~six customers accounted for ~~21.3~~18.1%, ~~15.5~~16.2%, ~~15.4~~15.7%, ~~14.0~~14.7%, 12.4% and ~~11.4~~12.3%, and five customers accounted for ~~18.5~~18.7%, ~~16.3~~17.9%, ~~15.0~~15.2%, ~~12.5~~11.8% and ~~12.5~~11.1%, respectively, of the Company’s ~~total revenue.~~

~~For the nine-month periods ended September 30, 2021 and 2020, five customers accounted for~~ ~~18.9~~%, ~~17.5~~%, ~~14.6~~%, ~~14.1% and~~ ~~11.4%, and five customers accounted for~~ ~~18.0~~%, ~~17.3~~%, ~~14.5~~%, ~~13.5% and~~ ~~11.4%, respectively, of the Company’s total~~ revenue.

And the Company’s top ten customers aggregately accounted for ~~98.1~~99.4% and ~~99.4~~99.2% of the total revenue for the three-month periods ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, and~~ ~~96.7% and~~ ~~98.5% for the nine-month periods ended September 30, 2021 and 2020.~~respectively.

As of ~~September 30, 2021 and December~~March 31, ~~2020, seven~~2022, six customers accounted for ~~97.6~~24.1%, 15.0%, 14.1%, 12.9%, 12.8% and ~~four customers accounted for~~ ~~96.4~~11.8% of the total accounts receivable balance, respectively.

The Company purchases its raw materials through various suppliers. Raw material purchases from these suppliers which individually exceeded 10% of the Company’s total raw material purchases, accounted for approximately ~~46.3~~47.4% (four suppliers) and ~~28.3% (two supplier) for the three-month periods, respectively,~~ ~~25.1% (two suppliers) and~~ ~~37.6~~38.1% (three suppliers) for the ~~nine-month~~three-month periods ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

F-14

NOTE 13 — COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, the Company is a party to various legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

As of ~~June 30, 2021,~~March 31, 2022, there were no legal proceedings.

Capital expenditure commitment

~~The~~On December 20, 2021, the Company ~~does not have any capital commitments~~entered into a contract with Shenzhen Municipal Haoyutuo Decoration & Cleaning Engineering Company Limited to purchase a facility decoration contract of RMB20.0 million (equivalent to US$3.1 million ). As of March 31, 2022, the Company has prepaid RMB15.0 million (equivalent to US$ 2.4 million) and recorded as construction in progress (see Note 5) and had a remaining balance of ~~September~~RMB5.0 million (equivalent to US$0.8 million) to be paid by July 30, ~~2021.~~2022.

NOTE 14 — REVENUES

The Company’s geographical revenue information is set forth below:

SCHEDULE OF GEOGRAPHICAL REVENUE INFORMATION

Three-Month Period Ended September 30, Nine-Month Period Ended September 30,
2021 2020 2021 2020
US$ US$ US$ US$
Sales in PRC $ 7,696,992 $ 8,407,154 $ 24,652,526 $ 13,940,471
Sales in Overseas
—Republic of China (ROC, or Taiwan) 1,785,128 1,955,577 6,663,678 3,652,771
-South Korea 1,618,284 1,500,392 5,519,484 2,993,899
-Others 65,576 40,997 278,482 82,131
Sub-total 3,468,988 3,496,966 12,461,644 6,728,801
Total Revenue $ 11,165,980 $ 11,904,120 $ 37,114,170 $ 20,669,272

	2022		2021
	For the Three-Month Periods Ended, March 31,
	2022		2021
Sales in PRC	$	8,169,567	$	7,155,877
Sales in Overseas
—Republic of China (ROC, or Taiwan)		1,998,679		1,977,038
-South Korea		1,763,200		1,574,315
-Others		63,101		6,074
Sub-total		3,824,980		3,557,427
Total revenues	$	11,994,547	$	10,713,304

Due to the COVID-19 pandemic, the Company’s subsidiary Sichuan Wetouch was temporarily shut down from early February 2020 to early March 2020 in accordance with the requirement of the local governments. The Company’s business was negatively impacted and generated lower revenue and net income during the period from February to April 2020. Our business was gradually recovered to its normal level during the three -months and nine months period ended September 30, 2021, due to our proactive efforts to in marketing new models such as POS touchscreens and penetrate into new customers into new regions.

NOTE 15 — SUBSEQUENT EVENT

~~Convertible Note and Warrant~~

~~On November 3,~~As of October 27, 2021, the Company entered into a Securities Purchase Agreement (the ~~“Purchase~~“Securities Purchase Agreement”) with Talos Victory Fund, LLC ~~a Delaware limited liability company~~ (the “Lender”)~~, dated as of October 27, 2021,~~. The transactions contemplated by the Securities Purchase Agreement pursuant to which the Company issued to the Lender a convertible promissory note in the principal amount of $250,000 (the “Note”) ~~with interest at~~ 8% ~~per annum, payable on the one-year anniversary of the issuance of the Note~~ and a three-year warrant (the “Warrant”) to purchase an aggregate of 200,000 shares of the Company’s common stock (the “Warrant Shares”) ~~at an exercise price of $1.25~~ ~~per share, subject~~and agreed to ~~certain adjustments. The Company received $225,000~~ ~~gross proceeds from~~register the ~~issuance of the Note as a result of the original discount rate on the Note.~~

~~Registration Statement~~

~~On September 13, 2021, the Company filed a registration statement (No. 333-259499) with the SEC to offer and sell~~ shares of common stock ~~in an underwritten offering through Craft Capital Management LLC~~underlying the Note and ~~R.F. Lafferty & Co., Inc. The Company also~~the Warrant Shares (the “Common Stock”) were previously disclosed on Current Report on Form 8-K filed ~~an application to have its shares of common stock listed~~with the Securities and Exchange Commission on ~~the Nasdaq Capital Market.~~November 5, 2021.

On April 27, 2022, the Company entered into an amendment to the Note (“Amendment to Promissory Note”) issued to the Lender and, on May 3, 2022, an amendment to the Registration Rights Agreement by and between the Company and the Lender dated as of October 27, 2021 (“Amendment to Registration Rights Agreement”), extending the number of days the Company shall have in order to cause the registration statement covering the resale of the Common Stock to become effective. For each 30-day extension, the Company agreed to repay the Lender $25,000 of the principal amount of the Note, without prepayment penalty. The Company has repaid $25,000 to the Lender on May 3, 2022.

~~F-12~~F-15

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-Looking Statements

The following management’s discussion and analysis should be read in conjunction with our historical financial statements and the related notes thereto. The management’s discussion and analysis contain forward-looking statements, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those under “Risk Factors” in our Annual Report filed with the SEC on ~~March 24, 2021,~~April 15, 2022, as updated in subsequent filings we have made with the SEC that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report.

Basis of Presentation

The following discussion highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on our unaudited financial statements contained in this Quarterly Report, which we have prepared in accordance with United States generally accepted accounting principles. You should read the discussion and analysis together with such financial statements and the related notes thereto.

~~Recent Developments~~Overview

We were originally incorporated under the laws of the state of Nevada on August 31, 1992. On October 9, 2020, we entered into a share exchange agreement (the “Share Exchange Agreement”) with BVI Wetouch, and all the shareholders of BVI Wetouch (each a “Shareholder” and collectively the “Shareholders”), to acquire all the issued and outstanding capital stock of BVI Wetouch in exchange for the issuance to the Shareholders an aggregate of 28 million shares of our common stock (the “Reverse Merger”). The Reverse Merger closed on October 9, 2020. Immediately after the closing of the Reverse Merger, we had a total of 31,396,394 issued and outstanding shares of common stock. As a result of the Reverse Merger, BVI Wetouch is now our wholly-owned subsidiary.

Hong Kong Wetouch Technology Limited, a limited company organized under the laws of Hong Kong (“HK Wetouch”), an affiliate of Guangde Cai, our Chairman and Director, was incorporated on December 3, 2020 under the laws of Hong Kong. HK Wetouch was established to own all the outstanding shares of Sichuan Vtouch Technology Co., Ltd., which was incorporated on December 30, 2020 (“Sichuan Vtouch”) in Chengdu, Sichuan, under the laws of The People’s Republic of China (“PRC”).

On March 12, 2021, Wetouch Holding Group Limited (“BVI Wetouch”), the Company’s wholly owned subsidiary, acquired all the outstanding shares of HK Wetouch from the sole shareholder of HK Wetouch, Guangde Cai, in consideration of the payment of HK$10,000 pursuant to instruments of transfer in accordance with Hong Kong law. As a result of the acquisition, HK Wetouch became a wholly-owned subsidiary of BVI Wetouch. BVI Wetouch owns (i) all the outstanding shares of Hong Kong Wetouch, which, in turn, owns all the outstanding shares of Sichuan Wetouch and (ii) all of the outstanding shares of HK Wetouch, which owns all the shares of Sichaun Vtouch Technology Co., Ltd., a company incorporated under the laws of PRC.

On March 16, 2021, ~~an indirectly wholly-owned operating subsidiary of the Company,~~ Sichuan Wetouch entered into an Agreement of Compensation on Demolition (“Compensation Agreement”) with Sichuan Renshou Shigao Tianfu Investment Co., Ltd, a limited company owned by the local government (Sichuan Renshou”), for the withdrawal of our right to use of state-owned land and the demolition of all buildings, facilities and equipment on such land where we maintain our executive offices, research and development facilities and factories at No.29, Third Main Avenue, Shigao Town, Renshou County, Meishan City, Sichuan, China (the “Property”). The Property, all buildings, facilities, equipment and all other appurtenances on the Property are collectively referred to as “Properties”. The Compensation Agreement was executed and delivered as a result of guidelines (the “Guidelines”) published by the local government of with respect to local environmental issues and a national overall plan on Tianfu New District, Meishan City, Sichuan, PRC. In accordance with the Guidelines, a project named “Chaisang River Ecological Wetland Park” is under construction in the areas where the manufacturing facilities and properties of the Company are located. As a result, Sichuan Wetouch must relocate. In consideration for such relocation, the owner of the buildings on the state-owned land will be compensated.

In order to minimize the interruption of our business, Sichuan Vtouch ~~our newly acquired wholly owned subsidiary,~~ entered into a Leaseback Agreement with Sichuan Renshou on March 16, 2021. The Leaseback Agreement entitles us to lease back the Properties commencing from April 1, 2021 until December 31, 2021, at a monthly rent of RMB300,000 (approximately ~~$46,367).~~$46,154), which period has been extended to October 31, 2022.

On March 18, 2021, Sichuan Wetouch received a total amount of RMB115.2 million (approximately ~~$17.9~~$17.7 million) as the total amount of compensation from Sichuan Renshou, including RMB100.2 million ($15.4 million) based upon the appraised value of the Properties plus an extra 15% relocation bonus of RMB15.0 million ($2.3 million).

We are actively searching for an appropriate parcel in Chengdu Medicine City (Technology Park), Wenjiang District, Chengdu for the construction of our new production facilities and office buildings. As of the date of this ~~Form 10-Q,~~prospectus, we estimate that our capital needs for this acquisition and construction will be approximately RMB170.0 million (approximately ~~$26.4~~$26.2 million), but there is no assurance that the estimated amount is sufficient to achieve our goals. We may need additional financing for our business development. In addition, we expect that this acquisition and construction will be completed prior to December 31, 2021, but there is no assurance and we may need extended time to achieve our business plan. Pursuant to local PRC government guidelines on local environment issues and the national overall plan, Sichuan Wetouch was under the government directed relocation order to relocate no later than December 31, 2021 and was compensated for RMB115.2 million ($~~17.9~~17.8 million) from the local government for the withdrawal of the right to use of state-owned land and the demolition of all buildings, facilities, equipment and all other appurtenances on the land. ~~The Company plans to dissolve Sichuan Wetouch and its business and operations are being assumed by Sichuan Vtouch.~~

On March 2, 2021, HK Wetouch acquired all shares of Hong Kong Wetouch. On June 18, 2021, Hong Kong Wetouch ~~started~~submitted its application for dissolution, ~~process.~~which requires approximately one year for governmental approval. During such period, Hong Kong Wetouch is no longer engaged in any operations. In addition, as of March 31, 2021, Sichuan Wetouch’s business and operations have been assumed by Sichuan Vtouch.

~~On March 2, 2021, HK Wetouch acquired all shares of Hong Kong Wetouch.~~

~~On June 18, 2021, Hong Kong Wetouch started its dissolution process.~~

~~Convertible Note and Warrant~~

On November 3, 2021, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Talos Victory Fund, LLC, a Delaware limited liability company (the “Lender”), dated as of October 27, 2021, pursuant to which the Company issued the Lender a convertible promissory note in the principal amount of $250,000 (the “Note”) and a three-year warrant (the “Warrant”) to purchase an aggregate of 200,000 shares of the Company’s common stock (the “Warrant Shares”). The terms and provisions of the Note and Warrant are described in the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission (the “SEC”) on November 5, 2021. The Company received $225,000 gross proceeds from the issuance of the Note as a result of the original discount rate on the Note. Unless the Note is converted, the principal amount of the Note, and accrued interest at the rate of 8% per annum, are payable on the one-year anniversary of the issuance of the Note (the “Maturity Date”). The Lender has the right to convert any or all of the principal and accrued interest on the Note into shares of common stock of the Company on the earlier of (i) 180 calendar days after October 27, 2021 or (ii) the closing of a listing for trading of the common stock of the Company on a national securities exchange offering resulting in gross proceeds to the Company of $15,000,000 or more (an “~~Uplist Offering”). If the Company closes an Uplist Offering on or before the 180~~^th ~~calendar date after October 27, 2021, the conversion price shall be 70% of the per share offering price in the Uplist Offering; otherwise, the conversion price is $0.75 per share.~~

The Warrant issued to the Lender granted the Lender the right to purchase up to 200,000 shares of common stock of the Company at an exercise price of $1.25 per share. However, if the Company closes an Uplist Offering on or before the 180^th calendar date after October 27, 2021, then the exercise price shall be 125% of the offering price of a share in the Uplist Offering. If the adjusted exercise price as a result of the Uplist Offering is less than $1.25 per share, then the number of shares that the Warrant is issuable shall be increased such that the exercise price, after taking into account the decrease in the exercise price, shall be equal to the exercise price prior to such adjustment. The Lender has the right to exercise the Warrant on a cashless basis if the highest traded price of a share of common stock of the Company during the 150 trading days prior to exercise of the Warrant exceeds $1.75, unless there is an effective registration statement of the Company which covers the resale. If the Company issues shares or any securities convertible into shares at an effective price per share lower than the exercise price of the Warrant, the exercise price of the Warrant shall be reduced to such lower price, subject to customary exceptions.

Pursuant to the terms of the Registration Rights Agreement dated October 27, 2021 executed between the Company and the Lender, the Company agreed to file a registration statement with the SEC to register the shares of common stock underlying the Note and the shares issuable upon exercise of the Warrant no later than December 26, 2021. The Company also granted the Lender piggyback registration rights on said shares pursuant to the Purchase Agreement.

~~Registration Statement~~

On September 13, 2021, the Company filed a registration statement (No. 333-259499) with the SEC to offer and sell shares of common stock in an underwritten offering through Craft Capital Management LLC and R.F. Lafferty & Co., Inc. The Company also filed an application to have its shares of common stock listed on the Nasdaq Capital Market.

~~Overview~~

We were originally incorporated under the laws of the state of Nevada in August 1992. On October 9, 2020, we entered into a share exchange agreement (the “Share Exchange Agreement”) with BVI Wetouch and all the shareholders of BVI Wetouch, to acquire all the issued and outstanding capital stock of BVI Wetouch in exchange for the issuance to such shareholders an aggregate of 28 million shares of our common stock (the “Reverse Merger”). The Reverse Merger closed on October 9, 2020. Immediately after the closing of the Reverse Merger, we had a total of 31,396,394 issued and outstanding shares of common stock. As a result of the Reverse Merger, BVI Wetouch is nowThrough our wholly-owned ~~subsidiary.~~

Wesubsidiaries, we are engaged in the research, development, manufacturing, sales and servicing of medium to large sized projected capacitive ~~touchscreens, which constitutes our source of revenues through BVI Wetouch, which owns Hong Kong Wetouch, HK Wetouch, Sichuan Wetouch and Sichuan Vtouch.~~touchscreens. We ~~are specialized~~specialize in large-format touchscreens, which are developed and designed for a wide variety of markets and used in by the financial terminals, automotive, ~~point of sale (POS),~~POS, gaming, lottery, medical, ~~human machine interface (HMI),~~HMI, and other specialized industries. Our product portfolio comprises medium to large sized projected capacitive touchscreens ranging from 7.0 inch to 42 inch screens. In terms of the structures of touch panels, we offer (i) Glass-Glass (“GG”), primarily used in GPS/car entertainment panels in mid-size and luxury cars, industrial HMI, financial and banking terminals, POS and lottery machines; (ii) Glass-Film-Film (“GFF”), mostly used in high-end GPS and entertainment panels, industrial HMI, financial and banking terminals, lottery and gaming industry; (iii) Plastic-Glass (“PG”), typically adopted by touchscreens in GPS/entertainment panels motor vehicle GPS, smart home, robots and charging stations; and (iv) Glass-Film (“GF”), mostly used in industrial HMI. The following discussion and analysis pertain financial condition and results of operations of our subsidiaries Hong Kong Wetouch, HK Wetouch, Sichuan Wetouch and Sichuan Vtouch for the quarter ended September 30, 2021.

Effects of COVID-19

The COVID-19 pandemic and resulting global disruptions have affected our businesses, as well as those of our customers and suppliers. To serve our customers while also providing for the safety of our employees and service providers, we have modified numerous aspects of our logistics, transportation, supply chain, purchasing, and after-sale processes. Beginning in Q1 2020, we made numerous process updates across our operations worldwide, and adapted our fulfillment network, to implement employee and customer safety measures, such as enhanced cleaning and physical distancing, personal protective gear, disinfectant spraying, and temperature checks. We will continue to prioritize employee and customer safety and comply with evolving state and local standards as well as to implement standards or processes that we determine to be in the best interests of our employees, customers, and communities.

Due to the COVID-19 pandemic, our subsidiary Sichuan Wetouch was temporarily shut down from early February 2020 to early March 2020 in accordance with the requirement of the local governments. Our business was negatively impacted and generated lower revenue and net income in 2020. The Company has taken proactive measures to promote products to new customers and entering more regions during the ~~nine-month~~three-month period ended ~~September 30, 2021.~~March 31, 2022. The extent of the impact of COVID-19 on the Company’s results of operations and financial condition will depend on the virus’ future developments, including the duration and spread of the outbreak and the impact on the Company’s customers, which are still uncertain and cannot be reasonably estimated at this point of time.

Highlights for the three-month period ended ~~September 30, 2021~~March 31, 2022 include:

	●	Revenues were ~~$11.2~~$12.0 million, ~~a decrease~~an increase of ~~5.9%~~12.1% from ~~$11.9~~$10.7 million in the ~~third~~first quarter of ~~2020~~2021
	●	Gross profit was ~~$4.8~~$4.3 million, a decrease of ~~22.6%~~15.7% from ~~$6.2~~$5.1 million in the ~~third~~first quarter of ~~2020~~2021
	●	Gross profit margin was ~~42.9%~~35.9%, compared to ~~52.0%~~47.7% in the ~~third~~first quarter of ~~2020~~2021
	●	Net income was ~~$3.3~~$2.5 million, compared to ~~$4.7~~$8.4 million in the ~~third~~first quarter of ~~2020~~2021
	●	Total volume shipped was ~~531,210~~559,958 units, ~~a decrease~~an increase of ~~12.5%~~12.0% from ~~607,261~~499,796 units in the ~~third~~first quarter of ~~2020~~2021

Results of Operations

The following table sets forth, for the periods indicated, statements of income data:

(in US Dollar millions, except percentage)	Three-Month Period Ended September 30,						Change			Nine-Month Period Ended September 30,						Change			Three-Month Period Ended March 31,						Change
	2021			2020			%			2021			2020			%			2022			2021			%
Revenues	$	11.2		$	11.9			(5.9	)%	$	37.1		$	20.7			79.2	%	$	12.0		$	10.7			12.1	%
Cost of revenues		(6.4	)		(5.7	)		12.3	%		(19.3	)		(10.2	)		89.2	%		(7.7	)		(5.6	)		37.5	%
Gross profit		4.8			6.2			(22.6	)%		17.8			10.5			69.5	%		4.3			5.1			(15.7	)%
Total operating expenses		(0.5	)		(1.0	)		(50.0	)%		(5.2	)		(1.6	)		225.0	%		(0.9	)		(3.7	)		(75.7	)%
Operating income		4.3			5.2			(17.3	)%		12.6			8.9			41.6	%		3.4			1.4			142.9	%
Total Other income																				0.1			8.3			(98.8	)%
Income before income taxes		4.4			5.2			(15.4	)%		21.0			9.1			130.8	%		3.5			9.7			(63.9	)%
Income tax expense		(1.1	)		(0.5	)		120.0	%		(4.3	)		(1.1	)		290.9	%		(1.0	)		(1.3	)		(23.1	)%
Net income	$	3.3		$	4.7			(29.8	)%	$	16.7		$	8.0			108.8	%	$	2.5		$	8.4			(70.2	)%

Results of Operations - Three Months Ended ~~September 30, 2021~~March 31, 2022 Compared to Three Months Ended ~~September 30, 2020~~March 31, 2021

Revenues

We generated revenue of ~~$11.2~~$12.0 million for the three months ended ~~September 30, 2021, a decrease~~March 31, 2022, an increase of ~~0.7~~$1.3 million, or ~~5.9%~~12.1%, compared to ~~$11.9~~$10.7 million in the same period of last year. This was due to ~~a decrease~~an increase of ~~12.5%~~12.0% in sales volume, ~~due to insufficient raw materials to meet order capacity and~~an increase of ~~7.2%~~0.9% in the average selling price of our products, and ~~0.3%~~2.1% positive impact from exchange rate due to appreciation of RMB against US dollars, compared with those of the same period of last year.

	For the Three-Month Ended September 30,																For the Three-Month Ended March 31,
	2021					2020					Change			Change			2022					2021					Change		Change
	Amount		%			Amount		%			Amount			%			Amount		%			Amount		%			Amount		%
	(in US Dollar millions except percentage)																(in US Dollar millions except percentage)
Revenue from sales to customers in PRC	$	7.7		68.8	%	$	8.4		70.6	%	$	(0.7	)		(8.3	)%	$	8.2		68.3	%	$	7.2		67.3	%	$	1.0		13.9	%
Revenue from sales to customers overseas		3.5		31.2	%		3.5		29.4	%		0.0			0.0	%		3.8		31.7	%		3.5		32.7	%		0.3		8.6	%
Total Revenues	$	11.2		100	%	$	11.9		100	%	$	(0.7	)		(5.9	)%	$	12.0		100	%	$	10.7		100	%	$	1.3		12.1	%

For the Three-Month Ended September 30,
2021 2020 Change Change
Unit % Unit % Unit %
(in UNIT, except percentage)
Units sold to customers in PRC 356,600 67.1 % 412,445 67.9 % (55,845 ) (13.5 )%
Units sold to customers overseas 174,610 32.9 % 194,816 32.1 % (20,206 ) (10.4 )%
Total Units Sold 531,210 100 % 607,261 100 % (76,051 ) (12.5 )%

	For the Three-Month Ended March 31,
	2022					2021					Change		Change
	Unit		%			Unit		%			Unit		%
	(in UNIT, except percentage)
Units sold to customers in PRC		356,687		63.7	%		317,413		63.5	%		39,274		12.3	%
Units sold to customers overseas		203,271		36.3	%		182,383		36.5	%		20,888		11.5	%
Total Units Sold		559,958		100	%		499,796		100	%		60,162		12.0	%

(i) Domestic market

For the three months ended ~~September 30, 2021,~~March 31, 2022, revenue from ~~the~~ domestic market ~~decreased~~increased by ~~$0.7~~$1.0 million or ~~8.3%~~13.9% as a combined result of: (i) ~~a decrease~~an increase of ~~13.5%~~12.3% in sales volume, and (ii) an increase of ~~7.2%~~4.2% in the average RMB selling price of our products, and ~~0.3%~~2.1% positive impact from exchange rate due to appreciation of RMB against US dollars, compared with those of the same period of last year.

As for the RMB selling price, the increase of ~~7.2%~~4.2% was mainly due to the increased sales of new models of higher-end products of such as ~~touch screens~~POS touchscreens, medical touchscreens and multi-functional printer touchscreens used in ~~gaming machines~~applications with higher selling price in ~~the~~ domestic market during the three-month period ended ~~September 30, 2021.~~March 31, 2022.

The weakening in macroeconomic conditions since the outbreak of COVID-19 pandemic in January 2020 continued to exacerbate the touch screen business environment. For the ~~three months period~~first quarter ended ~~September 30, 2020,~~March 31, 2022, the Company’s business was negatively impacted and has continued to generate lower revenues. Due to our proactive efforts to market new models such as POS touchscreens and ~~penetrate~~medical touchscreens, and penetration into new customers and new regions,we had sales increases of 46.6% in East China, 8.4% in Southwest China, and partially offset by decreases of ~~44.2%~~33.9% in South China, ~~and 9.2% in East China, partially offset by increases of 3.3% in North China and 0.9% in Southwest China,~~ for the ~~third~~first quarter ended ~~September 30, 2021~~March 31, 2022 as compared to that of the same period last year.

(ii) Overseas market

For the three-month period ended ~~September 30, 2021~~,March 31, 2022, revenues from ~~the~~ overseas market ~~remained stable at $3.5~~were $3.8 million as compared to $3.5 million of the same period of ~~2020,~~ ~~with~~2021, increasing by $0.3 million or 8.6% mainly due to an increase of 11.5% in sales volume, partially offset by a decrease of ~~10.4%~~ ~~in sales volume and an increase of 10.7%~~3.5% in average selling price.

The following table summarizes the breakdown of revenues by categories in US dollars:

	Revenues For the Three-Month Ended September 30,																Revenues For the Three-Month Ended March 31
	2021					2020					Change			Change			2022					2021					Change			Change
	Amount		%			Amount		%			Amount			Margin%			Amount		%			Amount		%			Amount			Margin%
	(in US Dollars, except percentage)																(in US Dollars, except percentage)
Product categories by end applications
Automotive Touchscreens	$	2,819,828		25.3	%	$	3,924,169		33.0	%	$	(1,104,341	)		(28.1	)%	$	3,012,725		25.1	%	$	3,519,642		32.9	%	$	(506,917	)		(14.4	)%
Industrial Control Computer Touchscreens		2,237,229		20.0	%		2,277,645		19.1	%		(40,416	)		(1.8	)%		2,298,142		19.2	%		2,235,175		20.9	%		62,967			2.8	%
POS Touchscreens		1,935,984		17.3	%		1,794,947		15.1	%		141,037			7.9	%		1,956,350		16.3	%		1,159,805		10.8	%		796,545			68.7	%
Gaming Touchscreens		1,576,455		14.1	%		1,500,392		12.6	%		76,063			5.1	%		1,763,069		14.7	%		1,574,315		14.7	%		188,754			12.0	%
Medical Touchscreens		1,556,448		13.9	%		1,424,617		12.0	%		131,831			9.3	%		1,472,091		12.3	%		1,216,583		11.4	%		255,508			21.0	%
Multi-Functional Printer Touchscreens		1,023,167		9.2	%		967,504		8.1	%		55,663			5.8	%		1,488,175		12.4	%		917,031		8.6	%		571,144			62.3	%
Others*		16,869		0.2	%		14,846		0.1	%		2,023			13.6	%		3,995		0.0	%		90,753		0.7	%		(86,758	)		(95.6	)%
Total Revenues	$	11,165,980		100.0	%	$	11,904,120		100.0	%	$	(738,140	)		(5.9	)%	$	11,994,547		100.0	%	$	10,713,304		100.0	%	$	1,281,243			12.0	%

*Others include applications in self-service kiosks, ticket vending machine and financial terminals.

The Company continued to shift production mix from traditional lower-end products such as touchscreens used in automotive and industrial control computer industries to high-end products such as touchscreens used in ~~self-service kiosks,~~POS touchscreens, multi-functional printer touchscreens, and medical touchscreens, ~~ticket vending machine and financial terminals,~~ primarily due to (i) greater growth potential of computer screen models in China, and (ii) the stronger demand and better quality ~~demand~~needs from consumers’ recognition of higher-end touch screens made in higher quality with better ~~raw materials.~~performance.

Gross Profit and Gross Profit Margin

	Three-Month Period Ended September 30,						Change					Three-Month Period Ended March 31,						Change
(in millions, except percentage)	2021			2020			Amount		%			2022			2021			Amount			%
Gross Profit	$	4.8		$	6.2		$	1.4		(22.6	)%	$	4.3		$	5.1		$	(0.8	)		(15.7	)%
Gross Profit Margin		42.9	%		52.0	%				(9.1	)%		35.9	%		47.7	%					(11.8	)%

Gross profit was ~~$4.8~~$4.3 million in the ~~third~~first quarter ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$6.2~~$5.1 million in the same period of ~~2020.~~2021. Our gross profit margin decreased to ~~42.9%~~35.9% for the ~~third~~first quarter ended ~~September 30, 2021~~March 31, 2022, as compared to ~~52.0%~~47.7% for the same period of ~~2020,~~2021, primarily due to ~~decrease~~the increase in sales ~~volume,~~of $1.3 million, partially offset by ~~our product shift to higher gross profit margin products~~the increase of cost of materials such as ~~POS touchscreens, gaming touchscreens, industrial control computer touchscreens~~chip cost by approximately 45.0%, and ~~medical touchscreens.~~the increase of labor cost by 30.8% for the three-month period ended March 31, 2022.

General and Administrative Expenses

	Three-Month Period Ended September 30,						Change						Three-Month Period Ended March 31,						Change
(in millions, except percentage)	2021			2020			Amount			%			2022			2021			Amount			%
General and Administrative Expenses	$	0.3		$	1.0		$	(0.7	)		(70.0	)%	$	0.4		$	0.5		$	(0.1	)		(20.0	%
as a percentage of revenues		2.7	%		8.4	%					(5.7	)%		3.3	%		4.7	%					(1.4	)%

General and administrative (G&A) expenses were ~~$0.3~~$0.4 million for the ~~quarter~~three-month period ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$1.0~~$0.5 million in the same period in ~~2020,~~2021, representing a decrease of ~~70.0%,~~20.0% or ~~$0.7~~$0.1 million. The decrease was primarily due to the decrease of $0.4 million loss of VAT input credits due to Sichuan Wetouch ceasing operation and relocation to comply with local PRC government guidelines on local environment issues and the national overall plan (see Note 5 to our Condensed Consolidated Financial Statements (unaudited)), and a decrease of $0.3 million of salary & benefits due to optimal management.

~~Research and Development Expenses~~

Three-Month Period Ended
September 30,
Change
(in US dollars, except percentage) 2021 2020 Amount %
Research and Development Expenses $ 22,267 $ 21,532 $ 735 3.4 %
as a percentage of revenues 0.0 % 0.0 % 0.0 %

~~Research and development (R&D) expenses were $22,267 for the quarter ended September 30, 2021 compared to $21,532 in the same period in 2020, representing an increase of $735 of material consumption.~~

~~Operating Income~~

Total operating income was $4.3 million for the third quarter ended September 30, 2021 as compared to $5.2 million for the same period of last year, due to lower gross profit, offset by lower operating expenses.

~~Income Taxes~~

Three-Month Period Ended
September 30,
Change
(in millions, except percentage) 2021 2020 Amount %
Income before Income Taxes $ 4.4 $ 5.2 $ (0.8 ) (15.4 )%
Income Tax (Expense) (1.1 ) (0.5 ) (0.6 ) 120.0 %
Effective income tax rate 25.0 % 10.2 % 12.2 %

The effective income tax rates for the three-month periods ended September 30, 2021 and 2020 were 25.0% and 10.2%, respectively. The increase of the effective income tax rate was partially due to the increase of $0.6 million income tax clearance for Sichuan Wetouch for the year ended 2020.

~~Net Income~~

~~As a result of the above factors, we had a net income of $3.3 million in the third quarter of 2021 compared to a net income of $4.7 million in the same quarter of 2020.~~

~~Results of Operations - Nine Months Ended~~ ~~September 30, 2021 Compared to Nine Months Ended September 30, 2020~~

~~Revenues~~

~~We generated revenue of $37.1 million for the nine-month period ended September 30, 2021, an increase of $16.4 million, or 79.2%, compared to $20.7 million in the same period of last year.~~ ~~This was due to an increase of 62.0% in sales volume and of 10.5% in the average selling price of our products, compared with those of the same period of last year.~~

For the Nine-Month Ended September 30,
2021 2020 Change Change
Amount % Amount % Amount %
(in US Dollar millions except percentage)
Revenue from sales to customers in PRC $ 24.6 66.3 % $ 13.9 67.1 % $ 10.7 77.0 %
Revenue from sales to customers overseas 12.5 33.7 % 6.8 32.9 % 5.7 83.8 %
Total Revenues $ 37.1 100 % $ 20.7 100 % $ 16.4 79.2 %

For the Nine-Month Ended September 30,
2021 2020 Change Change
Unit % Unit % Unit %
(in UNIT, except percentage)
Units sold to customers in PRC 1,109,985 63.7 % 710,719 66.1 % 399,266 56.2 %
Units sold to customers overseas 632,569 36.3 % 365,802 33.9 % 266,767 72.9 %
Total Units Sold 1,742,554 100 % 1,075,521 100 % 667,033 62.0 %

~~(i) Domestic market~~

~~For the nine-month period ended September 30, 2021, revenue from the domestic market increased by $10.7 million or 77.0%~~ ~~as a combined result of: (i) an increase of 56.2% in sales volume and (ii) an increase of 10.5% in the average RMB selling price of our products, compared with those of the same period of last year.~~

~~As for the RMB selling price, the increase of 10.5% was mainly due to the~~ ~~increased sales of new models of higher-end products such as touch screens used in gaming machines with higher selling price in the domestic market~~ ~~during the nine-month period ended September 30, 2021.~~

The weakening in macroeconomic conditions since the outbreak of COVID-19 pandemic in January 2020 continued to exacerbate touch screen business environment. The Company’s business was negatively impacted and has continued to generate lower revenues during the nine months ended September 30, 2020. The Company has taken proactive efforts to market new models such as POS touchscreens and penetrate into new customers and into new regions. We had our sales increases of 72.2% in East China, 71.3% in Southwest China, 55.8% in North China, and 35.1% in South China.

~~(ii) Overseas market~~

~~For the nine-month period ended September~~ ~~30, 2021, revenues from the overseas market was $12.5 million as compared to $6.8 million of the same period of 2020,~~ ~~increased by $5.7 million or 83.8%~~ ~~mainly due to an increase of 72.9% in sales volume and an increase of 6.7% in the average selling price of our products.~~

~~The following table summarizes the breakdown of revenues by categories in~~ ~~US dollars~~:

Revenues
For the Nine-Month Ended September 30,

2021 2020 Change Change
Amount % Amount % Amount Margin%
(in US Dollars, except percentage)
Product categories by end applications
Automotive Touchscreens $ 10,574,802 28.5 % $ 6,510,640 31.5 % $ 4,064,162 62.4 %
Industrial Control Computer Touchscreens 7,060,893 19.0 % 4,383,103 21.2 % 2,677,790 61.1 %
Gaming Touchscreens 5,469,102 14.8 % 2,993,899 14.5 % 2,475,203 82.7 %
POS Touchscreens 5,580,657 15.0 % 2,442,123 11.8 % 3,138,534 128.5 %
Medical Touchscreens 4,960,325 13.4 % 2,274,261 11.0 % 2,686,064 118.1 %
Multi-Functional Printer Touchscreens 3,356,615 9.0 % 2,031,850 9.8 % 1,324,765 65.2 %
Others* 111,776 0.3 % 33,396 0.2 % 78,380 234.7 %
Total Revenues $ 37,114,170 100.0 % $ 20,669,272 100.0 % $ 16,444,898 79.2 %

*Others include applications in self-service kiosks, ticket vending machine and financial terminals.

The Company continued to shift production mix from traditional lower-end products such as touchscreens used in automotive and industrial control computer industries to high-end products such as touchscreens used in self-service kiosks, medical touchscreens, ticket vending machine and financial terminals., primarily due to (i) greater growth potential of computer screen models in China and (ii) the stronger demand and better quality demand from consumers’ recognition of higher-end touch screens made by better raw materials.

~~Gross Profit and Gross Profit Margin~~

Nine-Month Period Ended
September 30,
Change
(in millions, except percentage) 2021 2020 Amount %
Gross Profit $ 17.8 $ 10.5 $ 7.3 69.5 %
Gross Profit Margin 48.2 % 50.7 % (2.5 )%

Gross profit was $17.8 million during the nine-month period ended September 30, 2021, compared to $10.5 million in the same period of 2020. Our gross profit margin decreased to 48.2% for the nine-month period ended September 30, 2021 as compared to 50.7% for the same period of 2020, primarily due to the increasing raw materials and higher cost of goods sold, despite of our product mix shift to higher gross profit margin products such as POS touchscreens, gaming touchscreens, and industrial control computer touchscreens.

~~General and Administrative Expenses~~

Nine-Month Period Ended
September 30,
Change
(in millions, except percentage) 2021 2020 Amount %
General and Administrative Expenses $ 1.6 $ 1.5 $ 0.1 6.7 %
as a percentage of revenues 4.3 % 7.5 % (3.2 )%

General and administrative (G&A) expenses were $1.6 million for the nine-month period ended September 30, 2021, compared to $1.5 million in the same period in 2020, representing an increase of 6.7%, or $0.1 million. ~~The increase was primarily due to~~ (i) the increase of $0.4 million loss of VAT input credits due to Sichuan Wetouch ceasing operation and relocation to comply with local PRC government guidelines on local environment issues and the national overall plan (see Note 5 of our Condensed Consolidated Financial Statements (unaudited)) and (ii) the increase of $0.1$0.1 million accelerated amortization expense due to Sichuan Wetouch ceasing operation and relocation to comply with local PRC government guidelines on local environment issues and the national overall ~~plan (see Note 5 of our Condensed Consolidated Financial Statements (unaudited)), and (iii) partially offset by the increase of $0.3 million in miscellaneous expenses.~~plan.

Research and Development Expenses

	Nine-Month Period Ended September 30,						Change					Three-Month Period Ended March 31,						Change
(in US dollars, except percentage)	2021			2020			Amount		%			2022			2021			Amount		%
Research and Development Expenses	$	67,035		$	54,831		$	12,204		22.2	%	$	22,857		$	22,180		$	677		3.1	%
as a percentage of revenues		0.0	%		0.0	%				0.0	%		0.0	%		0.0	%				0.0	%

Research and development (R&D) expenses were ~~$67,035~~$22,857 for ~~the nine-month period~~three-month ended ~~September 30, 2021~~March 31, 2022 compared to ~~$54,831~~$22,180 in the same period in ~~2020,~~2021, representing an increase of ~~$12,204 mainly due to the increase of salary expenses.~~$677 in material consumption.

Share-based Compensation

	Nine-Month Period Ended September 30,						Change					Three-Month Period Ended March 31,						Change
(in millions, except percentage)	2021			2020			Amount		%			2022			2021			Amount			%
Share-based compensation	$	3.1		$	0.0		$	3.1		0.0	%	$	0.0		$	3.1		$	(3.1	)		0.0	%
as a percentage of revenues		8.4	%		0.0	%				8.4	%		0.0	%		29.0	%					(29.0	)%

Share-based compensation was ~~$3.1 million~~nil for the ~~nine-month~~three-month period ended ~~September 30, 2021~~March 31, 2022, compared to ~~nil~~$3.1 million in the same period in ~~2020.~~2021. On January 1, 2021, the Board of Directors of the Company authorized the issuance of an aggregate of 310,830 shares and 631,080 warrants to ~~Ascendant Global Advisors, Inc.~~an external consultant for advisory services that had been rendered. The Company recognized relevant share-based compensation expense of $1,041,281 for the vested shares and $2,107,825 for the warrants.

Operating Income

Total operating income was ~~$12.6~~$3.4 million for the ~~nine-month~~three-month period ended ~~September 30, 202~~March 31, 2022 as compared to ~~$8.9~~$1.4 million of the same period of last year, primarily due to ~~higher gross profit~~the decrease of $3.1 million share-based compensation expenses for the three-month period ended March 31, 2021, partially offset by the ~~higher G&A~~decrease of $0.7 million in gross profit, and the increase of $0.3 million in selling and administrative expenses ~~and share-based compensation expenses.~~for the three-month period ended March 31, 2022.

Gain on changes in fair value of Common Stock Purchase Warrants

	Three-Month Period Ended March 31,						Change
(in millions, except percentage)	2022			2021			Amount		%
Gain on changes in fair value of Common Stock Purchase Warrants	$	0.2		$	0.0		$	0.2		0.0	%
as a percentage of revenues		1.7	%		0.0	%				1.7	%

Gain on changes in fair value of common stock purchase warrants was $160,443 for the three-month period ended March 31, 2022, as compared to nil in 2021 (See Note 9 (b)).

Gain on Asset Disposal

Nine-Month Period Ended
September 30,
Change
(in millions, except percentage) 2021 2020 Amount %
Gain on asset disposal $ 7.6 $ 0.0 $ 7.6 0.0 %
as a percentage of revenues 20.5 % 0.0 % 20.5 %

	Three-Month Period Ended March 31,						Change
(in millions, except percentage)	2022			2021			Amount			%
Gain on asset disposal	$	-		$	7.6		$	(7.6	)		(0.0	)%
as a percentage of revenues		0.0	%		71.0	%					(71.0	)%

Gain on asset disposal was ~~$7.6 million~~nil for the ~~nine-month~~three-month period ended ~~September 30, 2021~~March 31, 2022 as compared to ~~nil~~$7.6 million in the same period in ~~2020.~~2021. Pursuant to local PRC government guidelines on local environment issues and the national overall plan, Sichuan Wetouch iswas under ~~the~~ government directed relocation order to relocate no later than December 31, 2021 and received compensation accordingly. On March 18, 2021, pursuant to the agreement with the local government and an appraisal report issued by a mutual agreed appraiser, Sichuan Wetouch received a compensation of RMB115.2 million ($~~17.9~~18.2 million) (“Compensation Funds”) for the withdrawal of the right to use of state-owned land and the demolition of all buildings, facilities, equipment and all other appurtenances on the land. During the ~~nine-month~~three-month period ended ~~September 30,~~March 31, 2021, the Company recorded a gain of ~~$7,625,279~~$7,611,646 for the asset disposal.

Income Taxes

	Nine-Month Period Ended September 30,						Change						Three-Month Period Ended March 31,						Change
(in millions, except percentage)	2021			2020			Amount			%			2022			2021			Amount			%
Income before Income Taxes	$	21.0		$	9.1		$	11.9			130.8	%	$	3.5		$	9.7		$	(6.2	)		(63.9	)%
Income Tax (Expense)		(4.3	)		(1.1	)		(3.2	)		290.9	%		(1.0	)		(1.3	)		0.3			(23.1	)%
Effective income tax rate		20.6	%		12.2	%					8.4	%		28.1	%		13.9	%					14.2	%

The effective income tax rates for the ~~nine-month~~three-month periods ended ~~September 30,~~March 31, 2022 and 2021 were 28.1% and ~~2020 were 20.6% and 12.2%~~13.9%, respectively. The effective income tax rate for the ~~nine-month~~three-month period ended ~~September 30,~~March 31, 2022 and 2021 differs from the PRC statutory income tax rate of 25% primarily due to non deductible expenses of $160,443 resulting from gain of changes in fair value of Common Stock Purchase Warrants for the three-month periods ended March 31, 2022, and Sichuan Wetouch’s preferential income tax ~~rate.~~

~~Our PRC subsidiary Sichuan Vtouch had $54,1 million~~rate for the same period of ~~cash and cash equivalents as of September 30, 2021, which are planned to be indefinitely reinvested in PRC. The distributions from our PRC subsidiary are subject to~~ the U.S. federal income tax at 21%, less any applicable foreign tax credits. Due to our policy of indefinitely reinvesting our earnings in our PRC business, we have not provided for deferred income tax liabilities related to PRC withholding income tax on undistributed earnings of our PRC subsidiaries.last year, respectively.

Net Income

As a result of the above factors, we had a net income of ~~$16.7~~$2.5 million in the ~~nine-month period ended September 30, 2021~~first quarter of 2022 compared to a net income of ~~$8.0~~$8.4 million in the same ~~period~~quarter of ~~2020.~~2021.

Liquidity and Capital Resources

Historically, our primary uses of cash have been to finance working capital needs. We expect that we will be able to meet our needs to fund operations, capital expenditures and other commitments in the next 12 months primarily with our cash and cash equivalents, operating cash flows and bank borrowings.

We may, however, require additional cash resources due to changes in business conditions or other future developments. If these sources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or equity-linked securities could result in additional dilution to stockholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financial covenants that would restrict operations. Financing may not be available in amounts or on terms acceptable to us, or at all.

As of ~~September 30, 2021,~~March 31, 2022, we had current assets of ~~$66.9~~$61.4 million, consisting of ~~$54.1~~$44.8 million in cash, ~~$11.3~~$14.6 million in accounts receivable, ~~$0.5~~$0.3 million in inventories, and ~~$1.0~~$1.7 million in prepaid expenses other current assets. Our current liabilities as of ~~September 30, 2021,~~March 31, 2022, were ~~$2.2~~$5.1 million, which is comprised of ~~$1.1~~$1.0 million in income tax payable, ~~$0.8~~$1.3 in accounts payable, ~~and $0.3~~$0.8 million in accrued expenses and other current ~~liabilities.~~liabilities and $2.0 million convertible promissory notes payable.

The following is a summary of our cash flows provided by (used in) operating, investing, and financing activities for the ~~nine- month~~three-month period ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:

	Nine-Month Period Ended September 30,						Three-Month Period Ended March 31,
(in US Dollar millions)	2021			2020			2022			2021
Net cash provided by operating activities	$	13.0		$	4.9
Net cash provided by (used in) operating activities							$	(1.4	)	$	13.7
Net cash provided by investing activities		17.6			-			-			17.8
Net cash used in financing activities		-			(0.4	)		-			-
Effect of foreign currency exchange rate changes on cash and cash equivalents		(0.5	)		0.5			0.0			(1.0	)
Net increase in cash and cash equivalents		30.1			5.0			(1.4	)		30.5
Cash and cash equivalents at the beginning of period		24.0			14.3			46.2			24.0
Cash and cash equivalents at the end of period	$	54.1		$	19.3		$	44.8		$	54.5

Operating Activities

Net cash ~~provided by~~used in operating activities was ~~$13.0~~$1.4 million for the ~~nine-month~~three-month period ended ~~September 30, 2021,~~March 31, 2022, as compared to ~~$4.9~~$13.7 million provided by operating activities for the same period of the last year, primarily due to (i) the ~~increase~~decrease of ~~$8.7~~$5.8 million net income for the three-month period ended ~~September 30, 2021~~March 31, 2022 as compared to the same period of ~~2020,~~2021, (ii) the increase of $14.6 million of accounts receivable for the three-month period ended March 31, 2022, due to Sichuan Wetouch settling customer receivables for the three-month period ended March 31, 2021, (iii) the decrease of $3.1 million of share-based compensation ~~(iii)~~for the ~~increase of $1.5 million income tax payable due to income tax clearance for Sichuan Wetouch during the nine-month~~three-month period ended ~~September 30,~~March 31, 2021, ~~and (iv) the increase of $2.8 million account receivable due to the faster collection of customer accounts,~~ partially offset by ~~(v)~~(iv) the decrease of $7.6 million gain on asset disposal for the ~~September 30,~~three-month period ended March 31, 2021, and ~~(vi)~~(v) the ~~increase~~decrease of ~~0.5~~0.6 million of deferred income due to Sichuan Wetouch write-off government grant in the operating ceasing process for the ~~September 30, 2021, as compared to the same~~three-month period ~~of 2020.~~ended March 31, 2021.

Investing Activities

There were $17.8 million in proceeds from asset disposal for Sichuan Wetouch ~~and $0.2 million~~ for the ~~purchase of property, plant and equipment for the nine-month~~three-month period ended ~~September 30,~~March 31, 2021. See Note 5 in the interim financial information.

Financing Activities

There ~~was $0.4 million in payment of bank borrowings~~were nil financing activities for the ~~nine-month~~three-month period ended ~~September 30, 2020.~~March 31, 2022 and 2021.

As of ~~September 30, 2021,~~March 31, 2022, our cash and cash equivalents were ~~$54.1~~$44.8 million, as compared to ~~$24.0~~$46.2 million at December 31, ~~2020.~~2021.

Days Sales Outstanding (“DSO”) has decreased to 6585 days for the ~~nine-month~~three-month period ended ~~September 30, 2021~~March 31, 2022 from ~~161~~88 days for the year ended December 31, ~~2020~~2021 as a result of Sichuan Wetouch settling all accounts receivable collection from customers.

The following table provides an analysis of the aging of accounts receivable as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:

	September 30, 2021		December 31, 2020		March 31, 2022		December 31, 2021
-Current	$	4,323,500	$	3,531,963	$	9,210,001	$	1,403,187
-1-3 months past due		6,990,504		8,136,340		3,746,280		2,827,048
-4-6 months past due		29,110		123,581		1,654,904		3,742,732
7-12 months past due		-		160,844		-		18,070
-greater than 1 year past due		-		49,726		-		-
Total accounts receivable	$	11,343,114	$	12,002,454	$	14,611,185	$	7,991,037

The majority of the Company’s revenues and expenses were denominated primarily in Renminbi (“RMB”), the currency of the People’s Republic of China. There is no assurance that exchange rates between the RMB and the U.S. Dollar will remain stable. Inflation has not had a material impact on the Company’s business.

Our industry typical payment term is 180 days. Accounts receivable are written off against the allowances only after exhaustive collection efforts. There was a stalled collection activities during February and March 2020, during which most businesses except essential services were operated.

Based on past performance and current expectations, we believe our cash and cash equivalents provided by operating activities and financing activities will satisfy our working capital needs, capital expenditures and other liquidity requirements associated with our operations for at least the next 12 months.

Off Balance Sheet Arrangements

We have no off balance sheet arrangements.

1511

~~Item 3. Quantitative and Qualitative Disclosures About Market Risk.~~

~~Not applicable because we are a smaller reporting company.~~

~~Item 4. Controls and Procedures.~~

~~Disclosure Controls and Procedures~~

We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act 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 principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation and subject to the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of September 30, 2021 due to the material weaknesses in internal control over financial reporting described below. Because of our limited operations, we have a limited number of employees which prohibits a segregation of duties. In addition, we lack a formal audit committee with a financial expert. As we grow and expand our operations we will engage additional employees and experts as needed. However, there can be no assurance that our operations will expand.

~~Changes in Internal Control Over Financial Reporting~~

There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

~~Item~~ITEM 1. ~~Legal Proceedings.~~LEGAL PROCEEDINGS.

We know of no material, active, pending or threatened proceeding against us or our subsidiaries, nor are we, or any subsidiary, involved as a plaintiff or defendant in any material proceeding or pending litigation.

~~Item~~ITEM 1A. ~~Risk Factors.~~RISK FACTORS.

Not required for smaller reporting companies.

~~Item~~ITEM 2. ~~Unregistered Sales of Equity Securities and Use of Proceeds.~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

~~Item~~ITEM 3. ~~Defaults Upon Senior Securities.~~DEFAULTS UPON SENIOR SECURITIES.

None.

~~Item~~ITEM 4. ~~Mine Safety Disclosures.~~MINE SAFETY DISCLOSURES.

Not applicable.

~~Item~~ITEM 5. ~~Other Information.~~OTHER INFORMATION.

None.

~~Item~~ITEM 6. ~~Exhibits.~~EXHIBITS.

Exhibit No.		Description
4.1⁽¹⁾		Amendment No. 1 to Note
10.1⁽¹⁾		Amendment No. 1 to Regisration Rights Agreement
31.1		Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certifications of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certifications of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File ~~(formatted as~~(embedded within the Inline XBRL ~~and contained in Exhibit 101).~~document)

⁽¹⁾Incorporated by reference to the Exhibits to the Company’s Current Report on Form 8-K filed with the Commission on May 3, 2022

1712

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	WETOUCH TECHNOLOGY INC.

Date: ~~November 10, 2021~~May 16, 2022	By:	/s/ Zongyi Lian
	Name:	Zongyi Lian
	Title:	President and Chief Executive Officer (Principal Executive Officer)

Date: ~~November 10, 2021~~May 16, 2022	By:	/s/ Yuhua Huang
	Name:	Yuhua Huang
	Title:	Chief Financial Officer (Principal Financial and Accounting Officer)

1813

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
None		N/A		N/A

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒☐	Smaller reporting company	☒
(Do not check if a smaller reporting company)		Emerging growth company	☐

Condensed Consolidated Balance Sheets at ~~September 30, 2021~~March 31, 2022 (Unaudited) and December 31, ~~2020~~2021 (unaudited)	F-1

Condensed Consolidated Statements of Income and Comprehensive Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020 (unaudited)~~	F-2

Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (Unaudited)	F-3

Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (Unaudited)	~~F-5~~F-4

Notes to Condensed Consolidated Financial Statements ~~(unaudited)~~	~~F-6~~F-5 - ~~F-12~~F-15

	As of September 30, 2021		As of December 31, 2020		As of March 31, 2022		As of December 31, 2021

ASSETS
CURRENT ASSETS
Cash	$	54,067,358	$	23,963,861	$	44,820,433	$	46,163,704
Accounts receivable, net		11,343,114		11,926,835		14,611,185		7,991,037
Inventories		526,125		402,050		263,993		244,381
Due from related parties		-		76,619
Prepaid expenses and other current assets		1,006,710		228,443		1,737,357		2,445,894
TOTAL CURRENT ASSETS		66,943,307		36,597,808		61,432,968		56,845,016

Property, plant and equipment, net		190,202		9,491,195		11,892,836		11,833,302
Intangible assets, net		-		974,696
TOTAL ASSETS	$	67,133,509	$	47,063,699	$	73,325,804	$	68,678,318

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	833,955	$	891,848	$	1,256,499	$	800,586
Amount due to related parties		-		529,060
Due to related parties						34,833		34,669
Income tax payable		1,096,741		107,137		1,002,629		65,463
Accrued expenses and other current liabilities		324,315		503,455		776,201		310,407
Deferred grants		-		245,211
Convertible promissory notes payable						2,036,735		2,030,550
TOTAL CURRENT LIABILITIES		2,255,011		2,276,711		5,106,897		3,241,675

Deferred grants-non current		-		433,206
Common stock purchase warrants liability						968,192		1,128,635
TOTAL LIABILITIES	$	2,255,011	$	2,709,917	$	6,075,089	$	4,370,310

COMMITMENTS AND CONTINGENCIES		-
COMMITMENTS AND CONTINGENCIES (Note 13)						-		-
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 300,000,000 shares authorized, 31,811,523 and 31,500,693 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively	$	31,812	$	31,501
Common stock, $0.001 par value, 300,000,000 shares authorized, 31,811,523 and 31,811,523 issued and outstanding as of March 31, 2022 and December 31, 2021, respectively					$	31,812	$	31,812
Additional paid in capital		4,221,727		1,072,932		2,333,621		2,333,621
Statutory reserve		3,062,159		3,062,159		5,067,243		5,067,243
Retained earnings		55,933,106		39,229,282		57,172,677		54,610,164
Accumulated other comprehensive income		1,629,694		957,908		2,645,362		2,265,168
TOTAL STOCKHOLDERS’ EQUITY		64,878,498		44,353,782		67,250,715		64,308,008
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	67,133,509	$	47,063,699	$	73,325,804	$	68,678,318

	2021			2020			2021			2020
	Three-Month Period Ended September 30,						Nine-Month Period Ended September 30,
	2021			2020			2021			2020
REVENUES
Revenue from customers	$	11,165,980		$	11,904,120		$	37,016,616		$	20,669,272
Revenues from related parties		-			-			97,554			-
Total Revenues		11,165,980			11,904,120			37,114,170			20,669,272
COST OF REVENUES
Cost of revenues from customers		(6,370,278	)		(5,716,594	)		(19,179,253	)		(10,180,477	)
Cost of revenues related parties		-			-			(97,554	)		-

Total Cost of revenues		(6,370,278	)		(5,716,594	)		(19,276,807	)		(10,180,477	)
GROSS PROFIT		4,795,702			6,187,526			17,837,363			10,488,795

OPERATING EXPENSES
Selling expenses		(136,164	)		(29,028	)		(349,561	)		(73,960	)
General and administrative expenses		(298,047	)		(952,824	)		(1,618,753	)		(1,512,761	)
Research and development expenses		(22,267	)		(21,532	)		(67,035	)		(54,831	)
Share-based compensation		-			-			(3,149,106	)		-
OPERATING EXPENSES		(456,478	)		(1,003,384	)		(5,184,455	)		(1,641,552	)

INCOME FROM OPERATIONS		4,339,224			5,184,142			12,652,908			8,847,243

Interest income, net		28,798			21,450			64,184			55,166
Government grant		-			57,922			692,952			185,905
Gain on asset disposal		-			-			7,625,279			-
TOTAL OTHER INCOME		28,798			79,372			8,382,415			241,071

INCOME BEFORE INCOME TAX EXPENSE		4,368,022			5,263,514			21,035,323			9,088,314

INCOME TAX EXPENSE		(1,092,547	)		(537,019	)		(4,331,499	)		(1,108,849	)

NET INCOME	$	3,275,475		$	4,726,495		$	16,703,824		$	7,979,465

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustment		139,206			1,530,474			671,786			1,052,308
COMPREHENSIVE INCOME	$	3,414,681		$	6,256,969		$	17,375,610		$	9,031,773

EARNINGS PER COMMON SHARE
Basic	$	0.1		$	0.17		$	0.53		$	0.28
Diluted	$	0.1		$	0.17		$	0.53		$	0.28
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic()		31,811,523			28,000,000			31,811,523			28,000,000
Diluted()		32,653,163			28,000,000			32,653,163			28,000,000

		PAGE
PART I - FINANCIAL INFORMATION		4

Item 1.	Financial Statements	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5
	4
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	1613

Item 4.	Controls and Procedures	1613

PART II - OTHER INFORMATION		12

Item 1.	Legal Proceedings	12
	16
Item 1A.	Risk Factors	12
	16
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	12
	16
Item 3.	Defaults Upon Senior Securities	12
	16
Item 4.	Mine Safety Disclosure	12
	17
Item 5.	Other Information	12
	17
Item 6.	Exhibits	1712
~~SIGNATURES~~	18
SIGNATURES		13

	2022			2021
	For the three months ended March 31,
	2022			2021

REVENUES
Revenue from customers	$	11,994,547		$	10,615,924
Revenues from related parties		-			97,380
Total Revenues		11,994,547			10,713,304
COST OF REVENUES
Cost of revenues from customers		(7,683,792	)		(5,571,806	)
Cost of revenues related parties		-			-
Total Cost of revenues		(7,683,792	)		(5,571,806	)
GROSS PROFIT		4,310,755			5,141,498

OPERATING EXPENSES
Selling expenses		(485,147	)		(87,823	)
General and administrative expenses		(372,338	)		(494,897	)
Research and development expenses		(22,857	)		(22,180	)
Share-based compensation		-			(3,149,106	)
Total operating expenses		(880,342	)		(3,754,006	)

INCOME FROM OPERATIONS		3,430,413			1,387,492

OTHER INCOME (EXPENSES)

Interest income		29,134			22,015
Interest expense		(56,172	)		(4	)
Government grant		-			691,713
Gain on asset disposal		-			7,611,646
Gain on changes in fair value of common stock purchase warrants liability		160,443			-
TOTAL OTHER NET		133,405			8,325,370

INCOME BEFORE INCOME TAX EXPENSE		3,563,818			9,712,862

INCOME TAX EXPENSE		(1,001,305	)		(1,351,613	)

NET INCOME	$	2,562,513		$	8,361,249

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustment		380,194			(277,199
COMPREHENSIVE INCOME	$	2,942,707		$	8,084,050

EARNINGS PER COMMON SHARE
Basic	$	0.08		$	0.25
Diluted	$	0.08		$	0.25

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic		31,811,523			31,810,834
Diluted		32,653,163			32,652,474

	Shares		Amount		capital		reserve		Earnings		loss			equity
	Common stock at Par value $0.001				Additional paid-in		Statutory		Retained		Accumulated other comprehensive			Total stockholders’		Common stock at Par value $0.001				Additional paid-in		Statutory		Retained		Accumulated other comprehensive			Total stockholders’
	Shares		Amount		capital		reserve		Earnings		loss			equity		Shares		Amount		capital		reserve		Earnings		Income (loss)			equity

Balance at July 1, 2020()		28,000,000	$	28,000	$	14,034	$	2,003,569	$	34,610,464	$	(2,213,154	)	$	34,442,913
Balance at December 31 2020																	31,500,693	$	31,501	$	1,072,932	$	3,062,159	$	39,229,282	$	957,908		$	44,353,782

Share-based compensation																	310,830		311		3,148,795		-				-			3,149,106
Share-based compensation, shares
Net income										4,726,495					4,726,495										8,361,249					8,361,249
Foreign currency translation adjustment		-		-		-		-		-		1,530,474			1,530,474		-		-		-		-		-		(277,199	)		(277,199	)

Balance at September 30, 2020		28,000,000	$	28,000	$	14,034	$	2,003,569	$	39,336,959	$	(682,680	)	$	40,699,882
Balance at March 31, 2021																	31,811,523	$	31,812	$	4,221,727	$	3,062,159	$	47,590,531	$	680,709		$	55,586,938

	September 30, 2021		December 31 2020			March 31, 2022		December 31 2021
Accounts receivable	$	11,343,114	$	12,002,454		$	14,611,185	$	7,991,037
Allowance for doubtful accounts		-		(75,619	)		-		-
Accounts receivable, net	$	11,343,114	$	11,926,835		$	14,611,185	$	7,991,037

	September 30, 2021		December 31, 2020
Land use rights	$	-	$	1,016,215
Patents		-		417,919
Subtotal		-		1,434,134
Less: accumulated amortization for patents		-		(310,393	)
Accumulated amortization for land use right		-		(149,045	)
Subtotal		-		(459,438	)
Intangible assets, net	$	-	$	974,696

	Relationship	September 30, 2021		December 31, 2020		Note
Chengdu Wetouch Technology Co., Ltd (“Chengdu Wetouch”)	94% owned by Mr. Guangde Cai & 2% by Mr. Shengyong Li	$	-	$	134,616	Operating expense paid on behalf of the Company
Meishan Vtouch Electronics Technology Co., Ltd.	95% owned by Mr. Guangde Cai and 5% by Chengdu Wetouch		-		68,402	Operating expense paid on behalf of the Company
Chengdu Vtouch Intelligence Science & Technology Co., Ltd.	100% owned by HK Vtouch Holding Group Co., Ltd.		-		-	Operating expenses paid on behalf of the Company
Mr. Guangde Cai	Chairman and CEO of the Company		-		326,042	Payable to employee
Total		$	-	$	529,060

	For the Nine-Month Ended September 30,
	2021					2020					Change		Change
	Amount		%			Amount		%			Amount		%
	(in US Dollar millions except percentage)
Revenue from sales to customers in PRC	$	24.6		66.3	%	$	13.9		67.1	%	$	10.7		77.0	%
Revenue from sales to customers overseas		12.5		33.7	%		6.8		32.9	%		5.7		83.8	%
Total Revenues	$	37.1		100	%	$	20.7		100	%	$	16.4		79.2	%