UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended ~~March 31,~~June 30, 2023

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

Commission File Number: 000-56215

WETOUCH TECHNOLOGY INC.

(Exact name of registrant as specified in its charter)

Nevada

20-4080330

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

No.29, Third Main Avenue, Shigao Town, Renshou County

Meishan, Sichuan, China 620500

(Address of principal executive offices) (Zip Code)

(86) 028-37390666

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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

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.

Yes ☒ No ☐

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). Yes ☒ No ☐

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.

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

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).

Yes ☐ No ☒

As of ~~May 22,~~August 15, 2023, the registrant had ~~193,604,965~~ 194,304,965shares of common stock issued and outstanding.

WETOUCH TECHNOLOGY INC.

QUARTERLY REPORT ON FORM 10-Q

~~March 31,~~June 30, 2023

TABLE OF CONTENTS

		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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	1214

Item 4.	Controls and Procedures	1214

PART II - OTHER INFORMATION		1315

Item 1.	Legal Proceedings	1315

Item 1A.	Risk Factors	1315

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	1315

Item 3.	Defaults Upon Senior Securities	1315

Item 4.	Mine Safety Disclosure	1315

Item 5.	Other Information	1315

Item 6.	Exhibits	1315

SIGNATURES		1416

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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, 2022 which we filed with the Securities and Exchange Commission (“SEC”) on April 17, 2023 (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.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

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.

WETOUCH TECHNOLOGY INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~MARCH 31,~~JUNE 30, 2023

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets at ~~March 31,~~June 30, 2023 and December 31, 2022 (Unaudited)	F-1

Condensed Consolidated Statements of Income and Comprehensive Income for the three and six months ended ~~March 31,~~June 30, 2023 and 2022 (Unaudited)	F-2

Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and six months ended ~~March 31,~~June 30, 2023 and 2022 (Unaudited)	F-3

Condensed Consolidated Statements of Cash Flows for the three and six months ended ~~March 31,~~June 30, 2023 and 2022 (Unaudited)	F-4

Notes to Condensed Consolidated Financial Statements	F-5 - ~~F-18~~F-15

WETOUCH TECHNOLOGY INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	As of March 31,			As of December 31,			As of June 30,			As of December 31,
	2023			2022			2023			2022

ASSETS
CURRENT ASSETS
Cash	$	93,258,248		$	51,250,505		$	92,214,861		$	51,250,505
Accounts receivable, net		13,086,991			9,057,741			13,963,453			9,057,741
Inventories		171,623			423,276			170,356			423,276
Due from a related party		1,080			-			1,023			-
Prepaid expenses and other current assets		1,146,593			1,450,620			1,054,421			1,450,620
TOTAL CURRENT ASSETS		107,664,535			62,182,142			107,404,114			62,182,142

Property, plant and equipment, net		10,968,268			10,923,610			10,385,590			10,923,610
TOTAL ASSETS	$	118,632,803		$	73,105,752		$	117,789,704		$	73,105,752

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	2,088,520		$	1,383,094		$	2,369,245		$	1,383,094
Loan from a third party		472,526			385,791			467,936			385,791
Due to a related party		-			1,665			-			1,665
Income tax payable		1,400,221			22,152			1,503,458			22,152
Accrued expenses and other current liabilities		2,124,757			944,624			2,572,533			944,624
Convertible promissory notes payable		1,245,760			1,277,282			1,249,866			1,277,282
TOTAL CURRENT LIABILITIES		7,331,784			4,014,608			8,163,038			4,014,608

Common stock purchase warrants liability		354,559			256,957			212,174			256,957
TOTAL LIABILITIES	$	7,686,343		$	4,271,565		$	8,375,212		$	4,271,565

COMMITMENTS AND CONTINGENCIES (Note 13)		-			-			-			-
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 300,000,000 shares authorized, 193,604,965 and 33,604,965 issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	$	193,605		$	33,605
Common stock, $0.001 par value, 300,000,000 shares authorized, 193,904,965 and 33,604,965 issued and outstanding as of June 30, 2023 and December 31, 2022, respectively							$	193,905		$	33,605
Additional paid in capital		43,210,253			3,370,253			43,209,953			3,370,253
Statutory reserve		6,040,961			6,040,961			6,040,961			6,040,961
Retained earnings		65,160,141			62,366,892			69,833,124			62,366,892
Accumulated other comprehensive income		(3,658,500	)		(2,977,524	)		(9,863,451	)		(2,977,524	)
TOTAL STOCKHOLDERS’ EQUITY		110,946,460			68,834,187			109,414,492			68,834,187
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	118,632,803		$	73,105,752		$	117,789,704		$	73,105,752

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

F-1

WETOUCH TECHNOLOGY INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)

	2023			2022
	For the three months ended March 31,						Three-Month Period Ended						Six-Month Period Ended
	2023			2022			June 30,						June 30,
							2023			2022			2023			2022
REVENUES	$	13,433,461		$	11,994,547		$	12,774,432		$	11,752,934		$	26,207,893		$	23,747,481
Cost of revenues		(7,394,661	)		(7,683,792	)
COST OF REVENUES								(6,521,015	)		(6,701,935	)		(13,915,676	)		(14,385,727	)
GROSS PROFIT		6,038,800			4,310,755			6,253,417			5,050,999			12,292,217			9,361,754

OPERATING EXPENSES
Selling expenses		(50,705	)		(485,147	)		(81,360	)		(532,101	)		(132,065	)		(1,017,248	)
General and administrative expenses		(1,666,756	)		(372,338	)		(56,907	)		(443,146	)		(1,723,663	)		(815,484	)

Research and development expenses		(20,885	)		(22,857	)		(20,384	)		(21,713	)		(41,269	)		(44,570	)
Total operating expenses		(1,738,346	)		(880,342	)
OPERATING EXPENSES								(158,651	)		(996,960	)		(1,896,997	)		(1,877,302	)

INCOME FROM OPERATIONS		4,300,454			3,430,413			6,094,766			4,054,039			10,395,220			7,484,452

OTHER INCOME (EXPENSES)

Interest income		29,195			29,134			30,034			30,502			59,229			59,636
Interest expense		(33,399	)		(56,172	)		(38,108	)		(57,391	)		(71,507	)		(113,563	)
Government grant		-			-
Gain (loss) on changes in fair value of common stock purchase warrants liability		(97,602	)		160,443
TOTAL OTHER INCOME (EXPENSES)		(101,806	)		133,405
Gain on changes in fair value of common stock purchase warrants liability								142,386			62,208			44,784			222,651
TOTAL OTHER INCOME								134,312			35,319			32,506			168,724

INCOME BEFORE INCOME TAX EXPENSE		4,198,648			3,563,818			6,229,078			4,089,358			10,427,726			7,653,176

INCOME TAX EXPENSE		(1,405,399	)		(1,001,305	)		(1,556,095	)		(1,158,653	)		(2,961,494	)		(2,159,958	)

NET INCOME	$	2,793,249		$	2,562,513		$	4,672,983		$	2,930,705		$	7,466,232		$	5,493,218

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustment		(680,976	)		380,194			(6,204,951	)		(3,782,778	)		(6,885,927	)		(3,402,584	)
COMPREHENSIVE INCOME	$	2,112,273		$	2,942,707
COMPREHENSIVE INCOME (LOSS)							$	(1,531,968	)	$	(852,073	)	$	580,305		$	2,090,634

EARNINGS PER COMMON SHARE
Basic	$	0.02		$	0.08		$	0.02		$	0.09		$	0.04		$	0.17
Diluted	$	0.02		$	0.08		$	0.02		$	0.09		$	0.04		$	0.17

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic		159,827,187			31,811,523			193,654,416			31,991,065			176,834,247			32,078,536
Diluted		162,059,750			32,653,163			195,586,979			32,605,193			180,699,373			32,692,664

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

F-2

WETOUCH TECHNOLODY INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

	Shares		Amount		capital		reserve		Earnings		income		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		income		equity		Shares		Amount		capital			reserve		Earnings		income			equity

Balance at December 31 2021		31,811,523	$	31,812	$	2,333,621	$	5,067,243	$	54,610,164	$	2,265,168	$	64,308,008
Balance at April 1, 2022																31,811,523	$	31,812	$	2,333,621		$	5,067,243	$	57,172,677	$	2,645,362		$	67,250,715

Shares issued cashless for warrants																227,512		228		(228	)		-		-		-			-
Net income										2,562,513				2,562,513											2,930,705					2,930,705
Foreign currency translation adjustment		-		-		-		-		-		380,184		380,184		-		-		-			-		-		(3,782,778	)		(3,782,778	)

Balance at March 31, 2022		31,811,523	$	31,812	$	2,333,621	$	5,067,243	$	57,172,677	$	2,645,352	$	67,250,715
Balance at June 30, 2022																32,039,035	$	32,040	$	2,333,393		$	5,067,243	$	60,103,382	$	(1,137,416	)	$	66,398,642

Common stock at
Par value $0.001

Additional
paid-in
Statutory Retained
Accumulated
other
comprehensive

Total
stockholders’

Shares Amount capital reserve Earnings Income (loss) equity

Balance at December 31 2022 33,604,965 $ 33,605 $ 3,370,253 $ 6,040,961 $ 62,366,892 $ (2,977,524 ) $ 68,834,187

Shares issued to private placement 160,000,000 160,000 39,840,000 - - 40,000,000
Net income 2,793,249 2,793,249
Foreign currency translation adjustment - - - - - (680,976 ) (680,976 )

Balance at March 31, 2023 193,604,965 $ 193,605 $ 43,210,253 $ 6,040,961 $ 65,160,141 $ 3,658,500 $ 110,946,460

Common stock at
Par value $0.001

Additional
paid-in
Statutory Retained
Accumulated
other
comprehensive

Total
stockholders’

Shares Amount capital reserve Earnings Income (loss) equity

Balance at April 1, 2023 193,604,965 $ 193,605 $ 43,210,253 $ 6,040,961 $ 65,160,141 $ (3,658,500 ) $ 110,946,460
Exercise of warrants issued to third parties in conjunction with debt issuance in 2021 300,000 300 (300 ) - - - -
Net income 4,672,983 4,672,983
Foreign currency translation adjustment - - - - - (6,204,951 ) (6,204,951 )

Balance at June 30, 2023 193,904,965 $ 193,905 $ 43,209,953 $ 6,040,961 $ 69,833,124 $ (9,863,451 ) $ 109,414,492

Common stock at
Par value $0.001

Additional
paid-in
Statutory Retained
Accumulated
other
comprehensive

Total
stockholders’

Shares Amount capital reserve Earnings income equity

Balance at December 31, 2021 31,811,523 $ 31,812 $ 2,333,621 $ 5,067,243 $ 54,610,164 $ 2,265,168 $ 64,308,008

Shares issued cashless for warrants 227,512 228 (228 ) - - - -
Net income - - - - 5,493,218 - 5,493,218
Foreign currency translation adjustment - - - - - (3,402,584 ) (3,402,584 )

Balance at June 30, 2022 32,039,035 $ 32,040 $ 2,333,393 $ 5,067,243 $ 60,103,382 $ (1,137,416 ) $ 66,398,642

Common stock at
Par value $0.001

Additional
paid-in
Statutory Retained
Accumulated
other
comprehensive

Total
stockholders’

Shares Amount capital reserve Earnings Income (loss) equity

Balance at December 31, 2022 33,604,965 $ 33,605 $ 3,370,253 $ 6,040,961 $ 62,366,892 $ (2,977,524 ) $ 68,834,187

Shares issued to private placement 160,000,000 160,000 39,840,000 - - - 40,000,000
Exercise of warrants issued to third parties in conjunction with debt issuance in 2021 300,000 300 (300 ) - - - -
Net income - - - - 7,466,232 - 7,466,232
Foreign currency translation adjustment - - - - - (6,885,927 ) (6,885,927 )

Balance at June 30, 2023 193,904,965 $ 193,905 $ 43,209,953 $ 6,040,961 $ 69,833,124 $ (9,863,451 ) $ 109,414,492

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

F-3

WETOUCH TECHNOLODY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

2023 2022

For the three-months ended
March 31,

For the six-months ended
June 30,

2023 2022 2023 2022

Cash flows from operating activities
Net income $ 2,793,249 $ 2,562,513 $ 7,466,232 $ 5,493,218
Adjustments to reconcile net income to cash provided by operating activities
Depreciation and amortization 2,433 2,622
Depreciation 4,805 10,169
Amortization of discounts and issuance cost of the notes 6,941 12,655 15,151 25,896
Gain (loss) on changes in fair value of common stock purchase warrants liability 97,602 (160,443 )
Gain on changes in fair value of common stock purchase warrants liability (44,784 ) (222,651 )

Changes in operating assets and liabilities:
Accounts receivable (4,004,967 ) (6,350,920 ) (5,597,334 ) (7,727,876 )
Amounts due from related parties (1,076 ) - (1,158 ) -
Inventories 254,727 (11,620 ) 239,546 (276,717 )
Prepaid expenses and other current assets 307,380 741,854 339,335 1,183,520
Accounts payable 702,052 429,214 1,102,812 1,365,543
Amounts due to related parties (1,344 ) (53,472 ) 2,164 (22,417 )
Income tax payable 1,383,069 933,794 1,551,492 1,112,391
Accrued expenses and other current liabilities 1,176,473 456,056 1,680,447 557,669
Net cash provided by (used in) operating activities 2,716,539 (1,437,747 )
Net cash provided by operating activities 6,758,708 1,498,745

Cash flows from investing activities

Net cash provided by investing activities - - - -

Cash flows from financing activities

Proceeds from stock issuance of private placement 40,000,000 - 40,000,000 -
Proceeds from interest-free advances from a third party 86,735 - 82,145 -
Repayments of convertible promissory notes payable (35,000 ) - (35,000 ) -
Net cash used in financing activities 40,051,735 -
Net cash provided by financing activities 40,047,145 -

Effect of changes of foreign exchange rates on cash (760,531 ) 94,476 (5,841,498 ) (2,516,649 )
Net increase in cash 42,007,743 (1,343,271 ) 40,964,356 (1,017,904 )
Cash, beginning of period 51,250,505 46,163,704 51,250,505 46,163,704
Cash, end of period $ 93,258,248 $ 44,820,433 $ 92,214,861 $ 45,145,800
Supplemental disclosures of cash flow information
Income tax paid $ 22,330 $ 1,001,305 $ 2,961,494 $ 1,045,215

The accompanying notes are an integral part of these condensed consolidated financial statements.
F-4

WETOUCH TECHNOLOGY INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 1 — BUSINESS DESCRIPTION
Wetouch Technology Inc. (“Wetouch”, or the “Company”), 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 whose only asset, held through a subsidiary, is 100% of the registered capital of Sichuan Wetouch Technology Co. Ltd. (“Sichuan Wetouch”), a limited liability company organized under the laws of the People’s Republic of China (“China” or “PRC”). Sichuan Wetouch is primarily engaged in the business of research development, manufacture, and distribution of touchscreen displays to customers both in PRC and overseas. The touchscreen products, which are manufactured by the Company, are primarily for use in computer components.

The 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 prior years are retrospectively adjusted according.

Corporate History of BVI Wetouch

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

In June 2021, Hong Kong Wetouch completed its dissolution process pursuant to the minutes of its special shareholder meeting.

Sichuan Wetouch Technology Co. Ltd. (“Sichuan Wetouch”) was formed on May 6, 2011 in the People’s Republic of China (“PRC”) and 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 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. Sichuan Vtouch took over the operating business of Sichuan Wetouch.

On March 30, 2023 an independent third party acquired all shares of Sichuan ~~Wetouch.~~Wetouch in a nominal amount.

As a result of the above restructuring, HK Wetouch became the sole shareholder of Sichuan Vtouch.

The following diagram illustrates our current corporate structure:
F-5

Note 2 — BASIS OF PRESENTATION

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, 2022 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, 2022, 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 ~~March 31,~~June 30, 2023, the results of operations and cash flows for the ~~three-month~~six-month periods ended ~~March 31,~~June 30, 2023 and 2022 have been made. However, the results of operations included in such financial statements may not necessarily be indicative of annual results.

Use of Estimates

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.

Significant Accounting Policies

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 Company’s 2022 audited consolidated financial statements. During the ~~three-month~~six-month periods ended ~~March 31,~~June 30, 2023, there were no significant changes made to Wetouch significant accounting policies.

F-6

NOTE-3- ACCOUNTS RECEIVABLE

Accounts receivable consists of the following:
SCHEDULE OF ACCOUNTS RECEIVABLE
March 31, 2023
December 31 2022
June 30, 2023 December 31 2022
Accounts receivable $ 13,086,991 $ 9,057,741 $ 13,963,453 $ 9,057,741
Allowance for doubtful accounts - - - -
Accounts receivable, net $ 13,086,991 $ 9,057,741 $ 13,963,453 $ 9,057,741

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

NOTE-4 — PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:
SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS
March 31, 2023 December 31, 2022 June 30, 2023 December 31, 2022
Advance to suppliers $ 345,204 $ 333,920 $ 327,861 $ 333,920
VAT input credits 38,549 355,482 - 355,482
Issue cost related to convertible promissory notes 78,150 81,614 74,047 81,614
Prepayment for land use right (i) 571,558 569,105
Security deposit (ii) 57,225 56,979
Others receivable (iii) 55,907 53,520
Prepayment for land use right (i) 541,314 569,105
Security deposit (ii) 54,197 56,979
Others receivable (iii) 57,002 53,520
Prepaid expenses and other current assets $ 1,146,593 $ 1,450,620 $ 1,054,421 $ 1,450,620

(i) On July 23, 2021, Sichuan Vtouch entered into a contract with Chengdu Wenjiang District Planning and Natural Resources Bureau for purchasing a land use right of 131,010 square feet with a consideration of RMB3,925,233 (equivalent to $~~571,558~~541,314) for the new facility. The Company made a full prepayment by November 18, 2021. Upon a certificate of land use right issued by the local government, which is estimated to be obtained by the fourth quarter of 2023, the Company will reclassify this prepayment to intangible assets accordingly.

(ii) On July 28, 2021, Sichuan Vtouch made a security deposit of RMB393,000 (equivalent to $~~57,225~~54,197) to Chengdu Cross-Strait Science and Technology Industry Development Park Management Committee to obtain a construction license for new facility. This deposit will be refunded upon the issuance of the construction license by the end of 2023.

(iii) Other receivables are mainly employee advances, and prepaid expenses.

NOTE 5— PROPERTY, PLANT AND EQUIPMENT, NET
SCHEDULE OF PROPERTY , PLANT AND EQUIPMENT
March 31, 2023 December 31, 2022 June 30, 2023 December 31, 2022
Buildings $ 12,540 $ 12,487 $ 11,877 $ 12,487
Vehicles 42,637 42,453 40,380 42,453
Construction in progress 10,929,958 10,883,051 10,351,603 10,883,051
Subtotal 10,985,135 10,937,991 10,403,860 10,937,991
Less: accumulated depreciation (16,867 ) (14,381 ) (18,270 ) (14,381 )
Property, plant and equipment, net $ 10,968,268 $ 10,923,610 $ 10,385,590 $ 10,923,610

Depreciation expense was $~~2,433~~2,372and $~~2,622~~7,216 for the three-month period ended ~~March 31,~~June 30, 2023 and 2022, respectively, and $4,805 and $9,838 for the six-month period ended June 30, 2023 and 2022, 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 ($~~18.2~~15.9 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.

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. (later renamed as Meishan Huantian Industrial 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 ($~~43,683~~41,372), andrenewed on December 31, 2021 at a monthly rent of RMB 400,000 ($~~58,244)~~55,162) from January 1, 2022 till October 31, 2023 for the use of the Demised Properties.

F-7

NOTE 6 – RELATED PARTY TRANSACTIONS

Amounts due from a related party are as ~~follows~~:
follows:
SCHEDULE OF RELATED PARTY TRANSACTIONS
Relationship March 31, 2023 December 31, 2022 Note

Mr. Zongyi Lian President and CEO of the Company $ 1,080 $ - Receivable from employee
Total $ 1,080 $       -
Relationship June 30, 2023 December 31, 2022 Note

Mr. Zongyi Lian President and CEO of the Company $ 1,023 $                      - Receivable from employee
Total $ 1,023 $ -

Amounts due to a related party are as ~~follows~~:follows:

Relationship March 31, 2023 December 31, 2022 Note Relationship June 30, 2023 December 31, 2022 Note
Mr. Zongyi Lian President and CEO of the Company - 1,665 Payable to employee President and CEO of the Company - 1,665 Payable to employee
Total $         - $ 1,665 $ - $ 1,665
NOTE 7 — INCOME TAXES
Wetouch

Wetouch Technology Inc. files a U.S. federal income tax return.

BVI Wetouch

Under the current laws of the British Virgin Islands, BVI Wetouch, 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 rate of 16.5%.

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.

On March 30, 2023 an independent third party acquired all shares of Sichuan Wetouch.

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

The effective income tax rates for the ~~three-month~~six-month periods ended ~~March 31,~~June 30, 2023 and 2022 were ~~33.5~~28.4% and ~~28.1~~28.2%, respectively.

The estimated effective income tax rate for the year ended December 31, 2023 would be similar to actual effective tax rate of the ~~three-month~~six-month periods ended ~~March 31,~~June 30, 2023.

F-8

NOTE 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
March 31, 2023
December 31, 2022
June 30, 2023 December 31, 2022
Advance from customers $ 525,782 $ 397,886 $ 530,739 $ 397,886
Accrued payroll and employee benefits 89,054 89,359 83,034 89,359
Accrued interest expenses 148,592 122,135 178,490 122,135

Accrued underwriter fees (i) 1,200,000 - 1,200,000 -
Other tax payables (ii) - 261 321,377 261
Other payable to a former shareholder (iii) - 191,180 - 191,180
Accrued professional fees 99,412 -
Others (iv) 161,329 153,803 159,481 153,803
Accrued expenses and other current liabilities $ 2,124,757 $ 944,624 $ 2,572,533 $ 944,624

(i) On March 18, 2023, the Company entered into a private placement consent agreement with representatives related to the private placement consummated on January 19, 2023 (see Note 10) on the underwriting fees of US$1.2 million, payable only on the completion of the underwriting offering.

(ii) Other tax payables are mainly value added tax payable.

(iii) Other payable to a former shareholder was paid in March 2023.

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

NOTE 9 – CONVERTIBLE PROMISSORY NOTES PAYABLE

a) Convertible promissory notes
In October, November, and 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, November 5, November 16, November 29 and December 2 of ~~2022~~.2022. Net proceeds after debt issuance costs and debt discount were approximately US$1,793,000. Debt issuance costs in the amount of US$162,000 are recorded as deferred charges and included in the other current assets on the consolidated balance sheet. The debt discount and debt issuance costs are amortized into interest expense using the effective interest method over the terms of the Notes.

The details of convertible notes are as follows:

Unless the 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 fails to satisfy its loan obligation by the Maturity Date, the default interest rate will be 16%.

The Lenders have the right to convert any or all of 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 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 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.

F-9

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.

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.

The following table summarizes the outstanding promissory notes as of ~~March 31,~~June 30, 2023 and December 31, 2022 (dollars in thousands):

SUMMARY OF OUTSTANDING PROMISSORY NOTES
March 31, 2023 December 31, 2022 June 30, 2023 December 31, 2022
Interest rate Principal Amount Carrying Amount Principal Amount Carrying Amount Interest rate Principal Amount Carrying Amount Principal Amount Carrying Amount
Convertible Note - Talos Victory (Note 9 (b)) 8 % $ - $ - $ - - 8 % $ - $ - $ - -
Convertible Note - Mast Hill (Note 9 (b)) 8 % 725,000 639,400 740,000 635,535 8 % 725,000 658,988 740,000 635,535
Convertible Note - First Fire (Note 9 (b)) 8 % 176,250 156,466 181,250 156,594 8 % 176,250 125,922 181,250 156,594
Convertible Note - LGH Note 9 (b)) 8 % 202,500 188,949 207,500 188,987 8 % 202,500 194,094 207,500 188,987
Convertible Note - Fourth Man (Note 9 (b)) 8 % 152,000 129,322 157,000 128,703 8 % 152,000 133,510 157,000 128,703
Convertible Note - Jeffery Street Note 9 (b)) 8 % 165,000 136,809 170,000 142,554
Convertible Note - Blue Lake Note 9 (b))Total 8 % - - - -
Convertible Note - Jefferson Street Note 9 (b)) 8 % 165,000 141,240 170,000 142,554
Convertible Note - Blue Lake Note 9 (b)) 8 % - - - -
Total $ 1,420,750 $ 1,250,946 $ 1,455,750 $ 1,252,373 $ 1,420,750 $ 1,253,754 $ 1,455,750 $ 1,252,373
Amortization of discounts for the three months ended March 31, 2023
(5,186 )
Convertible promissory notes payable as of March 31, 2023 $ 1,245,760
Amortization of discounts for the six months ended June 30, 2023 (3,888 )
Convertible promissory notes payable as of June 30, 2023 $ 1,249,866

From December 28, 2022 to January 18, 2023, the remaining five (5) lenders and the Company entered into an amendment to the Note (“Amendment to Promissory Note”) extending maturity date for an additional 6 months.

For the ~~three-month~~six-month period ended ~~March 31~~,June 30, 2023 and 2022, the Company recognized interest expenses of the Notes in the amount of US$~~33,399~~ 71,507and US$~~56,172~~113,563, respectively.

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

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~~“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,~~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.

On January 17, 2022, we closed a private offering of ordinary shares and warrants to purchase ordinary shares. A total of 2,750,000 ordinary shares (the “Shares”) were issued to a total of five (5) investors (the “Investors”) at a subscription price of $0.80 per share for total subscription proceeds of $2,200,000. In addition, for each share subscribed for by the Investors, we issued one (1) warrant to purchase one (1) ordinary share at an exercise price of $0.88 per share, exercisable for a period of twenty-four (24) months (the “Warrants”). We have agreed to register the Investors’ re-sale of the Shares by way of a prospectus supplement to our currently effective unallocated shelf registration statement on Form F-3, (SEC File No. 333-267116). The offer and sale of the Shares and the Warrants was exempt under Rule 506 of Regulation D under the Securities Act of 1933 (the “Securities Act”). We engaged in no general solicitation or advertising with regard to the offering and the offering was made solely to “Accredited Investors” as defined in Rule 501 of Regulation D under the Securities Act.

On April 14, April 27, and September 1, 2022, three lenders exercised cashless for 115,540 (4th Man), 111,972 (Talos) and~~57,142~~ (Blue lake) warrant shares, respectively.

On June 16, 2023, one lender exercised cashless for 300,000 (Mast Hill) warrants shares.
F-11

The fair values of these warrants as of ~~March 31,~~June 30, 2023 were calculated using the Black-Scholes option-pricing model with the following assumptions:
SCHEDULE OF FAIR VALUE OF WARRANTS
March 31, 2023 June 30, 2023
Volatility (%) Expected dividends yield (%) Weighted average expected life (year) Risk-free interest rate (%) (per annum) Common stock purchase warrants liability as of December 31, 2022(US$) Changes of fair value of common stock purchase warrants liability
(+ (loss)/(- (gain)(US$) Common stock purchase warrants liability as of March 31, 2023 (US$) Volatility (%) Expected dividends yield (%) Weighted average expected life (year) Risk-free interest rate (%) (per annum) Common stock purchase warrants liability as of December 31, 2022(US$) Changes of fair value of common stock purchase warrants liability
(+ (loss)/(- (gain)(US$) Common stock purchase warrants liability as of June 30, 2023 (US$)
Convertible Note - Talos Victory (Note 9 (a)) 337.7 % $ 0.0 % $ 1.6 4.35 % 14,803 5,663 20,466 355.5 % $ 0.0 % $ 1.3 5.14 % 14,803 5,369 20,172
Convertible Note - Mast Hill (Note 9 (a)) 337.7 % 0.0 % 1.6 4.35 % 101,293 38,623 139,916 355.5 % 0.0 % 1.4 5.14 % 101,293 (101,293 ) -
Convertible Note - First Fire (Note 9 (a)) 337.7 % 0.0 % 1.6 4.35 % 33,919 12,883 46,802 355.5 % 0.0 % 1.4 5.14 % 33,919 12,315 46,234
Convertible Note - LGH Note 9 (a)) 337.7 % 0.0 % 1.7 4.35 % 34,028 12,888 46,916 355.5 % 0.0 % 1.4 5.14 % 34,028 12,355 46,383
Convertible Note - Fourth Man (Note 9 (ab)) 337.7 % 0.0 % 1.7 4.35 % 14,398 5,444 19,842 355.5 % 0.0 % 1.4 5.14 % 14,398 5,228 19,626
Convertible Note - Jeffery Street Note 9 (a))3,054 337.7 % 0.0 % 1.7 4.35 % 34,134 12,892 47,026
Convertible Note - Jefferson Street Note 9 (a))3,054 355.5 % 0.0 % 1.4 5.14 % 34,134 12,392 46,526
Convertible Note - Blue Lake Note 9 (a)) 337.7 % 0.0 % 1.7 4.35 % 24,382 9,209 33,591 355.5 % 0.0 % 1.4 5.14 % 24,382 8,851 33,233
Total Total 256,957 97,602 354,559 Total 256,957 (44,784 ) 212,174

(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

1) 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.

On April 14, April 27, 2022 and September 1, 2022, the Company issued cashless warrant shares of 115,540, 111,972 and 57,142 to three lenders respectively. (see Note 9 (b)).

During the year ended December 31, 2022, the Company issued 124,223 shares to a third party for warrant exercise (see Note 11).

During the year ended December 31, 2022, the Company issued 1,384,564 shares of common stock for the conversion of convertible promissory note payable (see note 9 (a)).

On January 19, 2023, the Company sold an aggregate of160,000,000 shares of the common stock to buyers of the private placement for an aggregate purchase price of $40,000,000, or $0.25 per ~~share.~~ share On January 20, 2023, the Company received net proceeds of $40 million accordingly.
During the six-month ended June 30, 2023, the Company issued 300,000 to a third party for warrant exercise (see Note 9).

As of ~~March 31,~~June 30, 2023, the Company had ~~193,604,965~~193,904,965 issued and outstanding shares.
~~2) Reverse Stock Split~~
~~On February 17, 2023, the Board authorized a reverse stock split with a ratio of not less than~~ ~~one to five (1:5) and not more than one to eighty (1:80)~~, with the exact amount and the timing of the reverse stock split to be as determined by the Chairman of the Board. Upon such reverse stock split becoming effective, the number of authorized shares of the common stock of the Company will also be decreased in the same ratio. Pursuant to Nevada Revised Statutes Section 78.209, the reverse stock split does not have to be approved by the shareholders of the Company.
NOTE 11- SHARE BASED COMPENSATION
The Company applied ASC 718 and related interpretations in accounting for measuring the cost of 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 authorized the issuance of an aggregate of 103,610 shares and 210,360 warrants 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 103,610 were vested on December 22, 2020 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 years, expected dividend rate of 0%0%, volatility of ~~43.5%~~43.5% and an average interest rate of ~~0.11%~~0.11%.

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 310,830 shares of common stock and 631,080 warrants were vested on January 1, 2021 and during the year ended December 31, 2022, 124,223 warrant shares were exercised cashless.

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 1.5 years, expected dividend rate of 0%0%, volatility of ~~215.4%~~215.4% and an average interest rate of ~~2.96%~~2.96%.

As of ~~March 31,~~June 30, 2023, the Company had 717,217 warrants outstanding related to above mentioned services with i) weighted average exercise price of $0.01; ii) weighted average remaining contractual life of ~~0.8~~0.5 years; and iii) aggregate intrinsic value of $~~0.2~~0.3 million.
~~For the three-month periods ended March 31, 2023 and 2022, the Company recognized relevant share-based compensation expense of~~ ~~nil~~ ~~and~~ ~~nil~~ ~~for the vested shares, and~~ ~~nil~~ ~~and~~ ~~nil~~ ~~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.

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.
For the three-month periods ended ~~March 31,~~June 30, 2023 and 2022, six customers accounted for 23.2%, 17.6%, 14.8%, 13.6%, 10.2% and 10.2%, and five customers accounted for ~~22.3%~~21.4%, ~~15.7%~~15.6%, ~~15.0%~~15.6%, ~~14.2%~~15.3, ~~12.2%~~% and ~~10.8%~~11.7%, respectively, of the Company’s revenue.
For the six-month periods ended June 30, 2023 and 2022, six customers accounted for ~~18.1%~~22.7%, ~~16.2%~~16.3%, ~~15.7%~~15.2%, ~~14.7%~~13.9%, ~~12.4%~~11.2% and ~~12.3%~~10.3%, and four customers accounted for 26.8%, 21.5%, 13.4% and 13.0%, respectively, of the Company’s revenue.

And the Company’s top ten customers aggregately accounted for ~~99.6%~~99.9% and ~~99.4%~~99.9% of the total revenue for the three-month periods ended ~~March 31,~~June 30, 2023 and 2022, ~~respectively.~~and 99.6% and 99.4% for the six-month periods ended June 30, 2023 and 2022.

As of ~~March 31,~~June 30, 2023, ~~five~~three customers accounted for ~~25.8~~35.7%, ~~17.4%~~17.6%,~~13.8%~~, ~~12.1%~~ and ~~10.9%~~11.1% 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 ~~75.0%~~28.4 ~~(five~~% (two suppliers) and ~~47.4%~~46.7% (four suppliers) for the three-month periods, respectively, 25.3% (two suppliers) and 47.0% (four suppliers) for the six-month periods ended ~~March 31,~~June 30, 2023 and 2022, respectively.

F-14

NOTE 13 — COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, the Company and its affiliates are parties to various legal actions arising in the ordinary course of business. Although Sichuan Wetouch and Hong Kong Wetouch, the previous subsidiaries of the Company, and our former Chairman and director Mr. Guangde Cai were named as defendants in several litigation matters, as of the date of this report, all such matters have been settled and Sichuan Wetouch, Hong Kong Wetouch and Mr. Guangde Cai were unconditionally and fully discharged and released therefrom (See Item 13- Legal Proceedings). Accordingly, there are no pending material legal proceedings against the Company.

i) ~~An equity dispute case with Yunqing Su with a disputed amount of RMB1,318,604~~ ~~(equivalent to $191,180~~)
~~On June 22, 2017, Yunqing Su, a former shareholder, entered an Equity Investment Agreement with Sichuan Wetouch~~Please also refer to NOTE 13 - commitments and ~~Guangde Cai, agreed that Yunqing Su would invest RMB~~1 ~~million (equivalent to $149,853) to purchase~~ ~~370,370.37~~ ~~original listed shares~~contingencies of the target company, and provided for the exit mechanism in the agreement. However, the target company failed to be listed prior to December 31, 2017 as agreed. On June 22, 2017, Guangde Cai and Yunqing Su entered into a supplementary agreement, pursuant to which Guangde Cai shall repurchase all of Yunqing Su’s equity interest and pay the interest. Sichuan Wetouch repaid Yunqing Su the interest of RMB~~220,000~~ ~~(equivalent to $32,968) and the principal of RMB128,000~~ ~~(equivalent to $19,181~~) in November 2018. The repayment period set forth in the supplementary agreement expired, but Sichuan Wetouch and Guangde Cai failed to pay the principal and interest owed to Yunqing Su. Yunqing Su sued Sichuan Wetouch and Guangde Cai to the Renshou County People’s Court of Sichuan Province, and the case wasAnnual Report filed on ~~February 9, 2022.~~
On May 9, 2022, pursuant to a civil mediation statement issued by the Renshou County People’s Court of Sichuan Province, Wetouch Sichuan and Guangde Cai agreed to repay Yunqing Su the principal and interest in the total amount of RMB ~~1,318,604~~ ~~(equivalent to $191,180). Wetouch Sichuan fully paid the aforesaid amount on March 15,~~April 17, 2023.
~~ii)~~ ~~Legal case with Chengdu SME Credit Guarantee Co., Ltd. on a court acceptance fee of RMB338,418~~ ~~(equivalent to $49,066~~)
~~On July 5, 2013, Sichuan Wetouch obtained a one-year loan of RMB60.0~~ ~~million (equivalent to $9.8~~ ~~million) from Bank of Chengdu, at an annual interest rate of~~ ~~8.61%~~. Chengdu SME Credit Guarantee Co., Ltd (“Chengdu SME”), a third party, provided a 70% guarantee and Bank of Chengdu retained 30% of the risk, while Chengdu Wetouch Technology Co. Ltd. (“Chengdu Wetouch”) and Mr. Guangde Cai provided joint and several liability guarantee for 100% of the loan.
~~On July 31, 2014, Sichuan Wetouch repaid RMB5.0~~ ~~million (equivalent to $0.8~~ ~~million). The remaining loan of RMB55.0~~ ~~million (equivalent to $8.9~~ ~~million) was twice extended to be due on August 22, 2018. Upon the loan becoming due, but unpaid by the Company, Chengdu SME paid the outstanding balance of RMB~~55 ~~million (equivalent to $8.9~~ ~~million) to Bank of Chengdu. The Company subsequently repaid RMB~~55 ~~million (equivalent to $8.0~~ ~~million) to Chengdu SME; however, Chengdu SME filed two separate lawsuits against the Company to recover loan default penalties from the Company. The loan default penalties were (a) RMB5.8~~ ~~million (equivalent to $0.8~~ ~~million) related to the 30% of the remaining loan balance repaid by Chengdu SME and (b) RMB6.0~~ ~~million (equivalent to $0.9~~ ~~million) related to the 70% of the remaining loan balance repaid by Chengdu SME. During the year ended December 31, 2017, the Company recorded loan default penalties, and related liabilities, of $1.7~~ ~~million.~~
~~Chengdu SME applied to the Chengdu High-tech Court for enforcement for the above-mentioned loan default penalties of RMB5.8~~ ~~million (equivalent to $0.8~~ ~~million) and RMB6.0~~ ~~million (equivalent to $0.9~~ ~~million) on December 30, 2018. On March 12, 2020, the Enforcement Settlement Agreement issued by the Chengdu High-tech Court confirmed that Sichuan Wetouch still owed RMB5.8~~ ~~million (equivalent to $0.8~~ ~~million) and RMB6.0~~ ~~million (equivalent to $0.9~~ ~~million) of loan default penalties. The agreement did not specify which party shall pay the court fee.~~
~~On September 16, 2020, Sichuan Wetouch made a full repayment of RMB11.8~~ ~~million (equivalent to $1.7~~ ~~million) of the above loan default penalties to Chengdu SME.~~
~~F-15~~
~~On March 16, 2023, pursuant to an Enforcement Settlement Agreement entered among Chengdu SME, Sichuan Wetouch and Chengdu Wetouch, Chengdu Wetouch agreed to pay the court acceptance fee of RMB338,418~~ ~~(equivalent to $49,066). On March 17, 2023, Chengdu Wetouch made a full payment of the above court fee to Chengdu SME.~~
~~iii)~~ ~~Legal case with Zhuhai Hongguang Technology Co., Ltd on the total amount of RMB131,859~~ ~~(equivalent to $19,118) for goods and liquidated damages~~
In September 2016, Sichuan Wetouch started purchasing components from Hongguang Technology Co., Ltd (“Hongguang Technology”) by sending a Purchase Order to Hongguang Technology and agreed to bear 20% of the breach of contract as liquidated damages. On November 30, 2021, Hongguang Technology filed a complaint with Renshou County People’s Court of Sichuan Province, requesting Sichuan Wetouch to pay RMB~~109,883.2~~ ~~(equivalent to $16,466) in arrears and liquidated damages of RMB21,976.64~~ ~~(equivalent to $3,293). Thereafter, the parties entered into a settlement agreement, pursuant to which Sichuan Wetouch agreed to pay the principal of outstanding payment and liquidated damages in the total amount of RMB~~ ~~131,859~~ ~~(equivalent to $19,118) on a lump-sum basis. Sichuan Wetouch paid the entire aforesaid amount to Hongguang Technology on February 16, 2022.~~
~~iv)~~ Legal case with Lifan Financial Leasing (Shanghai) Co., Ltd. and Sichuan Wetouch, Chengdu Wetouch, Meishan Wetouch and Xinjiang Wetouch Electronic Technology Co., Ltd. on a court acceptance fee of RMB RMB~~250,470~~ ~~(equivalent to $36,315~~)
On November 20, 2014, Lifan Financial Lease (Shanghai) Co., Ltd. (“Lifan Financial”) and Chengdu Wetouch entered into a Financial Lease Contract (Sale and Leaseback), which stipulated that Lifan Financial shall lease the equipment to Chengdu Wetouch after the purchase of the production equipment owned by Chengdu Wetouch at a purchase price, the purchase price/lease principal shall be RMB20 ~~million, the rental interest rate of the leased equipment shall be~~ 8% per year, and the lease term shall be 24 months. Upon the expiration of the lease term, Lifan Financial shall transfer the leased property to Chengdu Wetouch or a third party designated by Chengdu Wetouch at the price of RMB0 after Chengdu Wetouch has fully fulfilled its obligations, including, without limitation, the payment of the rent, liquidated damages (if any) and other contractual obligations. Guangde Cai, Sichuan Wetouch, Meishan Vtouch Electronics Technology Co., Ltd. (“Meishan Wetouch”) and Xinjiang Wetouch Electronic Technology Co., Ltd. (“Xinjiang Wetouch”) provided Lifan Financial with joint and several liability guarantee.
On August 9, 2021, Lifan Financial filed a lawsuit against Chengdu Wetouch, Guangde Cai, Sichuan Wetouch, Meishan Wetouch and Xinjiang Wetouch to the Chengdu Intermediate People’s Court. The court ruled that: 1) the Financial Lease Contract (Sale and Leaseback) was terminated; 2) the leased property was owned by Lifan Financial; 3) Chengdu Wetouch shall pay Lifan Financial all outstanding rent and interest thereon in the total amount of RMB ~~22,905,807.12~~ ~~as well as the difference between the liquidated damages and the value of the leased property recovered; etc.~~
~~The parties executed a settlement agreement on March 7, 2023, in which the parties confirmed that the outstanding payment of RMB~~ ~~22,905,807.12~~ has been fully paid up on December 23, 2021 and the above cases have been settled. As for the court acceptance fees that were not previously agreed upon by the parties, Chengdu Wetouch agreed to pay the court acceptance fee of RMB ~~250,470~~ ~~(equivalent to $36,315). Chengdu Wetouch paid the aforesaid fees to Lifan Financial on March 10, 2023.~~
v) ~~Legal case with Sichuan Renshou Shigao Tianfu Investment Co., Ltd and Renshou Tengyi Landscaping Co., Ltd. on a court acceptance fee of RMB103,232~~ ~~(equivalent to $14,967~~)
~~On March 19, 2014, Chengdu Wetouch, a related party, obtained a two and half-year loan of RMB15.0~~ ~~million (equivalent to $2.2~~ million) from Chengdu Bank Co., Ltd. Gaoxin Branch (“Chengdu Bank Gaoxin Branch”) , with Chengdu Hi-tech Investment Group Co., Ltd. (“CDHT Investment”) acting as guarantor to pay off the loan principal and related interests, while Sichuan Wetouch and Hong Kong Wetouch as guarantors, were jointly and severally liable for such debts.
Upon the loan due in January 2017, Chengdu Wetouch defaulted the loan, thus, CDHT Investment filed a lawsuit against Chengdu Wetouch, Sichuan Wetouch, and Hong Kong Wetouch demanding a full repayment of such debts.
~~F-16~~
To support the local economic development as well as Chengdu Wetouch, two government-backed companies, Sichuan Renshou Shigao Tianfu Investment Co., Ltd. (“Sichuan Renshou”) and Renshou Tengyi Landscaping Co., Ltd. (“Renshou Tengyi”) provided their bank deposits of RMB ~~12.0~~ ~~million (equivalent to $1.7~~ ~~million) as pledge, while Mr. Guangde Cai and Sichuan Wetouch also provided counter-guarantee.~~
~~Upon the expiration of the guarantee, Chengdu Wetouch still defaulted on repayment of the above pledge. As a result, CDHT Investment levied this collateral of RMB12.0~~ ~~million. On November 21, 2019. Subsequently, Sichuan Renshou and Renshou Tengyi filed with Chengdu Intermediate People’s Court a lawsuit demanding an asset recovery of RMB12.0~~ ~~million (equivalent to $1.7~~ ~~million) pursuant to the counter guarantee agreement.~~
On December 2, 2019, pursuant to the reconciling agreement issued by Chengdu Intermediate People’s Court, the parties agreed to cancel the demand to seize property of Sichuan Wetouch rather than the property of Chengdu Wetouch, and to waive freezing Guangde Cai’s 60% shareholding equity in Xinjiang Wetouch Electronic Technology Co., Ltd.
On October 9, 2020, pursuant to a settlement and release agreement, Sichuan Wetouch, Hong Kong Wetouch and Guangde Cai are fully discharged and released from any and all obligations under the outstanding debts, and from all liabilities under guarantee with Chengdu Wetouch being responsible for the outstanding debts by December 31, 2020.
~~On October 27, 2020, Chengdu Wetouch made a full payment of the above debts.~~
The settlement and release agreement did not specify which party shall pay the court acceptane fee. On March 10, 2023, pursuant to an enforcement settlement agreement entered among Sichuan Renshou, Renshou Tengyi, Sichuan Wetouch, Chengdu Wetouch, and other relevant parties, Sichuan Wetouch agreed to pay the court acceptance fee of RMB~~103,232~~ ~~(equivalent to $14,967). On March 17, 2023, Chengdu Wetouch made a full payment of the above court fee to Sichuan Renshou.~~
~~vi)~~ ~~Legal case with Chengdu High Investment Financing Guarantee Co. on a court acceptance fee of RMB250,000~~ ~~(equivalent to $36,246~~)
On March 22, 2019, Chengdu High Investment Financing Guarantee Co., Ltd, (“Chengdu High Investment”) filed a lawsuit against Hong Kong Wetouch to the Chengdu Intermediate People’s Court, claiming that Hong Kong Wetouch should assume the guarantee liability for the debt payable by Chengdu Wetouch. On May 21, 2020, the court rendered a judgment ordering Hong Kong Wetouch to pay compensation of RMB~~17,467,042~~ ~~(equivalent to $2,617,491), interest, liquidated damages, liquidated damages for late performance, etc.~~
~~On March 16, 2023, Chengdu Wetouch, Sichuan Wetouch and Chengdu High Investment entered into a settlement enforcement agreement, confirming that Chengdu High Investment had received RMB17,547,197.5~~ ~~(equivalent to $2,629,503~~) on October 27, 2020, and the above case has been settled. As for the court acceptance fees that were not previously agreed upon by the parties, Chengdu Wetouch agreed to pay the court acceptance fee of RMB ~~250,000~~ ~~(equivalent to $36,246). Chengdu Wetouch paid the aforesaid fees to Chengdu High Investment on March 20, 2023.~~
~~vii)~~ ~~Legal case with Hubei Lai’en Optoelectronics Technology Co., Ltd. on a product payment of RMB157,714~~ ~~(equivalent to $22,866~~)
Sichuan Wetouch purchased products from Hubei Lai’en Optoelectronics Technology Co., Ltd. (“Hubei Lai’en) multiple times from March to June 2019, but failed to pay the corresponding amount of RMB~~137,142.7~~ for the purchased products. On April 6, 2022, Hubei Lai’en filed a lawsuit against Sichuan Wetouch to the Renshou County People’s Court of Sichuan Province, requesting payment of overdue payment for the products and liquidated damages. On May 31, 2022, the Renshou County People’s Court rendered a judgment that Sichuan Wetouch shall pay Hubei Lai’en the price of goods of RMB~~137,143~~ ~~and liquidated damages of RMB~~ ~~20,571. Sichuan Wetouch paid the above amount to Hubei Lai’en on March 15, 2023.~~
~~F-17~~
~~viii)~~ ~~Legal case with Shenzhen Helitong Technology Co., Ltd. on a product payment of RMB229,513~~ ~~(equivalent to $34,393~~)
Sichuan Wetouch purchased products from Shenzhen Helitong Technology Co., Ltd. (“Shenzhen Helitong”) multiple times from January to June 2020, but failed to pay some of the purchase fee for the products. On October 21, 2021, Shenzhen Helitong filed a lawsuit against Sichuan Wetouch to the Renshou County People’s Court of Sichuan Province, requesting payment of overdue payment for the products and interests. On October 10, 2021, pursuant to a civil mediation letter issued by the Renshou County People’s Court, both parties agree that Sichuan Wetouch shall pay a total of RMB~~229,513~~ ~~(equivalent to $34,393) to Shenzhen Helitong, and the other claims waived by Shenzhen Helitong. As of February 16, 2022, Sichuan Wetouch made a full payment of RMB229,513~~ ~~(equivalent to $33,276) to Shenzhen Helitong.~~
~~ix)~~ ~~Legal case with Xinjiang Weiyida Real Estate Development Co., Ltd on a loan payment of RMB17,318,625~~ ~~(equivalent to $2,510,964~~)
Xinjiang Weiyida Real Estate Development Co., Ltd (“Weiyida Real Estate”) filed a lawsuit against Meishan Wetouch, Guangde Cai, Sichuan Wetouch, Xinjiang Wetouch, Sichuan Yitong Financing Guarantee Co., Ltd to the Renshou County People’s Court of Sichuan Province and applied for property preservation on February 14, 2022 with respect to the dispute over recovery right in connection with the loan agreement. The parties entered into a settlement agreement and agreed that Meishan Wetouch shall repay the principal of RMB$~~17,318,625~~ ~~(equivalent to $2,595,250) and liquidated damages to Weiyida Real Estate in a lump sum. On March 14, 2022, Meishan Wetouch paid RMB$17,318,625~~ ~~(equivalent to $2,510,964) to Weiyida Real Estate.~~
Capital expenditure commitment

On December 20, 2021, the Company 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$3.1 ~~million ).~~million). As of ~~March 31,~~June 30, 2023, the Company has prepaid RMB15.0 million (equivalent to US$~~2.2~~2.1 million) and recorded as construction in progress (see Note 5) and had a remaining balance of RMB5.0 million (equivalent to US$0.7 million) to be paid by the end of 2023.

NOTE 14 — REVENUES

The Company’s geographical revenue information is set forth below:
SCHEDULE OF GEOGRAPHICAL REVENUE INFORMATION

Three-Month Period
Ended
June 30,

Six-Month Period
Ended
June 30,

2023 2022 2023 2022
US$ US$ US$ US$
Sales in PRC $ 9,108,145 $ 8,104,365 $ 18,395,711 $ 16,262,309
Sales in Overseas
—Republic of China (ROC, or Taiwan) 1,900,147 1,851,955 4,019,287 3,856,534
-South Korea 1,733,135 1,797,900 3,644,432 3,566,827
-Others 33,005 (1,286 ) 148,463 61,811
Sub-total 3,666,287 3,648,569 7,812,182 7,485,172
Total Revenue $ 12,774,432 $ 11,752,934 $ 26,207,893 $ 23,747,481

2023 2022
For the Three-Month Periods Ended, March 31,
2023 2022
Sales in PRC $ 9,287,566 $ 8,169,567
Sales in Overseas
—Republic of China (ROC, or Taiwan) 2,119,140 1,998,679
-South Korea 1,911,297 1,763,200
-Others 115,458 63,101
Sub-total 4,145,895 3,824,980
Total revenues $ 13,433,461 $ 11,994,547
NOTE 15 — SUBSEQUENT EVENT
On February 17, 2023, the Board of Directors of the Company authorized a reverse stock split with a ratio of not less than one to five (1:5) and not more than one to eighty (1:80), with the exact amount and the timing of the reverse stock split to be as determined by the Chairman of the Board. On July 16, 2023, the Chairman of Company issued a certificate to determine that the reverse stock split ratio of its common stock was fixed at 1-for-20. The Company will retroactively restate the number of shares of common stock outstanding once it is implemented.
~~F-18~~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 April 17, 2023, 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.

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 Wetouch Holding Group Limited, a British Virgin Islands (“BVI”) company incorporated on August 14, 2020 under the laws of the British Virgin Islands (“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.

Through our wholly-owned subsidiaries, BVI Wetouch, HK Wetouch, and Sichuan Vtouch, 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. We are specialized in large-format touchscreens, which are developed and designed for a wide variety of markets and used in by the financial terminals, automotive, POS, gaming, lottery, medical, 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~~subsidiary for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023 and 2022, respectively.
5

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.

Commencing in the spring of 2021, China began to experience an increase in COVID-19 cases, and to some extent, local governments and the national government began to take more restrictive measures to stem the spread of the virus, particularly from October 2021 to December 2021 and various periods in 2022. ~~The Company experienced several shutdowns until~~Since December 2022, many of the ~~period ended March 31, 2023.~~
~~To serve~~restrictive policies previously adopted by the PRC government to control the spread of COVID-19 have been revoked or replaced with more flexible measures. Although there were occasional increases in COVID-19 cases in China after the government abandoned its restrictive policies, as of the date of this Quarterly Report, our ~~customers while also providing for~~PRC subsidiary has resumed normal operations. There are still uncertainties of future impact of the ~~safety of our employees~~COVID-19 pandemic, and service providers, we have modified numerous aspects of our logistics, transportation, supply chain, purchasing, and after-sale processes. The Company has taken proactive measures to promote products to new customers and entering more regions during the ~~three-month period ended March 31, 2023. 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,~~a number of factors, including the duration and severity of the pandemic; and the macroeconomic impact of government measures to contain the spread of ~~the outbreak~~COVID-19 and ~~the impact on the Company’s customers, which are still uncertain and cannot be reasonably estimated at this point of time.~~related government stimulus measures.
Highlights for the three-month period ended ~~March 31,~~June 30, 2023 include:

● Revenues were ~~$13.4~~$12.8 million, an increase of ~~11.7%~~8.4% from ~~$12.0~~$11.8 million in the ~~first~~second quarter of 2022
● Gross profit was ~~$6.0~~$6.3 million, an increase of ~~39.5~~%23.5% from ~~$4.3~~$5.1 million in the ~~first~~second quarter of 2022
● Gross profit margin was ~~45.0%~~49.0%, compared to ~~35.9%~~43.0% in the ~~first~~second quarter of 2022
● Net income was ~~$2.8~~$4.7 million, compared to ~~$2.5~~$2.9 million in the ~~first~~second quarter of 2022
● Total volume shipped was ~~635,276~~ 590,140 units, an increase of ~~13.5%~~ 4.1% from ~~559,958~~556,875 units in the ~~first~~second quarter of 2022
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 March 31, Change Three-Month
Period Ended
June 30, Change Six-Month
Period Ended
June 30, Change
2023 2022 % 2023 2022 % 2023 2022 %
Revenues $ 13.4 $ 12.0 11.7 % $ 12.8 $ 11.8 8.5 % $ 26.2 $ 23.7 10.5 %
Cost of revenues (7.4 ) (7.7 ) (3.9 )% (6.5 ) (6.7 ) (3.0 )% (13.9 ) (14.4 ) (3.5 )%
Gross profit 6.0 4.3 39.5 % 6.3 5.1 23.5 % 12.3 9.4 30.9 %
Total operating expenses (1.7 ) (0.9 ) 88.9 % (0.2 ) (1.0 ) (80.0 )% (1.9 ) (1.9 ) (0.0 )%
Operating income 4.3 3.4 26.5 % 6.1 4.1 48.8 % 10.4 7.5 38.7 %
Total other income (expenses) (0.1 ) 0.1 (200.0 )%
Changes in FV of Common Stock Purchase Warrants ( gain+/loss-) (0.1 ) 0.2 (150.0 )%
Gain on changes of fair values of Common Stock Purchase Warrant 0.1 0.0 N/A 0.0 0.2 (100.0 )%
Income before income taxes 4.2 3.5 20.0 % 6.2 4.1 51.2 % 10.4 7.7 35.1 %
Income tax expense (1.4 ) (1.0 ) 40.0 % (1.5 ) (1.2 ) 25.0 % (2.9 ) (2.2 ) 31.8 %
Net income $ 2.8 $ 2.5 12.0 % $ 4.7 $ 2.9 62.1 % $ 7.5 $ 5.5 36.4 %

6
Results of Operations - Three Months Ended ~~March 31,~~June 30, 2023 Compared to Three Months Ended ~~March 31,~~June 30, 2022

Revenues

We generated revenue of ~~$13.4~~$12.8 million for the three months ended ~~March 31,~~June 30, 2023, an increase of ~~$1.4~~$1.1 million, or ~~11.7%~~8.5%, compared to ~~$12.0~~$11.8 million in the same period of last ~~year.~~ ~~This was~~year, primarily due to an increase of ~~13.5%~~4.1% in sales volume, an increase of ~~5.4%~~10.4% in the average selling price of our products, and partially offset by ~~7.8%~~6.1% negative impact from exchange rate due to depreciation of RMB against US dollars, compared with those of the same period of last year.
For the Three-Month Ended March 31,
2023 2022 Change Change
Amount % Amount % Amount %
(in US Dollar millions except percentage)
Revenue from sales to customers in PRC $ 9.3 69.4 % $ 8.2 68.3 % $ 1.1 13.4 %
Revenue from sales to customers overseas 4.1 30.6 % 3.8 31.7 % 0.3 7.9 %
Total Revenues $ 13.4 100 % $ 12.0 100 % $ 1.4 11.7 %

For the Three-Month Ended March 31,
2023 2022 Change Change
Unit % Unit % Unit %
(in UNIT, except percentage)
Units sold to customers in PRC 414.518 65.3 % 356,687 63.7 % 57,831 16.2 %
Units sold to customers overseas 220,758 34.7 % 203,271 36.3 % 17,487 8.6 %
Total Units Sold 635,276 100 % 559,958 100 % 75,318 13.5 %
For the Three-Month Period Ended June 30,
2023 2022 Change Change
Amount % Amount % Amount %
(in US Dollar millions except percentage)
Revenue from sales to customers in PRC $ 9.1 71.1 % $ 8.1 68.6 % $ 1.0 12.3 %
Revenue from sales to customers overseas 3.7 28.9 % 3.7 31.4 % 0.0 0.0 %
Total Revenues $ 12.8 100 % $ 11.8 100 % $ 1.0 8.5 %

For the Three-Month Period Ended June 30,
2023 2022 Change Change
Unit % Unit % Unit %
(in UNIT, except percentage)
Units sold to customers in PRC 418,190 70.9 % 382,711 67.5 % 35,479 9.3 %
Units sold to customers overseas 171,950 29.1 % 184,164 32.5 % (12,214 ) (6.6 )%
Total Units Sold 590,140 100 % 566,875 100 % 23,265 4.1 %
(i) Domestic market

For the three months ended ~~March 31,~~June 30, 2023, revenue from the domestic market increased by ~~$1.1~~$1.0 million or ~~13.4%~~ 12.3% as a combined result of: (i) an increase of ~~16.2%~~9.3% in sales volume and (ii) an increase of ~~5.4%~~8.8% in the average RMB selling price of our products, and partially offset by ~~7.8%~~6.1% negative impact from exchange rate due to depreciation of RMB against US dollars, compared with those of the same period of last year.

As for the RMB selling price, the increase of ~~5.4%~~8.8% was mainly due to the increased sales of new models of higher-end products such as POS touchscreens and industrial control computer touchscreens ~~and gaming touch screens~~ with higher selling prices in the domestic market during the three-month period ended ~~March 31,~~June 30, 2023.
7

The weakening in macroeconomic conditions since the outbreak of COVID-19 pandemic in January 2020 continued to exacerbate the touch screen business environment. Due to our proactive efforts to market new models such as POS touchscreens, medical touchscreens, and industrial control computer touchscreens, and efforts to obtain new customers and penetrate into new regions, we had sales increases of ~~49.2%~~35.5% in Southwest China, ~~13.8%~~19.4% in South China, and 13.5% in Eastern China ~~and 9.0% in Southern China~~ during the ~~first~~second quarter ended ~~March 31,~~June 30, 2023 as compared to that of last year.

(ii) Overseas market

For the three-month period ended ~~March 31,~~June 30, 2023, and 2022, revenues from ~~the~~ overseas market ~~was $4.1 million as compared to $3.8 million of the same period of 2022, representing an~~ ~~increase by $0.3 million or 7.9%~~ ~~mainly due to~~remained stable at $3.7 million. We had an increase of ~~8.6% in sales volume due to increased sales in gaming touchscreens,~~ ~~automotive touchscreens~~ ~~and industrial control computer touchscreens, partially offset by a decrease of 0.2%~~9.9% in average selling ~~price.~~price, although the sales volume were flat.
7

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

Revenues
For the Three-Month Ended March 31

2023 2022 Change Change
Amount % Amount % Amount Margin%
(in US Dollars, except percentage)
Product categories by end applications
Automotive Touchscreens $ 3,234,836 24.1 % $ 3,012,725 25.1 % $ 222,111 7.4 %
Industrial Control Computer Touchscreens 2,672,250 19.9 % 2,298,142 19.2 % 374,108 16.3 %
POS Touchscreens 2,066,774 15.4 % 1,956,350 16.3 % 110,424 5.6 %
Gaming Touchscreens 1,911,297 14.2 % 1,763,069 14.7 % 148,228 8.4 %
Medical Touchscreens 2,094,242 15.6 % 1,472,091 12.3 % 622,151 42.3 %
Multi-Functional Printer Touchscreens 1,454,062 10.8 % 1,488,175 12.4 % (34,113 ) (2.3 )%
Others* - 0.0 % 3,995 0.0 % (3,995 ) (100.0 )%
Total Revenues $ 13,433,461 100.0 % $ 11,994,547 100.0 % $ 1,438,914 11.7 %

Revenues
For the Three-Month Period Ended June 30,

2023 2022 Change Change
Amount % Amount % Amount Margin%
(in US Dollars, except percentage)
Product categories by end applications
Automotive Touchscreens $ 3,210,054 25.1 % $ 2,904,951 24.7 % $ 305,103 10.5 %
Industrial Control Computer Touchscreens 2,422,606 19.0 % 2,344,118 20.0 % 78,488 3.3 %
POS Touchscreens 2,278,814 17.8 % 2,017,900 17.2 % 260,914 12.9 %
Medical Touchscreens 1,888,053 14.8 % 1,576,755 14.4 % 311,298 19.7 %
Gaming Touchscreens 1,733,135 13.6 % 1,803,630 15.3 % (70,495 ) (3.9 )%
Multi-Functional Printer Touchscreens 1,241,770 9.7 % 1,105,671 9.4 % 136,099 12.3 %
Others* - 0.0 % (91 ) 0.0 % 91 0.0 %
Total Revenues $ 12,774,432 100.0 % $ 11,752,934 100.0 % $ 1,021,498 8.5 %
*Others include applications in self-service kiosks, ticket vending ~~machines~~machine and financial terminals.

The Company continued to shift production mix from traditional lower-end products such as touchscreens used in ~~automotive~~industrial control computer industries to high-end products such as touchscreens used in POS touchscreens, medical touchscreens, multi-functional printer touchscreens, and ~~industrial control computer touchscreens,~~automotive touchscreen, 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 with better raw materials.

Gross Profit and Gross Profit Margin

Three-Month Period Ended March 31, Change Three-Month Period Ended June 30, Change
(in millions, except percentage) 2023 2022 Amount % 2023 2022 Amount %
Gross Profit $ 6.0 $ 4.3 $ 1.7 39.5 % $ 6.3 $ 5.1 $ 1.2 23.5 %
Gross Profit Margin 45.0 % 35.9 % 9.1 % 49.0 % 43.0 % 6.0 %

Gross profit was ~~$6.0~~$6.3 million in the ~~first~~second quarter ended ~~March 31,~~June 30, 2023, compared to ~~$4.3~~$5.1 million in the same period of 2022. Our gross profit margin increased to ~~45.0%~~49.0% for the ~~first~~second quarter ended ~~March 31,~~June 30, 2023, as compared to ~~35.9%~~43.0% for the same period of 2022, primarily due to the increase in revenues of 8.5%, particularly high-end products such as POS touchscreens, medical touchscreens, and multi-functional printer touchscreens for the quarter ended June 30, 2023, partially offset by the increase in cost of goods sold by 1.7% including increase of cost of materials such as chip cost by 1.5%, for the three-month period ended June 30, 2023.
General and Administrative Expenses

Three-Month Period Ended
June 30,
Change
(in US dollars, except percentage) 2023 2022 Amount %
General and Administrative Expenses $ 56,907 $ 443,146 $ (386,239 ) (87.2 )%
as a percentage of revenues 0.4 % 3.8 % (3.4 )%
General and administrative (G&A) expenses were $56,907 for the three-month period ended June 30, 2023, compared to $443,146 in the same period in 2022. The decrease was primarily due to the decrease of salary and wages expenses and miscellaneous expenses.
8
Research and Development Expenses

Three-Month Period Ended
June 30,
Change
(in US dollars, except percentage) 2023 2022 Amount %
Research and Development Expenses $ 20,384 $ 21,713 $ (1,329 ) (6.1 )%
as a percentage of revenues 0.2 % 0.2 % 0.0 %
Research and development (R&D) expenses were $20,384 for the three-month period ended June 30, 2023 compared to $21,713 in the same period in 2022, representing a decrease of $1,329 of material consumption.
Operating Income
Total operating income was $6.1 million for the three-month period ended June 30, 2023 as compared to $4.0 million of the same period of last year, primarily due to higher gross margin and lower selling expenses, and administrative expenses for the three-month period ended June 30, 2023.
Gain on changes in fair value of Common Stock Purchase Warrants
Three-Month Period Ended June 30, Change
(in millions, except percentage) 2023 2022 Amount %
Gain on changes in fair value of Common Stock Purchase Warrants $ 0.1 $ 0.0 $ 0.1 N/A
as a percentage of revenues 0.8 % 0.0 % 0.8 %
Gain on changes in fair value of common stock purchase warrants was $0.1 million and $0.0 million for the three-month periods ended June 30, 2023 and 2022, respectively (See Note 9 (b)).
Income Taxes

Three-Month Period Ended
June 30,
Change
(in millions, except percentage) 2023 2022 Amount %
Income before Income Taxes $ 6.2 $ 4.1 $ 2.1 51.2 %
Income Tax (Expense) (1.5 ) (1.2 ) (0.3 ) 25.0 %
Effective income tax rate 25.0 % 28.3 % (3.3 )%
The effective income tax rates for the three-month periods ended June 30, 2023 and 2022 were 25.0% and 28.3%, respectively.
Net Income
As a result of the above factors, we had a net income of $4.7 million in the second quarter of 2023 compared to a net income of $2.9 million in the same quarter of 2022.
9
Results of Operations - Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022
Revenues
We generated revenue of $26.2 million for the six months ended June 30, 2023, an increase of $2.5 million, or 10.5%, compared to $23.7 million in the same period of last year. This was mainly due to an increase of 28.1% in the average RMB selling price of our products, partially offset by the decrease of 7.9% in sales volume and 6.9% negative impact from exchange rate due to depreciation of RMB against US dollars, compared with those of the same period of last year.
For the Six-Month Period Ended June 30,
2023 2022 Change Change
Amount % Amount % Amount %
(in US Dollar millions except percentage)
Revenue from sales to customers in PRC $ 18.4 70.3 % $ 16.2 68.5 % $ 2.2 13.6 %
Revenue from sales to customers overseas 7.8 29.7 % 7.5 31.5 % 0.3 4.0 %
Total Revenues $ 26.2 100 % $ 23.7 100 % $ 2.5 10.5 %
For the Six-Month Period Ended June 30,
2023 2022 Change Change
Unit % Unit % Unit %
(in UNIT, except percentage)
Units sold to customers in PRC 842,308 68.7 % 739,398 55.6 % 102,910 13.9 %
Units sold to customers overseas 383,108 31.3 % 590,706 44.4 % (207,598 ) (35.1 )%
Total Units Sold 1,225,416 100 % 1,330,104 100 % (104,688 ) (7.9 )%
(i) Domestic market
For the six months ended June 30, 2023, revenue from domestic market increased by $2.2 million or 13.6% as a combined result of: (i) an increase of 13.9% in sales volume and (ii) an increase of 6.2% in the average RMB selling price of our products, and partially offset by 6.9% negative impact from exchange rate due to depreciation of RMB against US dollars, compared with those of the same period of last year.
As for the RMB selling price, the increase of 6.2% was mainly due to the increased sales of new models of higher-end products such as POS touchscreens, industrial control computer touchscreens and gaming touch screens with higher selling prices in the domestic market during the three-month period ended June 30, 2023.
The weakening in macroeconomic conditions since the outbreak of COVID-19 pandemic in January 2020 continued to exacerbate the touch screen business environment. Due to our proactive efforts to market new models such as POS touchscreens, medical touchscreens, and industrial control computer touchscreens, and efforts to obtain new customers and penetrate into new regions, we had sales increases of 35.5% in Southwest China, 19.4% in South China, and 13.6% in East China during the six-month period ended June 30, 2023.
(ii) Overseas market
For the six-month period ended June 30, 2023, revenues from overseas market were $7.8 million as compared to $7.5 million of the same period of 2022, representing an increase by $0.3 million or 4.0% mainly due to increase of 5.6% in average selling price, and partially offset by the decrease of 35.1% in sales volume due to decreased sales in gaming touchscreens and automotive touchscreens as a result of demand decreasing from overseas market.
10
The following table summarizes the breakdown of revenues by categories in US dollars:

Revenues
For the Six-Month Period Ended June 30,

2023 2022 Change Change
Amount % Amount % Amount Margin%
(in US Dollars, except percentage)
Product categories by end applications
Automotive Touchscreens $ 6,444,890 24.6 % $ 5,917,676 24.9 % $ 527,214 8.9 %
Industrial Control Computer Touchscreens 5,094,856 19.4 % 4,642,261 19.6 % 452,595 5.7 %
POS Touchscreens 4,345,588 16.6 % 3,566,699 15.0 % 778,889 21.8 %
Medical Touchscreens 3,982,295 15.2 % 3,048,846 12.8 % 933,449 30.6 %
Gaming Touchscreens 3,644,432 13.9 % 3,974,250 16.8 % (329,818 ) (8.3 )%
Multi-Functional Printer Touchscreens 2,695,832 10.3 % 2,593,846 10.9 % 101,986 3.9 %
Others* - 0.0 % 3,903 0.0 % (3,903 ) (0.0 )%
Total Revenues $ 26,207,893 100.0 % $ 23,747,481 100.0 % $ 2,460,412 10.5 %
*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 industrial control computer industries to high-end products such as POS touchscreens, medical touchscreens, and automotive touchscreens, primarily due to (i) greater growth potential of computer screen models in China, (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

Six-Month Period Ended
June 30,
Change
(in millions, except percentage) 2023 2022 Amount %
Gross Profit $ 12.3 $ 9.4 $ 2.9 30.9 %
Gross Profit Margin 46.9 % 39.4 % 7.5 %
Gross profit was $12.3 million during the six-month period ended June 30, 2023, compared to $9.4 million in the same period of 2022. Our gross profit margin increased to 46.9% for the six-month period ended June 30, 2023, as compared to 39.4% for the same period of 2022, primarily due to the increase in sales of ~~11.7%~~10.5%, particularly high-end products such as POS touchscreens, medical touchscreens, and ~~industrial control computer~~automotive touchscreens, for the ~~quarter~~six-month period ended ~~March 31,~~June 30, 2023, partially offset by the increase in cost of goods sold by ~~3.9%~~2.8% including increase of cost of materials such as chip cost by ~~3.8%~~2.7%, for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023.

8
General and Administrative Expenses
Three-Month Period Ended March 31, Change
(in millions, except percentage) 2023 2022 Amount %
General and Administrative Expenses $ 1.7 $ 0.4 $ 1.3 325.0 %
as a percentage of revenues 12.7 % 3.3 % 9.4 %

Six-Month Period Ended
June 30,
Change
(in millions, except percentage) 2023 2022 Amount %
General and Administrative Expenses $ 1.7 $ 0.8 $ 0.9 112.5 %
as a percentage of revenues 6.5 % 3.4 % 3.1 %

General and administrative (G&A) expenses were $1.7 million for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023, compared to ~~$0.4~~$0.8 million in the same period in 2022, representing an increase of ~~$1.3~~$0.9 million or ~~325.0%~~112.5%. The increase was primarily due to the increase of accrued $1.2 million underwriting fees in connection with a private ~~placement.~~placement, partially offset by the decrease of $0.2 million in salary and wages and other miscellaneous expenses. On March 18, 2023, the Company entered into a consent agreement with representatives related to the private placement on the fees of US$1.2 million, payable only on the completion of an underwritten offering (see Note 8).

11
Research and Development Expenses

Three-Month Period Ended March 31, Change
Six-Month Period Ended
June 30,
Change
(in US dollars, except percentage) 2023 2022 Amount % 2023 2022 Amount %
Research and Development Expenses $ 20,885 $ 22,857 $ (1,972 ) (8.6 )% $ 41,269 $ 44,570 $ (3,301 ) (7.4 )%
as a percentage of revenues 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

Research and development (R&D) expenses were ~~$20,885~~$41,269 for ~~three-month~~the six-month period ended ~~March 31,~~June 30, 2023 compared to ~~$22,857~~$44,570 in the same period in ~~2022, representing a decrease of $1,972 of material consumption.~~2022.

Operating Income

Total operating income was ~~$4.3~~$10.4 million for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023 as compared to ~~$3.4~~$7.5 million of the same period of last year ~~primarily~~ due to higher gross ~~margin~~profit and lower selling expenses, partially offset by higher ~~administrative expenses for the three-month period ended March 31, 2023.~~general & administration expenses.

Gain (loss) on changes in fair value of Common Stock Purchase Warrants

Three-Month Period
Ended March 31, Change
(in millions, except percentage) 2023 2022 Amount %
Gain (loss) on changes in fair value of common stock purchase warrants $ (0.1 ) $ 0.2 $ (0.3 ) (150,0 )%
as a percentage of revenues 0.7 % 1.7 % (1.0 )%
Six-Month Period Ended
June 30, Change
(in US$ millions, except percentage) 2023 2022 Amount %
Gain on changes in fair value of Common Stock Purchase Warrants $ 0.0 $ 0.2 $ (0.2 ) (100.0 )%
as a percentage of revenues 0.0 % 0.8 % (0.8 )%

~~Loss~~Gain on changes in fair value of common stock purchase warrants was ~~$97,602~~$44,784 for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023, as compared to gain of ~~$160,443~~$0.2 million on changes in fair value of common stock purchase warrants in the same period of 2022 (See Note 9 (b)).

9
Income Taxes

Three-Month Period Ended March 31, Change
Six-Month Period Ended
June 30,
Change
(in millions, except percentage) 2023 2022 Amount % 2023 2022 Amount %
Income before Income Taxes $ 4.2 $ 3.5 $ 0.7 20.0 % $ 10.4 $ 7.7 $ 2.7 35.1 %
Income Tax (Expense) (1.4 ) (1.0 ) (0.4 ) 40.0 % (2.9 ) (2.2 ) (0.7 ) 31.8 %
Effective income tax rate 33.5 % 28.1 % 5.4 % 28.4 % 28.2 % 0.2 %

The effective income tax rates for the ~~three-month~~six-month periods ended ~~March 31,~~June 30, 2023 and 2022 were ~~33.5%~~28.4% and ~~28.1%~~28.2%, respectively.

Our PRC subsidiary Sichuan Vtouch had $92.2 million of cash and cash equivalents of June 30, 2023, 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.
12
Net Income

As a result of the above factors, we had a net income of ~~$2.8~~$7.5 million in the ~~first quarter of~~six-month period ended June 30, 2023 compared to a net income of ~~$2.5~~$5.5 million in the same ~~quarter~~period of 2022.

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 ~~March 31,~~June 30, 2023, we had current assets of ~~$107.7~~$107.4 million, consisting of ~~$93.3~~$92.2 million in cash including $40.0 million from the stock issuance of a private placement, ~~$13.1~~$14.0 million in accounts receivable, $0.2 million in inventories, and $1.1 million in prepaid expenses and other current assets. Our current liabilities as of ~~March 31,~~June 30, 2023, were ~~$7.3~~$8.1 million, which is comprised of ~~$2.1~~$2.4 million in accounts payable, ~~$1.4~~$1.5 million in income tax payable, ~~$2.1~~$2.5 million in accrued expenses and other current liabilities, $0.5 million from a third-party loan, and $1.2 million in convertible promissory notes payable.

The following is a summary of our cash flows provided by (used in) operating, investing, and financing activities for the ~~three-month periods~~six-month period ended ~~March 31,~~June 30, 2023 and 2022:

Three-Month Period Ended
March 31,

Six-Month Period Ended
June 30,

(in US Dollar millions) 2023 2022 2023 2022
Net cash provided by (used in) operating activities $ 2.7 $ (1.4 )
Net cash provided by operating activities $ 6.8 $ 1.5
Net cash provided by investing activities - - - -
Net cash provided by financing activities 40.0 - 40.0 -
Effect of foreign currency exchange rate changes on cash and cash equivalents (0,7 ) 0.0 (5.8 ) (2.5 )
Net increase (decrease) in cash and cash equivalents 42.0 (1.4 ) 41.0 (1.0 )
Cash and cash equivalents at the beginning of period 51.3 46.2 51.2 46.1
Cash and cash equivalents at the end of period $ 93.3 $ 44.8 $ 92.2 $ 45.1

10
Operating Activities

Net cash provided by operating activities was ~~$2.7~~$6.8 million for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023, as compared to ~~$1.4~~$1.5 million used in operating activities for the same period of the last year, primarily due to (i) the increase of ~~$0.2~~$1.9 million net income for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023 as compared to the same period of 2022, (ii) the increase of $0.3 million loss on changes of FV of common stock purchase warrants for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023; (iii) the decrease of ~~$2.3~~$2.1 million of accounts receivable for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023 due to faster collection of receivables, (iv) the decrease of ~~$0.3~~$0.5 million in inventories, (v) the decrease of ~~$0.4~~$0.3 million in accounts payable, (vi) the increase of ~~$0.5~~$0.4 million in income tax payable, and (vii) the decrease of ~~$0.7~~$1.0 million of accrued expenses and other current liabilities for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023, partially offset by the decrease in $0.8 million in account payable for the six-month period ended June 30, 2023.

13
Investing Activities

There was nil investing activities for the ~~three-month~~six-month periods ended ~~March 31,~~June 30, 2023 and 2022.

Financing Activities

Net cash provided by financing activities for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023 ~~were~~was $40.0 million, due to the $40.0 million proceeds from stock issuance in a private placement.

There were nil financing activities for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2022.

As of ~~March 31,~~June 30, 2023, our cash and cash equivalents were ~~$93.3~~$92.2 million, as compared to $51.3 million at December 31, 2022.

Days Sales Outstanding (“DSO”) has decreased to 7479 days for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2023 from 81 days for the year ended December 31, 2022.

The following table provides an analysis of the aging of accounts receivable as of ~~March 31,~~June 30, 2023 and December 31, 2022:

March 31, 2023 December 31 2022 June 30, 2023 December 31 2022
-Current $ 8,668,782 $ 1,252,152 $ 8,031,102 $ 1,252,152
-1-3 months past due 4,186,053 4,998,596 4,600,385 4,998,596
-4-6 months past due 232,156 2,806,973 1,331,966 2,806,973
7-12 months past due - 20 - 20
-greater than 1 year past due - - - -
Total accounts receivable $ 13,086,991 $ 9,057,741 $ 13,963,453 $ 9,057,741

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.

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.

11
Off Balance Sheet Arrangements
We have no off balance sheet arrangements.
~~COMMITMENTS AND CONTINGENCIES~~
~~Legal Proceedings~~
From time to time, the Company and its affiliates are parties to various legal actions arising in the ordinary course of business. As of the date of this report, 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.
~~Capital expenditure commitment~~
On December 20, 2021, the Company 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, 2023, the Company has prepaid RMB15.0 million (equivalent to US$2.2 million) and recorded as construction in progress (see Note 5) and had a remaining balance of RMB5.0 million (equivalent to US$0.7 million) to be paid by the end of 2023.

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 ~~March 31,~~June 30, 2023 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.

1214

PART II – OTHER INFORMATION

ITEM 1. 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 ~~March 31,~~June 30, 2023, 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 1A. RISK FACTORS.

Not required for smaller reporting companies.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

Exhibit No.
Description
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 (embedded within the Inline XBRL document)
1315

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: ~~May 22,~~August 16, 2023 By: /s/ Zongyi Lian
Name: Zongyi Lian
Title: President and Chief Executive Officer (Principal Executive Officer)

Date: ~~May 22,~~August 16, 2023 By: /s/ Yuhua Huang
Name: Yuhua Huang
Title: Chief Financial Officer (Principal Financial and Accounting Officer)

1416

	2023			2022
	For the three-months ended March 31,						For the six-months ended June 30,
	2023			2022			2023			2022

Cash flows from operating activities
Net income	$	2,793,249		$	2,562,513		$	7,466,232		$	5,493,218
Adjustments to reconcile net income to cash provided by operating activities
Depreciation and amortization		2,433			2,622
Depreciation								4,805			10,169
Amortization of discounts and issuance cost of the notes		6,941			12,655			15,151			25,896
Gain (loss) on changes in fair value of common stock purchase warrants liability		97,602			(160,443	)
Gain on changes in fair value of common stock purchase warrants liability								(44,784	)		(222,651	)

Changes in operating assets and liabilities:
Accounts receivable		(4,004,967	)		(6,350,920	)		(5,597,334	)		(7,727,876	)
Amounts due from related parties		(1,076	)		-			(1,158	)		-
Inventories		254,727			(11,620	)		239,546			(276,717	)
Prepaid expenses and other current assets		307,380			741,854			339,335			1,183,520
Accounts payable		702,052			429,214			1,102,812			1,365,543
Amounts due to related parties		(1,344	)		(53,472	)		2,164			(22,417	)
Income tax payable		1,383,069			933,794			1,551,492			1,112,391
Accrued expenses and other current liabilities		1,176,473			456,056			1,680,447			557,669
Net cash provided by (used in) operating activities		2,716,539			(1,437,747	)
Net cash provided by operating activities								6,758,708			1,498,745

Cash flows from investing activities


Net cash provided by investing activities		-			-			-			-

Cash flows from financing activities

Proceeds from stock issuance of private placement		40,000,000			-			40,000,000			-
Proceeds from interest-free advances from a third party		86,735			-			82,145			-
Repayments of convertible promissory notes payable		(35,000	)		-			(35,000	)		-
Net cash used in financing activities		40,051,735			-
Net cash provided by financing activities								40,047,145			-

Effect of changes of foreign exchange rates on cash		(760,531	)		94,476			(5,841,498	)		(2,516,649	)
Net increase in cash		42,007,743			(1,343,271	)		40,964,356			(1,017,904	)
Cash, beginning of period		51,250,505			46,163,704			51,250,505			46,163,704
Cash, end of period	$	93,258,248		$	44,820,433		$	92,214,861		$	45,145,800
Supplemental disclosures of cash flow information
Income tax paid	$	22,330		$	1,001,305		$	2,961,494		$	1,045,215

	March 31, 2023		December 31 2022		June 30, 2023		December 31 2022
Accounts receivable	$	13,086,991	$	9,057,741	$	13,963,453	$	9,057,741
Allowance for doubtful accounts		-		-		-		-
Accounts receivable, net	$	13,086,991	$	9,057,741	$	13,963,453	$	9,057,741

	March 31, 2023		December 31, 2022		June 30, 2023		December 31, 2022
Advance to suppliers	$	345,204	$	333,920	$	327,861	$	333,920
VAT input credits		38,549		355,482		-		355,482
Issue cost related to convertible promissory notes		78,150		81,614		74,047		81,614
Prepayment for land use right (i)		571,558		569,105
Security deposit (ii)		57,225		56,979
Others receivable (iii)		55,907		53,520
Prepayment for land use right (i)						541,314		569,105
Security deposit (ii)						54,197		56,979
Others receivable (iii)						57,002		53,520
Prepaid expenses and other current assets	$	1,146,593	$	1,450,620	$	1,054,421	$	1,450,620

	Relationship	March 31, 2023		December 31, 2022		Note

Mr. Zongyi Lian	President and CEO of the Company	$	1,080	$	-	Receivable from employee
Total		$	1,080	$	-

				March 31, 2023					December 31, 2022				June 30, 2023					December 31, 2022
	Interest rate			Principal Amount		Carrying Amount			Principal Amount		Carrying Amount		Interest rate			Principal Amount		Carrying Amount			Principal Amount		Carrying Amount
Convertible Note - Talos Victory (Note 9 (b))		8	%	$	-	$	-		$	-		-		8	%	$	-	$	-		$	-		-
Convertible Note - Mast Hill (Note 9 (b))		8	%		725,000		639,400			740,000		635,535		8	%		725,000		658,988			740,000		635,535
Convertible Note - First Fire (Note 9 (b))		8	%		176,250		156,466			181,250		156,594		8	%		176,250		125,922			181,250		156,594
Convertible Note - LGH Note 9 (b))		8	%		202,500		188,949			207,500		188,987		8	%		202,500		194,094			207,500		188,987
Convertible Note - Fourth Man (Note 9 (b))		8	%		152,000		129,322			157,000		128,703		8	%		152,000		133,510			157,000		128,703
Convertible Note - Jeffery Street Note 9 (b))		8	%		165,000		136,809			170,000		142,554
Convertible Note - Blue Lake Note 9 (b))Total		8	%		-		-			-		-
Convertible Note - Jefferson Street Note 9 (b))														8	%		165,000		141,240			170,000		142,554
Convertible Note - Blue Lake Note 9 (b))														8	%		-		-			-		-
Total				$	1,420,750	$	1,250,946		$	1,455,750	$	1,252,373				$	1,420,750	$	1,253,754		$	1,455,750	$	1,252,373
Amortization of discounts for the three months ended March 31, 2023							(5,186	)
Convertible promissory notes payable as of March 31, 2023						$	1,245,760
Amortization of discounts for the six months ended June 30, 2023																			(3,888	)
Convertible promissory notes payable as of June 30, 2023																		$	1,249,866

												March 31, 2023																	June 30, 2023
	Volatility (%)			Expected dividends yield (%)			Weighted average expected life (year)		Risk-free interest rate (%) (per annum)			Common stock purchase warrants liability as of December 31, 2022(US$)		Changes of fair value of common stock purchase warrants liability (+ (loss)/(- (gain)(US$)		Common stock purchase warrants liability as of March 31, 2023 (US$)		Volatility (%)			Expected dividends yield (%)			Weighted average expected life (year)		Risk-free interest rate (%) (per annum)			Common stock purchase warrants liability as of December 31, 2022(US$)		Changes of fair value of common stock purchase warrants liability (+ (loss)/(- (gain)(US$)			Common stock purchase warrants liability as of June 30, 2023 (US$)
Convertible Note - Talos Victory (Note 9 (a))		337.7	%	$	0.0	%	$	1.6		4.35	%		14,803		5,663		20,466		355.5	%	$	0.0	%	$	1.3		5.14	%		14,803		5,369			20,172
Convertible Note - Mast Hill (Note 9 (a))		337.7	%		0.0	%		1.6		4.35	%		101,293		38,623		139,916		355.5	%		0.0	%		1.4		5.14	%		101,293		(101,293	)		-
Convertible Note - First Fire (Note 9 (a))		337.7	%		0.0	%		1.6		4.35	%		33,919		12,883		46,802		355.5	%		0.0	%		1.4		5.14	%		33,919		12,315			46,234
Convertible Note - LGH Note 9 (a))		337.7	%		0.0	%		1.7		4.35	%		34,028		12,888		46,916		355.5	%		0.0	%		1.4		5.14	%		34,028		12,355			46,383
Convertible Note - Fourth Man (Note 9 (ab))		337.7	%		0.0	%		1.7		4.35	%		14,398		5,444		19,842		355.5	%		0.0	%		1.4		5.14	%		14,398		5,228			19,626
Convertible Note - Jeffery Street Note 9 (a))3,054		337.7	%		0.0	%		1.7		4.35	%		34,134		12,892		47,026
Convertible Note - Jefferson Street Note 9 (a))3,054																			355.5	%		0.0	%		1.4		5.14	%		34,134		12,392			46,526
Convertible Note - Blue Lake Note 9 (a))		337.7	%		0.0	%		1.7		4.35	%		24,382		9,209		33,591		355.5	%		0.0	%		1.4		5.14	%		24,382		8,851			33,233
Total										Total			256,957		97,602		354,559										Total			256,957		(44,784	)		212,174


	Three-Month Period Ended June 30,					Six-Month Period Ended June 30,
	2023		2022			2023		2022
	US$		US$			US$		US$
Sales in PRC	$	9,108,145	$	8,104,365		$	18,395,711	$	16,262,309
Sales in Overseas
—Republic of China (ROC, or Taiwan)		1,900,147		1,851,955			4,019,287		3,856,534
-South Korea		1,733,135		1,797,900			3,644,432		3,566,827
-Others		33,005		(1,286	)		148,463		61,811
Sub-total		3,666,287		3,648,569			7,812,182		7,485,172
Total Revenue	$	12,774,432	$	11,752,934		$	26,207,893	$	23,747,481

	2023		2022
	For the Three-Month Periods Ended, March 31,
	2023		2022
Sales in PRC	$	9,287,566	$	8,169,567
Sales in Overseas
—Republic of China (ROC, or Taiwan)		2,119,140		1,998,679
-South Korea		1,911,297		1,763,200
-Others		115,458		63,101
Sub-total		4,145,895		3,824,980
Total revenues	$	13,433,461	$	11,994,547

	● Revenues were ~~$13.4~~$12.8 million, an increase of ~~11.7%~~8.4% from ~~$12.0~~$11.8 million in the ~~first~~second quarter of 2022
	● Gross profit was ~~$6.0~~$6.3 million, an increase of ~~39.5~~%23.5% from ~~$4.3~~$5.1 million in the ~~first~~second quarter of 2022
	● Gross profit margin was ~~45.0%~~49.0%, compared to ~~35.9%~~43.0% in the ~~first~~second quarter of 2022
	● Net income was ~~$2.8~~$4.7 million, compared to ~~$2.5~~$2.9 million in the ~~first~~second quarter of 2022
	● Total volume shipped was ~~635,276~~ 590,140 units, an increase of ~~13.5%~~ 4.1% from ~~559,958~~556,875 units in the ~~first~~second quarter of 2022

(in US Dollar millions, except percentage)	Three-Month Period Ended March 31,						Change			Three-Month Period Ended June 30,						Change			Six-Month Period Ended June 30,						Change
	2023			2022			%			2023			2022			%			2023			2022			%
Revenues	$	13.4		$	12.0			11.7	%	$	12.8		$	11.8			8.5	%	$	26.2		$	23.7			10.5	%
Cost of revenues		(7.4	)		(7.7	)		(3.9	)%		(6.5	)		(6.7	)		(3.0	)%		(13.9	)		(14.4	)		(3.5	)%
Gross profit		6.0			4.3			39.5	%		6.3			5.1			23.5	%		12.3			9.4			30.9	%
Total operating expenses		(1.7	)		(0.9	)		88.9	%		(0.2	)		(1.0	)		(80.0	)%		(1.9	)		(1.9	)		(0.0	)%
Operating income		4.3			3.4			26.5	%		6.1			4.1			48.8	%		10.4			7.5			38.7	%
Total other income (expenses)		(0.1	)		0.1			(200.0	)%
Changes in FV of Common Stock Purchase Warrants ( gain+/loss-)		(0.1	)		0.2			(150.0	)%
Gain on changes of fair values of Common Stock Purchase Warrant											0.1			0.0			N/A			0.0			0.2			(100.0	)%
Income before income taxes		4.2			3.5			20.0	%		6.2			4.1			51.2	%		10.4			7.7			35.1	%
Income tax expense		(1.4	)		(1.0	)		40.0	%		(1.5	)		(1.2	)		25.0	%		(2.9	)		(2.2	)		31.8	%
Net income	$	2.8		$	2.5			12.0	%	$	4.7		$	2.9			62.1	%	$	7.5		$	5.5			36.4	%

	For the Three-Month Ended March 31,
	2023					2022					Change		Change
	Amount		%			Amount		%			Amount		%
	(in US Dollar millions except percentage)
Revenue from sales to customers in PRC	$	9.3		69.4	%	$	8.2		68.3	%	$	1.1		13.4	%
Revenue from sales to customers overseas		4.1		30.6	%		3.8		31.7	%		0.3		7.9	%
Total Revenues	$	13.4		100	%	$	12.0		100	%	$	1.4		11.7	%

	For the Three-Month Period Ended June 30,
	2023					2022					Change		Change
	Amount		%			Amount		%			Amount		%
	(in US Dollar millions except percentage)
Revenue from sales to customers in PRC	$	9.1		71.1	%	$	8.1		68.6	%	$	1.0		12.3	%
Revenue from sales to customers overseas		3.7		28.9	%		3.7		31.4	%		0.0		0.0	%
Total Revenues	$	12.8		100	%	$	11.8		100	%	$	1.0		8.5	%

	Revenues For the Three-Month Ended March 31
	2023					2022					Change			Change
	Amount		%			Amount		%			Amount			Margin%
	(in US Dollars, except percentage)
Product categories by end applications
Automotive Touchscreens	$	3,234,836		24.1	%	$	3,012,725		25.1	%	$	222,111			7.4	%
Industrial Control Computer Touchscreens		2,672,250		19.9	%		2,298,142		19.2	%		374,108			16.3	%
POS Touchscreens		2,066,774		15.4	%		1,956,350		16.3	%		110,424			5.6	%
Gaming Touchscreens		1,911,297		14.2	%		1,763,069		14.7	%		148,228			8.4	%
Medical Touchscreens		2,094,242		15.6	%		1,472,091		12.3	%		622,151			42.3	%
Multi-Functional Printer Touchscreens		1,454,062		10.8	%		1,488,175		12.4	%		(34,113	)		(2.3	)%
Others*		-		0.0	%		3,995		0.0	%		(3,995	)		(100.0	)%
Total Revenues	$	13,433,461		100.0	%	$	11,994,547		100.0	%	$	1,438,914			11.7	%

	Revenues For the Three-Month Period Ended June 30,
	2023					2022						Change			Change
	Amount		%			Amount			%			Amount			Margin%
	(in US Dollars, except percentage)
Product categories by end applications
Automotive Touchscreens	$	3,210,054		25.1	%	$	2,904,951			24.7	%	$	305,103			10.5	%
Industrial Control Computer Touchscreens		2,422,606		19.0	%		2,344,118			20.0	%		78,488			3.3	%
POS Touchscreens		2,278,814		17.8	%		2,017,900			17.2	%		260,914			12.9	%
Medical Touchscreens		1,888,053		14.8	%		1,576,755			14.4	%		311,298			19.7	%
Gaming Touchscreens		1,733,135		13.6	%		1,803,630			15.3	%		(70,495	)		(3.9	)%
Multi-Functional Printer Touchscreens		1,241,770		9.7	%		1,105,671			9.4	%		136,099			12.3	%
Others*		-		0.0	%		(91	)		0.0	%		91			0.0	%
Total Revenues	$	12,774,432		100.0	%	$	11,752,934			100.0	%	$	1,021,498			8.5	%

	Three-Month Period Ended March 31,						Change					Three-Month Period Ended June 30,						Change
(in millions, except percentage)	2023			2022			Amount		%			2023			2022			Amount		%
Gross Profit	$	6.0		$	4.3		$	1.7		39.5	%	$	6.3		$	5.1		$	1.2		23.5	%
Gross Profit Margin		45.0	%		35.9	%				9.1	%		49.0	%		43.0	%				6.0	%

	Three-Month Period Ended June 30,						Change
(in US dollars, except percentage)	2023			2022			Amount			%
General and Administrative Expenses	$	56,907		$	443,146		$	(386,239	)		(87.2	)%
as a percentage of revenues		0.4	%		3.8	%					(3.4	)%

	For the Six-Month Period Ended June 30,
	2023					2022					Change		Change
	Amount		%			Amount		%			Amount		%
	(in US Dollar millions except percentage)
Revenue from sales to customers in PRC	$	18.4		70.3	%	$	16.2		68.5	%	$	2.2		13.6	%
Revenue from sales to customers overseas		7.8		29.7	%		7.5		31.5	%		0.3		4.0	%
Total Revenues	$	26.2		100	%	$	23.7		100	%	$	2.5		10.5	%

	Revenues For the Six-Month Period Ended June 30,
	2023					2022					Change			Change
	Amount		%			Amount		%			Amount			Margin%
	(in US Dollars, except percentage)
Product categories by end applications
Automotive Touchscreens	$	6,444,890		24.6	%	$	5,917,676		24.9	%	$	527,214			8.9	%
Industrial Control Computer Touchscreens		5,094,856		19.4	%		4,642,261		19.6	%		452,595			5.7	%
POS Touchscreens		4,345,588		16.6	%		3,566,699		15.0	%		778,889			21.8	%
Medical Touchscreens		3,982,295		15.2	%		3,048,846		12.8	%		933,449			30.6	%
Gaming Touchscreens		3,644,432		13.9	%		3,974,250		16.8	%		(329,818	)		(8.3	)%
Multi-Functional Printer Touchscreens		2,695,832		10.3	%		2,593,846		10.9	%		101,986			3.9	%
Others*		-		0.0	%		3,903		0.0	%		(3,903	)		(0.0	)%
Total Revenues	$	26,207,893		100.0	%	$	23,747,481		100.0	%	$	2,460,412			10.5	%

	Six-Month Period Ended June 30,						Change
(in millions, except percentage)	2023			2022			Amount		%
Gross Profit	$	12.3		$	9.4		$	2.9		30.9	%
Gross Profit Margin		46.9	%		39.4	%				7.5	%

	Three-Month Period Ended March 31,						Change
(in millions, except percentage)	2023			2022			Amount			%
Gain (loss) on changes in fair value of common stock purchase warrants	$	(0.1	)	$	0.2		$	(0.3	)		(150,0	)%
as a percentage of revenues		0.7	%		1.7	%					(1.0	)%

	Six-Month Period Ended June 30,						Change
(in US$ millions, except percentage)	2023			2022			Amount			%
Gain on changes in fair value of Common Stock Purchase Warrants	$	0.0		$	0.2		$	(0.2	)		(100.0	)%
as a percentage of revenues		0.0	%		0.8	%					(0.8	)%

	Three-Month Period Ended March 31,						Six-Month Period Ended June 30,
(in US Dollar millions)	2023			2022			2023			2022
Net cash provided by (used in) operating activities	$	2.7		$	(1.4	)
Net cash provided by operating activities							$	6.8		$	1.5
Net cash provided by investing activities		-			-			-			-
Net cash provided by financing activities		40.0			-			40.0			-
Effect of foreign currency exchange rate changes on cash and cash equivalents		(0,7	)		0.0			(5.8	)		(2.5	)
Net increase (decrease) in cash and cash equivalents		42.0			(1.4	)		41.0			(1.0	)
Cash and cash equivalents at the beginning of period		51.3			46.2			51.2			46.1
Cash and cash equivalents at the end of period	$	93.3		$	44.8		$	92.2		$	45.1

Exhibit No.		Description
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 (embedded within the Inline XBRL document)

	WETOUCH TECHNOLOGY INC.

Date: ~~May 22,~~August 16, 2023	By:	/s/ Zongyi Lian
	Name:	Zongyi Lian
	Title:	President and Chief Executive Officer (Principal Executive Officer)

Date: ~~May 22,~~August 16, 2023	By:	/s/ Yuhua Huang
	Name:	Yuhua Huang
	Title:	Chief Financial Officer (Principal Financial and Accounting Officer)