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 ~~June~~September 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 ~~August 15,~~November 13, 2023, the registrant had ~~194,304,965~~9,732,948 shares of common stock issued and outstanding.

WETOUCH TECHNOLOGY INC.

QUARTERLY REPORT ON FORM 10-Q

~~June~~September 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
	5
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15

Item 4.	Controls and Procedures	15

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	16

Item 1A.	Risk Factors	16

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16

Item 3.	~~Quantitative and Qualitative Disclosures About Market Risk~~Defaults Upon Senior Securities	1416

Item 4.	~~Controls and Procedures~~	14

~~PART II - OTHER INFORMATION~~		15

~~Item 1.~~	~~Legal Proceedings~~	15

~~Item 1A.~~	~~Risk Factors~~	15

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	15

~~Item 3.~~	~~Defaults Upon Senior Securities~~	15

~~Item 4.~~	Mine Safety Disclosure	1516

Item 5.	Other Information	1516

Item 6.	Exhibits	1516

SIGNATURES		1617

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)

~~JUNE~~SEPTEMBER 30, 2023

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

Notes to Condensed Consolidated Financial Statements	F-5 - ~~F-15~~F-16

WETOUCH TECHNOLOGY INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


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

ASSETS
CURRENT ASSETS
Cash	$	92,214,861		$	51,250,505		$	93,936,779		$	51,250,505
Accounts receivable, net		13,963,453			9,057,741			13,931,782			9,057,741
Inventories		170,356			423,276			203,922			423,276
Due from a related party		1,023			-
Prepaid expenses and other current assets		1,054,421			1,450,620			1,043,270			1,450,620
TOTAL CURRENT ASSETS		107,404,114			62,182,142			109,115,753			62,182,142

Property, plant and equipment, net		10,385,590			10,923,610			10,319,680			10,923,610
TOTAL ASSETS	$	117,789,704		$	73,105,752		$	119,435,433		$	73,105,752

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	2,369,245		$	1,383,094		$	1,502,743		$	1,383,094
Loan from a third party		467,936			385,791			385,791			385,791
Due to a related party		-			1,665			-			1,665
Income tax payable		1,503,458			22,152			1,150,001			22,152
Accrued expenses and other current liabilities		2,572,533			944,624			3,062,051			944,624
Convertible promissory notes payable		1,249,866			1,277,282			1,234,355			1,277,282
TOTAL CURRENT LIABILITIES		8,163,038			4,014,608			7,334,941			4,014,608

Common stock purchase warrants liability		212,174			256,957			381,241			256,957
TOTAL LIABILITIES	$	8,375,212		$	4,271,565		$	7,716,182		$	4,271,565

COMMITMENTS AND CONTINGENCIES (Note 13)		-			-			-
STOCKHOLDERS’ EQUITY
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		43,209,953			3,370,253
Common stock, $0.001 par value, 15,000,000 shares authorized, 9,732,948 and 1,680,248 issued and outstanding as of September 30, 2023 and December 31, 2022, respectively*							$	9,733		$	1,680
Additional paid in capital*								43,514,125			3,402,178
Statutory reserve		6,040,961			6,040,961			6,040,961			6,040,961
Retained earnings		69,833,124			62,366,892			72,692,092			62,366,892
Accumulated other comprehensive income		(9,863,451	)		(2,977,524	)
Accumulated other comprehensive loss								(10,537,660	)		(2,977,524	)
TOTAL STOCKHOLDERS’ EQUITY		109,414,492			68,834,187			111,719,251			68,834,187
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	117,789,704		$	73,105,752		$	119,435,433		$	73,105,752

Retrospectively restated for effect of reverse stock split (1-for-20), see Note 10 (2)

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)


	Three-Month Period Ended						Six-Month Period Ended							Three-Month Period Ended						Nine-Month Period Ended
	June 30,						June 30,							September 30,						September 30,
	2023			2022			2023			2022				2023			2022			2023			2022
REVENUES	$	12,774,432		$	11,752,934		$	26,207,893		$	23,747,481			$	11,123,605		$	11,623,018		$	37,331,498		$	35,370,499
COST OF REVENUES		(6,521,015	)		(6,701,935	)		(13,915,676	)		(14,385,727	)			(6,346,079	)		(6,561,166	)		(20,261,755	)		(20,946,893	)
GROSS PROFIT		6,253,417			5,050,999			12,292,217			9,361,754				4,777,526			5,061,852			17,069,743			14,423,606

OPERATING EXPENSES
Selling expenses		(81,360	)		(532,101	)		(132,065	)		(1,017,248	)			(265,526	)		(214,719	)		(397,591	)		(1,231,967	)
General and administrative expenses		(56,907	)		(443,146	)		(1,723,663	)		(815,484	)			(205,940	)		(88,063	)		(1,929,603	)		(903,547	)
Research and development expenses		(20,384	)		(21,713	)		(41,269	)		(44,570	)			(20,580	)		(20,737	)		(61,849	)		(65,307	)
OPERATING EXPENSES		(158,651	)		(996,960	)		(1,896,997	)		(1,877,302	)			(492,046	)		(323,519	)		(2,389,043	)		(2,200,821	)

INCOME FROM OPERATIONS		6,094,766			4,054,039			10,395,220			7,484,452				4,285,480			4,738,333			14,680,700			12,222,785

Interest income		30,034			30,502			59,229			59,636				30,616			29,621			89,845			89,257
Interest expense		(38,108	)		(57,391	)		(71,507	)		(113,563	)			(139,876	)		(58,692	)		(211,383	)		(172,255	)
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
Gain (loss) on changes in fair value of common stock purchase warrants liability															(169,067	)		(187,109	)		(124,283	)		35,542
TOTAL OTHER LOSS															(278,327	)		(216,180	)		(245,821	)		(47,456	)

INCOME BEFORE INCOME TAX EXPENSE		6,229,078			4,089,358			10,427,726			7,653,176				4,007,153			4,522,153			14,434,879			12,175,329

INCOME TAX EXPENSE		(1,556,095	)		(1,158,653	)		(2,961,494	)		(2,159,958	)			(1,148,185	)		(1,232,629	)		(4,109,679	)		(3,392,587	)

NET INCOME	$	4,672,983		$	2,930,705		$	7,466,232		$	5,493,218			$	2,858,968		$	3,289,524		$	10,325,200		$	8,782,742

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustment		(6,204,951	)		(3,782,778	)		(6,885,927	)		(3,402,584	)			(674,209	)		(4,195,353	)		(7,560,136	)		(7,597,937	)
COMPREHENSIVE INCOME (LOSS)	$	(1,531,968	)	$	(852,073	)	$	580,305		$	2,090,634			$	2,184,759		$	(905,829	)	$	2,765,064		$	1,184,805

EARNINGS PER COMMON SHARE
EARNINGS PER COMMON SHARE*
Basic	$	0.02		$	0.09		$	0.04		$	0.17		*	$	0.29		$	2.01		$	1.13		$	5.47
Diluted	$	0.02		$	0.09		$	0.04		$	0.17		*	$	0.29		$	2.01		$	1.13		$	5.12
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING*
Basic		193,654,416			31,991,065			176,834,247			32,078,536		*		9,712,404			1,639,881			9,135,132			1,604,328
Diluted		195,586,979			32,605,193			180,699,373			32,692,664		*		9,794,357			1,637,024			9,224,423			1,715,956

*	Retrospectively restated for effect of reverse stock split (1-for-20), see Note 10 (2)

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)


	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		loss			equity

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
Balance at July 1, 2022*																			1,601,952	$	1,602	$	2,363,831		$	5,067,243	$	60,103,382	$	(1,137,416	)	$	66,398,642

Shares issued cashless for warrants		227,512		228		(228	)		-		-		-			-			65,325		65		(65	)		-		-		-			-
Net income											2,930,705					2,930,705			-		-		-			-		3,289,524		-			3,289,524
Foreign currency translation adjustment		-		-		-			-		-		(3,782,778	)		(3,782,778	)		-		-		-			-		-		(4,195,353	)		(4,195,353	)

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
Balance at September 30, 2022																			1,667,277	$	1,667	$	2,363,766		$	5,067,243	$	63,392,906	$	(5,332,769	)	$	65,492,813

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

Balance at July 1, 2023* 9,695,248 $ 9,695 $ 43,394,163 $ 6,040,961 $ 69,833,124 $ (9,863,451 ) $ 109,414,492

Fraction shares issued due to reverse stock split 5,362 6 (6 ) - -- -
Exercise of warrants issued to third parties in conjunction with debt issuance in 2021 7,338 7 (7 ) - - - -
Stock issuance for convertible promissory notes payable 25,000 25 119,975 - - - 120,000
Net income - - - - 2,858,968 - 2,858,968
Foreign currency translation adjustment - - - - - (674,209 ) (674,209 )

Balance at September 30, 2023 9,732,948 $ 9,733 $ 43,514,125 $ 6,040,961 $ 72,692,092 $ (10,537,600 ) $ 111,719,251

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 (loss) equity

Balance at December 31 2021* 1,590,576 $ 1,591 $ 2,363,842 $ 5,067,243 $ 54,610,164 $ 2,265,168 $ 64,308,008

Shares issued cashless for warrants 76,701 76 (76 ) - - - -
Net income - - - - 8,782,742 - 8,782,742
Foreign currency translation adjustment - - - - - (7,597,937 ) (7,597,937 )

Balance at September 30, 2022 1,667,277 $ 1,667 $ 2,363,766 $ 5,067,243 $ 63,392,906 $ (5,332,769 ) $ 65,492,813

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’

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 Shares Amount capital reserve Earnings 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
Balance at December 31 2022* 1,680,248 $ 1,680 $ 3,402,178 $ 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 8,000,000 8,000 39,992,000 - - - 40,000,000

Fraction shares issued due to reverse stock split 5,362 6 (6 ) - - - -
Exercise of warrants issued to third parties in conjunction with debt issuance in 2021 300,000 300 (300 ) - - - - 22,338 22 (22 ) - - - -
Stock issuance for convertible promissory notes payable 25,000 25 119,975 - - - 120,000
Net income - - - - 7,466,232 - 7,466,232 - - - - 10,325,200 - 10,325,200
Foreign currency translation adjustment - - - - - (6,885,927 ) (6,885,927 ) - - - - - (7,560,136 ) (7,560,136 )

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
Balance at September 30, 2023 9,732,948 $ 9,733 $ 43,514,125 $ 6,040,961 $ 72,692,092 $ (10,537,600 ) $ 111,719,251

* Retrospectively restated for effect of reverse stock split (1-for-20), see Note 10 (2)
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)

For the six-months ended
June 30,

For the nine-months ended
September 30,

2023 2022 2023 2022

Cash flows from operating activities
Net income $ 7,466,232 $ 5,493,218 $ 10,325,200 $ 8,782,742
Adjustments to reconcile net income to cash provided by operating activities
Depreciation 4,805 10,169 9,465 12,494
Amortization of discounts and issuance cost of the notes 15,151 25,896 24,121 39,774
Gain on changes in fair value of common stock purchase warrants liability (44,784 ) (222,651 )
(Gain) loss on changes in fair value of common stock purchase warrants liability 124,284 (35,542 )

Changes in operating assets and liabilities:
Accounts receivable (5,597,334 ) (7,727,876 ) (5,568,912 ) (7,451,004 )
Amounts due from related parties (1,158 ) - (98 ) -
Inventories 239,546 (276,717 ) 199,566 (194,529 )
Prepaid expenses and other current assets 339,335 1,183,520 335,230 1,168,383
Accounts payable 1,102,812 1,365,543 202,514 723,723
Amounts due to related parties 2,164 (22,417 ) (1,665 ) 7,366
Income tax payable 1,551,492 1,112,391 1,171,069 1,208,810
Accrued expenses and other current liabilities 1,680,447 557,669 2,187,200 506,706
Net cash provided by operating activities 6,758,708 1,498,745 9,007,974 4,768,923

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 82,145 -
Repayments of convertible promissory notes payable (35,000 ) - (55,000 ) -
Net cash provided by financing activities 40,047,145 - 39,945,000 -

Effect of changes of foreign exchange rates on cash (5,841,498 ) (2,516,649 ) (6,266,700 ) (5,383,354 )
Net increase in cash 40,964,356 (1,017,904 )
Net increase (decrease) in cash 42,686,274 (614,431 )
Cash, beginning of period 51,250,505 46,163,704 51,250,505 46,163,704
Cash, end of period $ 92,214,861 $ 45,145,800 $ 93,936,779 $ 45,549,273
Supplemental disclosures of cash flow information
Income tax paid $ 2,961,494 $ 1,045,215
$ 2,938,610 $ 2,181,273
Non-cash financing activities
Cashless stock issuance for convertible promissory notes payable $ 22,338 $ -

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 (1,400,000 shares post-Reverse Stock Split) of our common stock (the “Reverse Merger”). In the Reverse Merger, each ordinary share of BVI Wetouch was exchanged for 2,800 shares (140 shares post-Reverse Stock Split) 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 (1,569,820 shares post-Reverse Stock Split) 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.~~accordingly.

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.~~Vtouch. Due to the fact that Hong Kong Wetouch and HK Wetouch are both under the same sole stockholder, the acquisition is accounted for under common control.

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.

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On March 30, 2023, an independent third party acquired all shares of Sichuan 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 ~~June~~September 30, 2023, the results of operations and cash flows for the ~~six-month~~nine-month periods ended ~~June~~September 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.
F-6

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 ~~six-month~~nine-month periods ended ~~June~~September 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
June 30, 2023 December 31 2022 September 30,
2023 December 31,
2022
Accounts receivable $ 13,963,453 $ 9,057,741 $ 13,931,782 $ 9,057,741
Allowance for doubtful accounts - - - -
Accounts receivable, net $ 13,963,453 $ 9,057,741 $ 13,931,782 $ 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
June 30, 2023 December 31, 2022 September 30,
2023 December 31,
2022
Advance to suppliers $ 327,861 $ 333,920 $ 325,852 $ 333,920
VAT input credits - 355,482 - 355,482
Issue cost related to convertible promissory notes 74,047 81,614 69,566 81,614
Prepayment for land use right (i) 541,314 569,105 537,998 569,105
Security deposit (ii) 54,197 56,979 53,865 56,979
Others receivable (iii) 57,002 53,520 55,989 53,520
Prepaid expenses and other current assets $ 1,054,421 $ 1,450,620 $ 1,043,270 $ 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 $~~541,314~~537,998) 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 $~~54,197~~53,865) 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.
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NOTE 5— PROPERTY, PLANT AND EQUIPMENT, NET
SCHEDULE OF PROPERTY , PLANT AND EQUIPMENT
June 30, 2023 December 31, 2022
Buildings $ 11,877 $ 12,487
Vehicles 40,380 42,453
Construction in progress 10,351,603 10,883,051
Subtotal 10,403,860 10,937,991
Less: accumulated depreciation (18,270 ) (14,381 )
Property, plant and equipment, net $ 10,385,590 $ 10,923,610
September 30, 2023 December 31, 2022
Buildings $ 11,804 $ 12,487
Vehicles 40,132 42,453
Construction in progress 10,288,183 10,883,051
Subtotal 10,340,119 10,937,991
Less: accumulated depreciation (20,439 ) (14,381 )
Property, plant and equipment, net $ 10,319,680 $ 10,923,610

Depreciation expense was $~~2,372~~2,294 and $~~7,216~~2,340 for the three-month period ended ~~June~~September 30, 2023 and 2022, respectively, and $~~4,805~~9,465 and $~~9,838~~12,494 for the ~~six-month~~nine-month period ended ~~June~~September 30, 2023 and 2022, ~~respectively.~~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 ($~~15.9~~15.8 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 ($41,372), and renewed on December 31, 2021 at a monthly rent of RMB 400,000 ($~~55,162~~52,825) from January 1, 2022 till October 31, ~~2023~~2024 for the use of the Demised Properties.
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NOTE 6 – RELATED PARTY TRANSACTIONS

Amounts due ~~from~~to a related party are as follows:
SCHEDULE OF RELATED PARTY TRANSACTIONS
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:~~
Relationship June 30, 2023 December 31, 2022 Note Relationship September 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%.

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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 ~~six-month~~nine-month periods ended ~~June~~September 30, 2023 and 2022 were ~~28.4~~28.5% and ~~28.2~~27.9%, respectively.

The estimated effective income tax rate for the year ended December 31, 2023 would be similar to actual effective tax rate of the ~~six-month~~nine-month periods ended ~~June~~September 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
June 30, 2023 December 31, 2022
September 30,
2023

December 31,
2022

Advance from customers $ 530,739 $ 397,886 $ 532,069 $ 397,886
Accrued payroll and employee benefits 83,034 89,359 82,015 89,359
Accrued interest expenses 178,490 122,135 209,397 122,135
Accrued underwriter fees (i) 1,200,000 - 1,200,000 -
Other tax payables (ii) 321,377 261 595,183 261
Other payable to a former shareholder (iii) - 191,180 - 191,180
Accrued professional fees 99,412 - 332,313 -
Others (iv) 159,481 153,803 111,074 153,803
Accrued expenses and other current liabilities $ 2,572,533 $ 944,624 $ 3,062,051 $ 944,624

(i) On March 18, 2023, the Company entered into a private placement consent agreement with ~~representatives related to~~Representatives of the private placement ~~consummated~~taken place 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.
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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. 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 $15,000,000or more (an “~~Uplist Offering~~”“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~~15.0 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.
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The following table summarizes the outstanding promissory notes as of ~~June~~September 30, 2023 and December 31, 2022 (dollars in thousands):
SUMMARY OF OUTSTANDING PROMISSORY NOTES
June 30, 2023 December 31, 2022
Interest rate Principal Amount Carrying Amount Principal Amount Carrying Amount
Convertible Note - Talos Victory (Note 9 (b)) 8 % $ - $ - $ - -
Convertible Note - Mast Hill (Note 9 (b)) 8 % 725,000 658,988 740,000 635,535
Convertible Note - First Fire (Note 9 (b)) 8 % 176,250 125,922 181,250 156,594
Convertible Note - LGH Note 9 (b)) 8 % 202,500 194,094 207,500 188,987
Convertible Note - Fourth Man (Note 9 (b)) 8 % 152,000 133,510 157,000 128,703
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 $ 1,253,754 $ 1,455,750 $ 1,252,373
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
September 30, 2023 December 31, 2022

Interest
rate
Principal Amount Carrying Amount Principal Amount Carrying Amount
Convertible Note - Talos Victory (Note 9 (b)) 8 % $ - $ - $ - -
Convertible Note - Mast Hill (Note 9 (b)) 8 % 725,000 679,402 740,000 635,535
Convertible Note - First Fire (Note 9 (b)) 8 % 156,250 146,654 181,250 156,594
Convertible Note - LGH Note 9 (b)) 8 % 202,500 199,438 207,500 188,987
Convertible Note - Fourth Man (Note 9 (b)) 8 % 152,000 137,882 157,000 128,703
Convertible Note - Jeffery Street Note 9 (b)) 8 % 165,000 145,865 170,000 142,554
Convertible Note - Blue Lake Note 9 (b))Total 8 % - - - -
Total $ 1,400,750 $ 1,309,241 $ 1,455,750 $ 1,252,373

Amortization of discounts for the nine months ended September 30, 2023 (74,886 )
Convertible promissory notes payable as of September 30, 2023 $ 1,234,355

From December 28, 2022 to ~~January 18,~~April 6, 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.

From August 29 to September 9, 2023, the remaining lenders and the Company entered into an amendment to the Note (“Amendment to Promissory Note”) that the Company’s ordinary shares on the Nasdaq Capital Market (the “Uplist”), the Company shall within three (3) business days after the Uplist, pay to the Holders amounts equal to 105% of the total outstanding balance of the Convertible Debenture.
During the nine-month period ended September 30, 2023, principal and default charges totaling $1,200,000 was converted into 25,000 shares of common stock of the Company.
For the ~~six-month~~nine-month period ended ~~June~~September 30, 2023 and 2022, the Company recognized interest expenses of the Notes in the amount of US$~~71,507~~211,383 and US$~~113,563~~172,255, respectively.

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

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~~90,000 shares of the Company’s common stock (the “Warrant Shares”).

The Warrants issued to the Lenders granted each of the Lenders the right to purchase up to ~~200,000~~10,000 shares of common stock of the Company at an exercise price of $~~1.25~~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~~25per ~~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.
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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~~137,500 ordinary shares (the “Shares”) were issued to a total of five (5) investors (the “Investors”) at a subscription price of $~~0.80~~16.0 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~~17.6 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,~~During the year ended December 31, 2022, three lenders exercised cashless for ~~115,540~~14,233 ~~(4th Man),~~ ~~111,972~~ ~~(Talos) and (Blue lake)~~ warrant ~~shares, respectively.~~shares.

~~On June 16,~~During the nine-month period ended September 30, 2023, ~~one lender~~two lenders exercised cashless for ~~300,000~~22,338 ~~(Mast Hill) warrants~~warrant shares.
~~F-11~~

The fair values of these warrants as of ~~June~~September 30, 2023 were calculated using the Black-Scholes option-pricing model with the following assumptions:
SCHEDULE OF FAIR VALUE OF WARRANTS
June 30, 2023 September 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 June 30, 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$) Common stock purchase warrants liability as of September 30, 2023 (US$)
Convertible Note - Talos Victory (Note 9 (a)) 355.5 % $ 0.0 % $ 1.3 5.14 % 14,803 5,369 20,172 522.6 % $ 0.0 % $ 1.1 5.46 % 14,803 28,758 43,561
Convertible Note - Mast Hill (Note 9 (a)) 355.5 % 0.0 % 1.4 5.14 % 101,293 (101,293 ) - 522.6 % 0.0 % - 5.46 % 101,293 (101,293 ) -
Convertible Note - First Fire (Note 9 (a)) 355.5 % 0.0 % 1.4 5.14 % 33,919 12,315 46,234 522.6 % 0.0 % 1.1 5.46 % 33,919 65,246 99,165
Convertible Note - LGH Note 9 (a)) 355.5 % 0.0 % 1.4 5.14 % 34,028 12,355 46,383 522.6 % 0.0 % 1.2 5.46 % 34,028 65,204 99,232
Convertible Note - Fourth Man (Note 9 (ab)) 355.5 % 0.0 % 1.4 5.14 % 14,398 5,228 19,626 522.6 % 0.0 % 1.2 5.46 % 14,398 27,524 41,922
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 - Jeffery Street Note 9 (a)) 522.6 % 0.0 % 1.2 5.46 % 34,134 (7,697 ) 26,437
Convertible Note - Blue Lake Note 9 (a)) 355.5 % 0.0 % 1.4 5.14 % 24,382 8,851 33,233 522.6 % 0.0 % 1.2 5.46 % 24,382 46,542 70,924
Total Total 256,957 (44,784 ) 212,174 Total 256,957 124,284 381,241
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(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~~15,000,000 shares with par value of $0.001.

On December ~~22,2020,~~22, 2020, the Company issued ~~103,610~~5,181 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~~15,541 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~~5,777, ~~111,972~~5,599 and ~~57,142~~2,857 to three lenders respectively. (see Note 9 (b)).

During the year ended December 31, 2022, the Company issued ~~124,223~~6,211 shares to a third party for warrant exercise (see Note 11).

During the year ended December 31, 2022, the Company issued ~~1,384,564~~69,228 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 of ~~160,000,000~~8,000,000 shares of the common stock to buyers of the ~~private placement~~Private Placement for an aggregate purchase price of $40,000,000, or $~~0.25~~5.00 per ~~share~~share. On January 20, 2023, the Company received net proceeds of $40 million accordingly.

During ~~the six-month~~nine-month ended ~~June~~September 30, 2023, the Company issued ~~300,000~~25,000 shares of common stock for the conversion of convertible promissory note payable (see note 9 (a)).
During the nine-month ended September 30, 2023, the Company issued 22,338 shares to atwo third party for warrant exercise (see Note 9)9(b)).

As of ~~June~~September 30, 2023, the Company had ~~193,904,965~~9,732,948 issued and outstanding shares.

2) Reverse Stock Split
On February 17, 2023, the Company’s board of directors 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.
F-13
On July 16, 2023, the Company’s board of directors approved a reverse stock split of the Company’s common stock at a ratio of 1-for-20. On July 16, 2023, the Company filed a certificate of change (with an effective date of July 16, 2023) with the Nevada Secretary of State pursuant to Nevada Revised Statutes 78.209 to effectuate a 1-for-20 reverse stock split of its outstanding common stock. On September 11, 2023, the Company received notice from FINRA/OTC Corporate Actions the reverse split would take effect at the open of business on September 12, 2023, and the reverse stock that split took effect on that date. All share information included in this Form 10-Q has been reflected as if the reverse stock split occurred as of the earliest period presented.
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~~5,181shares and ~~210,360~~10,518 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~~5,181 were vested on December 22, 2020 and no6,211 ~~warrants~~warrant shares were ~~exercised.~~exercised on September 21, 2022 and had 4,307 warrant shares remaining for the Crone law Group, P.C. or its designees for legal services. 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%, volatility of 43.5% and an average interest rate of 0.11%.

On January 1, 2021, the Board of Directors of the Company authorized the issuance of an aggregate of ~~310,830~~15,541 shares and ~~631,080~~31,554 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~~15,541 shares of common stock and ~~631,080~~31,554 warrants were vested on January 1, ~~2021 and during the year ended December 31, 2022,~~ ~~124,223~~ ~~warrant shares were exercised cashless.~~2021.

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~~2.5 years, expected dividend rate of 0%, volatility of ~~215.4~~51.3% and an average interest rate of ~~2.96~~0.12%.

As of ~~June~~September 30, 2023, the Company had ~~717,217~~35,861 warrants outstanding related to above mentioned services with i) weighted average exercise price of $~~0.01~~0.2; ii) weighted average remaining contractual life of ~~0.5~~0.2 years; and iii) aggregate intrinsic value of $~~0.3~~0.4 million.
~~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.

F-14
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 ~~June~~September 30, 2023 and 2022, ~~six~~five customers accounted for ~~23.2~~20.5%, ~~17.6~~17.4%, ~~14.8~~15.7%, ~~13.6~~%, ~~10.2~~15.6% and ~~10.2~~12.3%, and five customers accounted for ~~21.4~~21.9%, ~~15.6~~16.3%, ~~15.6~~15.0%, ~~15.3~~13.4% and ~~11.7~~12.9%, respectively, of the Company’s revenue.

For the ~~six-month~~nine-month periods ended ~~June~~September 30, 2023 and 2022, five customers accounted for 22.0%, 16.1%, 15.9%, 14.4%, and 11.6%, and six customers accounted for ~~22.7~~20.5%, ~~16.3~~15.9%, ~~15.2~~15.6%, ~~13.9~~14.5%, ~~11.2~~12.3% and ~~10.3%, and four customers accounted for~~ ~~26.8~~%, ~~21.5~~%, ~~13.4% and~~ ~~13.0~~10.2%, respectively, of the Company’s revenue.

And the Company’s top ten customers aggregately accounted for ~~99.9~~99.8% and ~~99.9~~99.1% of the total revenue for the three-month periods ended ~~June~~September 30, 2023 and 2022, and 99.6% and ~~99.4~~99.2% for the ~~six-month~~nine-month periods ended ~~June~~September 30, 2023 and 2022.

As of ~~June~~September 30, 2023, ~~three~~two customers accounted for ~~35.7~~%, ~~17.6~~26.7%, and ~~11.1~~14.1% 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 ~~28.4~~23.0% (two suppliers) and ~~46.7~~47.7% (four suppliers) for the three-month periods, respectively, ~~25.3~~11.9% ~~(two suppliers)~~(one supplier) and ~~47.0~~47.2% (four suppliers) for the ~~six-month~~nine-month periods ended ~~June~~September 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).~~therefrom. Accordingly, there are no pending material legal proceedings against the Company.

Please also refer to NOTE 13 - commitments and ~~contingencies~~ of ~~the Annual Report~~our 2023 10K-Annual report for year ending December 31, 2022 filed on April 17, 2023.

Capital ~~expenditure commitment~~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 ~~June~~September 30, 2023, the Company has prepaid RMB15.0 million (equivalent to US$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.
F-15

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,

Three-Month Period Ended
September 30,

Nine-Month Period Ended
September 30,

2023 2022 2023 2022 2023 2022 2023 2022
US$ US$ US$ US$ US$ US$ US$ US$
Sales in PRC $ 9,108,145 $ 8,104,365 $ 18,395,711 $ 16,262,309 $ 7,423,695 $ 8,159,260 $ 25,819,405 $ 24,421,569
Sales in Overseas
—Republic of China (ROC, or Taiwan) 1,900,147 1,851,955 4,019,287 3,856,534
-Republic of China (ROC, or Taiwan) 1,943,123 1,851,599 5,962,410 5,708,133
-South Korea 1,733,135 1,797,900 3,644,432 3,566,827 1,742,589 1,578,002 5,387,021 5,144,829
-Others 33,005 (1,286 ) 148,463 61,811 14,199 34,157 162,662 95,968
Sub-total 3,666,287 3,648,569 7,812,182 7,485,172 3,699,910 3,463,758 11,512,093 10,948,930
Total Revenue $ 12,774,432 $ 11,752,934 $ 26,207,893 $ 23,747,481 $ 11,123,605 $ 11,623,018 $ 37,331,498 $ 35,370,499

NOTE 15 — SUBSEQUENT ~~EVENT~~EVENTS
On September 7, 2023, Wetouch Technology Inc. (the “Company”) filed a Certificate of Change Pursuant to Nevada Revised Statutes Section 78.209 with the Secretary of State of the State of Nevada to affect a 1-for-20 reverse stock split (the “Reverse Stock Split”). On September 11, 2023, the Financial Industry Regulatory Authority (“FINRA”) notified us that the Reverse Stock Split will become effective on the OTCQB marketplace of OTC Markets on September 12, 2023 (the “Effective Date”). At the opening of business on the Effective Date, the Company’s common stock began trading on a split-adjusted basis. In connection with the Reverse Stock Split, the CUSIP number for the common stock will change to 961881208. The Company’s shares of common stock will continue to trade on the OTCQB marketplace under the symbol “WETHD” for a period of 20 business days, and thereafter, the symbol will return to “WETH”. Pursuant to Nevada Revised Statutes Section 78.209, the reverse stock split does not have to be approved by the shareholders of the Company. Fractional shares resulting from the Reverse Stock Split will be rounded up to the nearest whole number.

~~On February 17,~~Prior to the effective date of the Certificate of Change, the Company was authorized to issue 300,000,000 shares of common stock. As a result of the Reverse Stock Split, the Company is authorized to issue 15,000,000 shares of common stock. As of September 8, 2023 (immediately prior to the ~~Board~~Effective Date of ~~Directors~~the Reverse Stock Split), there were 194,551,716 shares of common stock outstanding. As a result of the Reverse Stock Split, there are approximately 9,727,586 shares of common stock outstanding (subject to adjustment due to the effect of rounding fractional shares into whole shares). The Reverse Stock Split will not have any effect on the stated par value of the common stock.
Each shareholder’s percentage ownership interest in the Company and proportional voting power remains virtually unchanged as a result of the Reverse Stock Split, except for minor changes and adjustments that will result from rounding fractional shares into whole shares. The rights and privileges of the holders of shares of common stock will be substantially unaffected by the Reverse Stock Split. All options, warrants and convertible securities of the Company ~~authorized a reverse stock split with a ratio of not less than~~ ~~one~~outstanding immediately prior to ~~five (1:5) and not more than one to eighty (1:80), with~~ the ~~exact amount and~~Reverse Stock Split (to the ~~timing of the reverse stock split to~~extent they don’t provide otherwise) will be ~~as determined~~appropriately adjusted 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 restatedividing the number of shares of common stock ~~outstanding once it is implemented.~~into which the options, warrants and convertible securities are exercisable or convertible by 20 and multiplying the exercise or conversion price thereof by 20, as a result of the Reverse Stock Split.
~~F-15~~ F-16

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,~~14, 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”),~~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~~such shareholders an aggregate of 28 million shares of our common stock (the “Reverse Merger”). The Reverse Merger closed on October 9, 2020. Immediately after the closing of the Reverse Merger, we had a total of ~~31,396,394~~1,569,820 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,~~On July 16, 2023, the Company’s board of directors approved a reverse stock split of the Company’s common stock at a ratio of 1-for-20. On July 16, 2023, the Company filed a certificate of change (with an effective date of July 16, 2023) with the Nevada Secretary of State pursuant to Nevada Revised Statutes 78.209 to effectuate a 1-for-20 reverse stock split of its outstanding common stock. On September 11, 2023, the Company received notice from FINRA/OTC Corporate Actions the reverse split would take effect at the open of business on September 12, 2023, and ~~Sichuan Vtouch, we~~the reverse stock that split took effect on that date. All share information included in this Quarterly Report has been reflected as if the reverse stock split occurred as of the earliest period presented.
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.~~revenues through BVI Wetouch, which owns Hong Kong Wetouch, HK Wetouch, Sichuan Wetouch and Sichuan Vtouch. 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,~~point of sale (POS), gaming, lottery, medical, ~~HMI,~~human machine interface (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 ~~subsidiary~~subsidiaries Hong Kong Wetouch, HK Wetouch, Sichuan Wetouch and Sichuan Vtouch for the ~~six-month period~~quarter ended ~~June~~September 30, ~~2023 and 2022, respectively.~~2022.
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. Since December 2022, many of the 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 PRC subsidiary has resumed normal operations. There are still uncertainties of future impact of the COVID-19 pandemic, and the extent of the impact will depend on a number of factors, including the duration and severity of the pandemic; and the macroeconomic impact of government measures to contain the spread of COVID-19 and related government stimulus measures.

Highlights for the three-month period ended ~~June~~September 30, 2023 include:

● ● Revenues were ~~$12.8~~$11.1 million, ~~an increase~~a decrease of ~~8.4%~~4.3% from ~~$11.8~~$11.6 million in the ~~second~~third quarter of 2022
● ● Gross profit was ~~$6.3~~$4.8 million, ~~an increase~~a decrease of ~~23.5%~~5.9% from $5.1 million in the ~~second~~third quarter of 2022
● ● Gross profit margin was ~~49.0%~~42.9%, compared to ~~43.0%~~43.6% in the ~~second~~third quarter of 2022
● ● Net income was ~~$4.7~~$2.9 million, compared to ~~$2.9~~$3.3 million in the ~~second~~third quarter of 2022
● ● Total volume shipped was ~~590,140~~557,503 units, ~~an increase~~a decrease of ~~4.1%~~2.6% from ~~556,875~~572,241 units in the ~~second~~third 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
June 30, Change Six-Month
Period Ended
June 30, Change
Three-Month
Period Ended
September 30,
Change
Nine-Month
Period Ended
September 30,
Change
2023 2022 % 2023 2022 % 2023 2022 % 2023 2022 %
Revenues $ 12.8 $ 11.8 8.5 % $ 26.2 $ 23.7 10.5 % $ 11.1 $ 11.6 (4.3 )% $ 37.3 $ 35.4 5.4 %
Cost of revenues (6.5 ) (6.7 ) (3.0 )% (13.9 ) (14.4 ) (3.5 )% (6.3 ) (6.6 ) (4.5 )% (20.2 ) (20.9 ) (3.3 )%
Gross profit 6.3 5.1 23.5 % 12.3 9.4 30.9 % 4.8 5.1 (5.9 )% 17.1 14.4 21.3 %
Total operating expenses (0.2 ) (1.0 ) (80.0 )% (1.9 ) (1.9 ) (0.0 )% (0.5 ) (0.3 ) 66.7 % (2.4 ) (2.2 ) 9.1 %
Operating income 6.1 4.1 48.8 % 10.4 7.5 38.7 % 4.3 4.7 (8.5 )% 14.7 12.2 20.5 %
Gain on changes of fair values of Common Stock Purchase Warrant 0.1 0.0 N/A 0.0 0.2 (100.0 )%

Loss on changes of fair values of Common Stock Purchase Warrant (0.2 ) (0.2 ) 0.0 % (0.1 ) 0.0 N/A
Income before income taxes 6.2 4.1 51.2 % 10.4 7.7 35.1 % 4.0 4.5 (11.1 )% 14.4 12.2 18.0 %
Income tax expense (1.5 ) (1.2 ) 25.0 % (2.9 ) (2.2 ) 31.8 % (1.1 ) (1.2 ) (8.3 )% (4.1 ) (3.4 ) 20.6 %
Net income $ 4.7 $ 2.9 62.1 % $ 7.5 $ 5.5 36.4 % $ 2.9 $ 3.3 (12.1 )% $ 10.3 $ 8.8 17.0 %

6

Results of Operations - Three Months Ended ~~June~~September 30, 2023 Compared to Three Months Ended ~~June~~September 30, 2022

Revenues

We generated revenue of ~~$12.8~~$11.1 million for the three months ended ~~June~~September 30, 2023, ~~an increase~~a decrease of ~~$1.1~~$0.5 million, or ~~8.5%~~4.3%, compared to ~~$11.8~~$11.6 million in the same period of last ~~year, primarily~~year. This was mainly due to ~~increase of 4.1% in sales volume, an increase of 10.4% in the average selling price of our products, and partially offset by 6.1%~~5.7% negative impact from exchange rate due to depreciation of RMB against US dollars, a decrease of 2.6% in sales volume and partially offset by an increase of 3.8% in the average RMB selling price of our products, compared with those of the same period of last year.

For the Three-Month Period Ended June 30, For the Three-Month Ended September 30,
2023 2022 Change Change 2023 2022 Change Change
Amount % Amount % Amount % Amount % Amount % Amount %
(in US Dollar millions except percentage) (in US Dollar millions except percentage)
Revenue from sales to customers in PRC $ 9.1 71.1 % $ 8.1 68.6 % $ 1.0 12.3 % $ 7.4 66.7 % $ 8.1 69.8 % $ (0.7 ) (8.6 )%
Revenue from sales to customers overseas 3.7 28.9 % 3.7 31.4 % 0.0 0.0 % 3.7 33.3 % 3.5 30.2 % 0.2 5.7 %
Total Revenues $ 12.8 100 % $ 11.8 100 % $ 1.0 8.5 % $ 11.1 100 % $ 11.6 100 % $ (0.5 ) (4.3 )%

For the Three-Month Period Ended June 30, For the Three-Month Ended September 30,
2023 2022 Change Change 2023 2022 Change Change
Unit % Unit % Unit % Unit % Unit % Unit %
(in UNIT, except percentage) (in UNIT, except percentage)
Units sold to customers in PRC 418,190 70.9 % 382,711 67.5 % 35,479 9.3 % 365,623 65.6 % 390,542 68.2 % (24,919 ) (6.4 )%
Units sold to customers overseas 171,950 29.1 % 184,164 32.5 % (12,214 ) (6.6 )% 191,880 34.4 % 181,699 31.8 % 10,181 5.6 %
Total Units Sold 590,140 100 % 566,875 100 % 23,265 4.1 % 557,503 100 % 572,241 100 % (14,738 ) (2.6 )%
(i) Domestic market

For the three months ended ~~June~~September 30, 2023, revenue from ~~the~~ domestic market ~~increased~~decreased by ~~$1.0~~$0.7 million or ~~12.3%~~8.6% as a combined result ~~of: (i) an increase~~ of ~~9.3% in sales volume and (ii) an increase of 8.8% in the average RMB selling price of our products, and partially offset by 6.1%~~5.7% negative impact from exchange rate due to depreciation of RMB against US dollars, a decrease of 6.4% in sales volume due to the fluctuation of product demand for products such as POS touchscreens and industrial control touchscreens with increase of raw material costs and higher selling price, and partially offset by an increase of 2.3% in the average RMB selling price of our products. For example, our POS touchscreens had an increase of 16% of selling price due to the pricing control capability of the Company, compared with those of the same period of last year.

As for the RMB selling price, the increase of ~~8.8%~~2.3% was mainly due to the increased sales of new models of higher-end products such as POS touchscreens, and industrial control computer touchscreens with higher selling prices in the domestic market during the three-month period ended ~~June~~September 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~~Despite 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~~our sales ~~increases of 35.5%~~decreased by 6.0% in South China, 5.5% in Southwest China, ~~19.4%~~and 2.2% in ~~South~~East China and ~~13.5% in Eastern China~~ during the ~~second quarter~~three-month period ended ~~June~~September 30, ~~2023 as compared to that of last year.~~2023.
(ii) Overseas market

For the three-month period ended ~~June~~September 30, 2023, ~~and 2022,~~ revenues from overseas market ~~remained stable at $3.7 million. We had an~~increased by 5.7% or $0.2 million as compared to the same period of 2022, mainly due to the increase of ~~9.9%~~5.6% in sales volume and the increase of 7.7% in average selling price ~~although~~in RMB in gaming touchscreens and automotive touchscreens during the ~~sales volume were flat.~~three-month period ended September 30, 2023.

7

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

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 %

Revenues
For the Three-Month Ended September 30,

2023 2022 Change Change
Amount % Amount % Amount Margin%

(in US Dollars, except percentage)

Product categories by end applications
Automotive Touchscreens $ 2,945,460 26.5 % $ 2,841,960 24.5 % $ 103,500 3.6 %
Industrial Control Computer Touchscreens 2,297,924 20.7 % 2,609,467 22.5 % (311,543 ) (11.9 )%
POS Touchscreens 1,738,935 15.6 % 1,989,250 17.1 % (250,315 ) (12.6 )%
Gaming Touchscreens 1,742,589 15.7 % 1,578,004 13.5 % 164,585 10.4 %
Medical Touchscreens 1,398,203 12.6 % 1,579,007 13.6 % (180,804 ) (11.5 )%
Multi-Functional Printer Touchscreens 1,000,494 9.0 % 1,024,278 8.8 % (23,784 ) (2.3 )%
Others* - 0.0 % 1,052 0.0 % (1,052 ) (100.0 )%
Total Revenues $ 11,123,605 100.0 % $ 11,623,018 100.0 % $ (499,413 ) (4.3 )%
*Others include applications in self-service kiosks, ticket vending ~~machine~~machines and financial terminals.

The Company continued to shift production mix from traditional lower-end products ~~such as~~to high-end touchscreens used in ~~industrial~~ control computer industries, ~~to high-end products such as touchscreens used in POS touchscreens, medical touchscreens, multi-functional printer~~gaming touchscreens, and automotive ~~touchscreen,~~touchscreens, 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 June 30, Change
Three-Month Period Ended
September 30,
Change
(in millions, except percentage) 2023 2022 Amount % 2023 2022 Amount %
Gross Profit $ 6.3 $ 5.1 $ 1.2 23.5 % $ 4.8 $ 5.1 $ (0.3 ) (5.9 )%
Gross Profit Margin 49.0 % 43.0 % 6.0 % 42.9 % 43.6 % (0.7 )%

Gross profit was ~~$6.3~~$4.8 million in the ~~second~~third quarter ended ~~June~~September 30, 2023, compared to $5.1 million in the same period of 2022. Our gross profit margin ~~increased~~decreased to ~~49.0%~~42.9% for the ~~second~~third quarter ended ~~June~~September 30, 2023 as compared to ~~43.0%~~43.6% for the same period of 2022, primarily due to the decrease of 4.3% in sales revenues and 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~~3.8% in cost of goods sold, ~~by 1.7%~~ including the increase of 7.7% in labor cost and increase of 4.0% in the raw materials such as chip cost by ~~1.5%~~3.8%, despite the Company shifting our products to higher gross profit margin products such as automotive touchscreens and gaming touchscreens and POS touchscreens.
Selling Expenses

Three-Month Period Ended
September 30,
Change
(in millions, except percentage) 2023 2022 Amount %
Selling Expenses $ 0.3 $ 0.2 $ 0.1 50.0 %
as a percentage of revenues 2.7 % 1.7 % 1.0 %
Selling expenses were $0.3 million for the three-month period ended ~~June~~September 30, ~~2023.~~2023, compared to $0.2 million in the same period in 2022, primarily due to the more marketing expenses incurred during the three-month period ended September 301, 2023 in order to market new models and penetrate into new regions.
8
General and Administrative Expenses

Three-Month Period Ended
June 30,
Change
Three-Month Period Ended
September 30,
Change
(in US dollars, except percentage) 2023 2022 Amount %
(in millions, except percentage) 2023 2022 Amount %
General and Administrative Expenses $ 56,907 $ 443,146 $ (386,239 ) (87.2 )% $ 0.2 $ 0.1 $ 0.1 100.0 %
as a percentage of revenues 0.4 % 3.8 % (3.4 )% 1.8 % 0.8 % 1.0 %

General and administrative (G&A) expenses were ~~$56,907~~$0.2 million for the ~~three-month period~~quarter ended ~~June~~September 30, 2023, compared to ~~$443,146~~$0.1 million in the same period in ~~2022. The decrease was~~2022, primarily due to $0.1 million in professional fees and traveling expenses during the ~~decrease~~third quarter of ~~salary and wages expenses and miscellaneous expenses.~~2023.
8

Research and Development Expenses

Three-Month Period Ended
June 30,
Change
Three-Month Period Ended
September 30,
Change
(in US dollars, except percentage) 2023 2022 Amount % 2023 2022 Amount %
Research and Development Expenses $ 20,384 $ 21,713 $ (1,329 ) (6.1 )% $ 20,580 $ 20,737 $ (157 ) (0.8 )%
as a percentage of revenues 0.2 % 0.2 % 0.0 % 0.0 % 0.0 % 0.0 %

Research and development (R&D) expenses were ~~$20,384~~$20,580 for the ~~three-month period~~quarter ended ~~June~~September 30, 2023, compared to ~~$21,713~~$20,737 in the same period in 2022, representing a decrease of ~~$1,329~~$157 of material consumption.

Operating Income

Total operating income was ~~$6.1~~$4.3 million for the ~~three-month period~~third quarter ended ~~June~~September 30, 2023, as compared to ~~$4.0~~$4.7 million offor the same period of last year, ~~primarily~~ due to lower gross profit, and higher ~~gross margin and lower selling expenses, and administrative expenses for the three-month period ended June 30, 2023.~~operating expenses.

~~Gain~~Loss 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 %
Three-Month Period Ended September 30, Change
(in US$ millions, except percentage) 2023 2022 Amount %
Loss on changes in fair value of Common Stock Purchase Warrants $ (0.2 ) $ (0.2 ) $ (0.0 ) 0.0 %
as a percentage of revenues 1.8 % 1.7 % 0.1 %

~~Gain~~Loss on changes in fair value of common stock purchase warrants ~~was $0.1 million and $0.0~~stayed the same as $0.2 million for the three-month ~~periods~~period ended ~~June~~September 30, 2023 and 2022, ~~respectively~~respectively. (See Note 9 (b)).
9

Income Taxes

Three-Month Period Ended
June 30,
Change
Three-Month Period Ended
September 30,
Change
(in millions, except percentage) 2023 2022 Amount % 2023 2022 Amount %
Income before Income Taxes $ 6.2 $ 4.1 $ 2.1 51.2 % $ 4.0 $ 4.5 $ (0.5) (11.1 )%
Income Tax (Expense) (1.5 ) (1.2 ) (0.3 ) 25.0 % (1.1 ) (1.2 ) 0.1 (8.3 )%
Effective income tax rate 25.0 % 28.3 % (3.3 )% 28.7 % 27.3 % 1.4 %

The effective income tax rates for the three-month periods ended ~~June~~September 30, 2023 and 2022 were ~~25.0%~~28.7% and ~~28.3%~~27.3%, respectively.
Net Income

As a result of the above factors, ~~we had a~~our net income ~~of $4.7 million in~~was $2.9 for the ~~second quarter of~~three-month period ended September 30, 2023, as compared to ~~a net income of $2.9~~$3.3 million in the same ~~quarter~~period of 2022.

9
Results of Operations - ~~Six~~Nine Months Ended ~~June~~September 30, 2023 Compared to ~~Six~~Nine Months Ended ~~June~~September 30, 2022

Revenues

We generated revenue of ~~$26.2~~$37.3 million for the ~~six months~~nine-month period ended ~~June~~September 30, 2023, an increase of ~~$2.5~~$1.9 million, or ~~10.5%~~5.4%, compared to ~~$23.7~~$35.4 million in the same period of last year. This was ~~mainly~~primarily due to an increase of ~~28.1%~~4.9% in sales volume, and an increase of 6.8% in the average RMB selling price of our products, and partially offset by ~~the decrease of 7.9% in sales volume and 6.9%~~6.2% 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, For the Nine-Month Ended September 30,
2023 2022 Change Change 2023 2022 Change Change
Amount % Amount % Amount % Amount % Amount % Amount %
(in US Dollar millions except percentage) (in US Dollar millions except percentage)
Revenue from sales to customers in PRC $ 18.4 70.3 % $ 16.2 68.5 % $ 2.2 13.6 % $ 25.8 69.2 % $ 24.5 69.2 % $ 1.3 5.3 %
Revenue from sales to customers overseas 7.8 29.7 % 7.5 31.5 % 0.3 4.0 % 11.5 30.8 % 10.9 30.8 % 0.6 5.5 %
Total Revenues $ 26.2 100 % $ 23.7 100 % $ 2.5 10.5 % $ 37.3 100 % $ 35.4 100 % $ 1.9 5.4 %

For the Six-Month Period Ended June 30, For the Nine-Month Ended September 30,
2023 2022 Change Change 2023 2022 Change Change
Unit % Unit % Unit % Unit % Unit % Unit %
(in UNIT, except percentage) (in UNIT, except percentage)
Units sold to customers in PRC 842,308 68.7 % 739,398 55.6 % 102,910 13.9 % 1,207,931 66.5 % 1,129,764 66.5 % 78,167 6.9 %
Units sold to customers overseas 383,108 31.3 % 590,706 44.4 % (207,598 ) (35.1 )% 574,988 33.5 % 569,144 33.5 % 5,844 1.0 %
Total Units Sold 1,225,416 100 % 1,330,104 100 % (104,688 ) (7.9 )% 1,782,919 100 % 1,698,908 100 % 84,011 4.9 %
(i) Domestic market

For the ~~six months~~nine-month period ended ~~June~~September 30, 2023, revenue from domestic market increased by ~~$2.2~~$1.3 million or ~~13.6% as a combined result of: (i)~~5.3%. This was primarily due to an increase of ~~13.9%~~6.9% in sales volume due to market demand for gaming touchscreen, and ~~(ii)~~medical touchscreens, and an increase of ~~6.2%~~4.8% in the average RMB selling price of our products, and partially offset by ~~6.9%~~6.2% 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%~~4.8% was mainly due to the increased sales of new models of higher-end products such as medical touchscreens, automotive touchscreens, 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~~September 30, 2023.
10

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 POS touchscreens and efforts to obtain new customers and penetrate into new regions, we had sales increases of ~~35.5%~~20.5% in Southwest China, ~~19.4%~~10.4% in South China, and ~~13.6%~~8.3% in East China during the ~~six-month~~nine-month period ended ~~June~~September 30, 2023.

(ii) Overseas market

For the ~~six-month~~nine-month period ended ~~June~~September 30, 2023, revenues from overseas market were ~~$7.8~~$11.5 million as compared to ~~$7.5~~$10.9 million of the same period of 2022, ~~representing~~ an increase ~~by $0.3~~of $0.6 million or ~~4.0%~~5.5% mainly due to the increase of ~~5.6%~~11.2% in average selling price, and ~~partially offset by the decrease~~increase of ~~35.1%~~1.0% in sales volume ~~due to decreased sales in~~as a result of demand increasing from overseas market such as gaming touchscreens and automotive touchscreens ~~as a result of demand decreasing from overseas market.~~for the nine-month period ended September 30, 2023.
10

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

Revenues
For the Six-Month Period Ended June 30,

Revenues
For the Nine-Month Ended September 30,

2023 2022 Change Change 2023 2022 Change Change
Amount % Amount % Amount Margin% Amount % Amount % Amount Margin%
(in US Dollars, except percentage) (in US Dollars, except percentage)
Product categories by end applications
Automotive Touchscreens $ 6,444,890 24.6 % $ 5,917,676 24.9 % $ 527,214 8.9 % $ 9,390,350 25.2 % $ 8,759,635 24.8 % $ 630,715 7.2 %
Industrial Control Computer Touchscreens 5,094,856 19.4 % 4,642,261 19.6 % 452,595 5.7 % 7,392,780 19.8 % 7,251,728 20.5 % 141,052 1.9 %
POS Touchscreens 4,345,588 16.6 % 3,566,699 15.0 % 778,889 21.8 % 6,084,523 16.3 % 5,963,500 16.9 % 121,023 2.0 %
Gaming Touchscreens 5,387,021 14.4 % 5,144,703 14.5 % 242,318 4.7 %
Medical Touchscreens 3,982,295 15.2 % 3,048,846 12.8 % 933,449 30.6 % 5,380,498 14.4 % 4,627,854 13.1 % 752,644 16.3 %
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 % 3,696,326 9.9 % 3,618,124 10.2 % 78,202 2.2 %
Others* - 0.0 % 3,903 0.0 % (3,903 ) (0.0 )% - 0.0 % 4,955 0.0 % (4,955 ) (100.0 )%
Total Revenues $ 26,207,893 100.0 % $ 23,747,481 100.0 % $ 2,460,412 10.5 % $ 37,331,498 100.0 % $ 35,370,499 100.0 % $ (1,960,999 ) 5.4 %
*Others include applications in self-service kiosks, ticket vending ~~machine~~machines and financial terminals.

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

Gross Profit and Gross Profit Margin

Six-Month Period Ended
June 30,
Change
Nine-Month Period Ended
September 30,
Change
(in millions, except percentage) 2023 2022 Amount % 2023 2022 Amount %
Gross Profit $ 12.3 $ 9.4 $ 2.9 30.9 % $ 17.1 $ 14.4 $ 2.7 18.8 %
Gross Profit Margin 46.9 % 39.4 % 7.5 % 45.7 % 40.8 % 4.9 %

Gross profit was ~~$12.3~~$17.1 million during the ~~six-month~~nine-month period ended ~~June~~September 30, 2023, compared to ~~$9.4~~$14.4 million in the same period of 2022. Our gross profit margin increased to ~~46.9%~~45.7% for the ~~six-month~~nine-month period ended ~~June~~September 30, 2023 as compared to ~~39.4%~~40.8% for the same period of 2022, primarily due to the increase inof sales ~~of 10.5%~~by 5.4%, particularly high-end products such as ~~POS touchscreens,~~ medical touchscreens, automotive touchscreens, and ~~automotive~~gaming touchscreens for the ~~six-month~~nine-month period ended ~~June~~September 30, 2023, partially offset by the increase in cost of goods sold by ~~2.8%~~2.4% including increase of cost of materials such as chip cost by ~~2.7%~~2.6% and labor cost by 8.2%, for the ~~six-month~~nine-month period ended ~~June~~September 30, 2023.
11
Selling Expenses

Nine-Month Period Ended
September 30,
Change
(in millions, except percentage) 2023 2022 Amount %
Selling Expenses $ 0.4 $ 1.2 $ (0.8 ) (66.7 )%
as a percentage of revenues 3.6 % 3.4 % 0.2 %
Selling expenses were $0.4 million for the nine-month period ended September 30, 2023 compared to $1.2 million in the same period in 2022, representing a decrease of 66.7%, or $0.8 million, primarily due to the marketing expenses of $1.0 million during the nine-month months ended September 31, 2022 as the Company increased marketing expenses of $1.0 million to promote Company’s products, coping with the extreme local and national government lockdown for restrictive measures for COVID-19. China started to revoke the restrictive policies previously adopted by the PRC government in late December 2022 by replacing with more flexible measures.

General and Administrative Expenses

Six-Month Period Ended
June 30,
Change
Nine-Month Period Ended
September 30,
Change
(in millions, except percentage) 2023 2022 Amount % 2023 2022 Amount %
General and Administrative Expenses $ 1.7 $ 0.8 $ 0.9 112.5 % $ 1.9 $ 0.9 $ 1.0 111.1 %
as a percentage of revenues 6.5 % 3.4 % 3.1 % 5.1 % 2.5 % 2.6 %

General and administrative (G&A) expenses were ~~$1.7~~$1.9 million for the ~~six-month~~nine-month period ended ~~June~~September 30, 2023, compared to ~~$0.8~~$0.9 million in the same period in 2022, representing an increase of ~~$0.9 million~~111.1%, or ~~112.5%.~~$1.0 million. The increase was primarily due to the increase of accrued $1.2 million underwriting fees in connection with a private 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

Six-Month Period Ended
June 30,
Change
Nine-Month Period Ended
September 30,
Change
(in US dollars, except percentage) 2023 2022 Amount % 2023 2022 Amount %
Research and Development Expenses $ 41,269 $ 44,570 $ (3,301 ) (7.4 )% $ 61,849 $ 65,307 $ (3,458 ) (5.3 )%
as a percentage of revenues 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 %

Research and development (R&D) expenses were ~~$41,269~~$61,849 for the ~~six-month~~nine-month period ended ~~June~~September 30, 2023 compared to ~~$44,570~~$65,307 in the same period in 2022.

Operating Income

Total operating income was ~~$10.4~~$14.7 million for the ~~six-month~~nine-month period ended ~~June~~September 30, 2023 as compared to ~~$7.5~~$12.2 million of the same period of last year due to higher gross profit and lower selling expenses, partially offset by higher ~~general & administration~~G&A expenses.
12
Gain (loss) on changes in fair value of Common Stock Purchase Warrants

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 )%
Nine-Month Period Ended September 30, Change
(in millions, except percentage) 2023 2022 Amount %
Gain (loss) on changes in fair value of Common Stock Purchase Warrants $ (0.2 ) $ 0.0 $ (0.2 ) N/A
as a percentage of revenues 1.8 % 0.0 % 1.8 %

~~Gain~~Loss on changes in fair value of common stock purchase warrants was ~~$44,784~~$0.2 million for the ~~six-month~~nine-month period ended ~~June~~September 30, 2023, as compared to a gain of ~~$0.2 million on changes in fair value of common stock purchase warrants~~$35,542 in the same period of 2022 (See Note 9 (b)).

Income Taxes

Six-Month Period Ended
June 30,
Change
Nine-Month Period Ended
September 30,
Change
(in millions, except percentage) 2023 2022 Amount % 2023 2022 Amount %
Income before Income Taxes $ 10.4 $ 7.7 $ 2.7 35.1 % $ 14.4 $ 12.2 $ 2.2 18.0 %
Income Tax (Expense) (2.9 ) (2.2 ) (0.7 ) 31.8 % (4.1 ) (3.4 ) (0.7 ) 20.6 %
Effective income tax rate 28.4 % 28.2 % 0.2 % 28.5 % 27.9 % 0.6 %

The effective income tax rates for the ~~six-month~~nine-month periods ended ~~June~~September 30, 2023 and 2022 were ~~28.4%~~28.5% and ~~28.2%~~27.9%, respectively. The effective income tax rate for the nine-month period ended September 30, 2023 increase was primarily due to more taxable income for the nine-month periods ended September 30, 2023.

Our PRC subsidiary Sichuan Vtouch had ~~$92.2~~$93.9 million of cash and cash equivalents of ~~June~~September 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 ~~$7.5~~$10.3 million in the ~~six-month~~nine-month period ended ~~June~~September 30, 2023 compared to a net income of ~~$5.5~~$8.8 million in the same 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.

13
As of ~~June~~September 30, 2023, we had current assets of ~~$107.4~~$109.1 million, consisting of ~~$92.2~~$93.9 million in cash, ~~including $40.0 million from the stock issuance of a private placement, $14.0~~$13.9 million in accounts receivable, $0.2 million in inventories, and ~~$1.1~~$1.0 million in prepaid expenses ~~and~~ other current assets. Our current liabilities as of ~~June~~September 30, 2023, were ~~$8.1~~$7.3 million, which is comprised of ~~$2.4~~$1.5 million in accounts payable, ~~$1.5~~$3.1 million in accrued expenses, $1.1 million in income tax payable, ~~$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 ~~six-month~~nine-month period ended ~~June~~September 30, 2023 and 2022:

Six-Month Period Ended
June 30,

Nine-Month Period Ended
September 30,

(in US Dollar millions) 2023 2022 2023 2022
Net cash provided by operating activities $ 6.8 $ 1.5 $ 9.0 $ 4.8
Net cash provided by investing activities - - - -
Net cash provided by financing activities 40.0 -
Net cash used in financing activities 39.9 -
Effect of foreign currency exchange rate changes on cash and cash equivalents (5.8 ) (2.5 ) (6.2 ) (5.4 )
Net increase (decrease) in cash and cash equivalents 41.0 (1.0 ) 42.7 (0.6 )
Cash and cash equivalents at the beginning of period 51.2 46.1 51.2 46.1
Cash and cash equivalents at the end of period $ 92.2 $ 45.1 $ 93.9 $ 45.5

Operating Activities

Net cash provided by operating activities was ~~$6.8~~$9.0 million for the ~~six-month~~nine-month period ended ~~June~~September 30, 2023, as compared to ~~$1.5~~$4.8 million used in operating activities for the same period of the last year, primarily due to (i) the increase of ~~$1.9~~$1.5 million net income for the ~~six-month~~nine-month period ended ~~June~~September 30, 2023 as compared to the same period of 2022, (ii) the increase of ~~$0.3~~$0.2 million loss on changes of FV of common stock purchase warrants for the ~~six-month~~nine-month period ended ~~June~~September 30, 2023; (iii) the decrease of ~~$2.1~~$1.8 million of accounts receivable for the ~~six-month~~nine-month period ended ~~June~~September 30, 2023 due to faster collection of receivables, (iv) the decrease of ~~$0.5~~$0.4 million in inventories, (v) the ~~decrease of $0.3 million in accounts payable, (vi) the~~ increase of ~~$0.4 million in income tax payable, and (vii) the decrease of $1.0~~$1.8 million of accrued expenses and other current liabilities for the ~~six-month~~nine-month period ended ~~June~~September 30, 2023, partially offset by (vi) the decrease in ~~$0.8~~$0.5 million in account payable, and (vii) the increase of $0.8 million in prepaid expenses and other current assets for the ~~six-month~~nine-month period ended ~~June~~September 30, 2023.

13
Investing Activities

There ~~was~~were nil investing activities for ~~the six-month periods~~nine-month period ended ~~June~~September 30, 2023 and 2022.

Financing Activities

Net cash provided by financing activities for the ~~six-month~~nine-month period ended ~~June~~September 30, 2023 was $40.0 million, due to the $40.0 million proceeds from stock issuance in a private ~~placement.~~placement, partially offset by the repayment of $55,000 convertible promissory note payable.

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

As of ~~June~~September 30, 2023, our cash and cash equivalents were ~~$92.2~~$93.9 million, as compared to ~~$51.3~~$51.2 million at December 31, 2022.

Days Sales Outstanding (“DSO”) has decreased to 7983 days for the ~~six-month~~nine-month period ended ~~June~~September 30, 2023 from 81 days for the year ended December 31, 2022.
14

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

June 30, 2023 December 31 2022 September 30,
2023 December 31,
2022
-Current $ 8,031,102 $ 1,252,152 $ 6,473,561 $ 1,252,152
-1-3 months past due 4,600,385 4,998,596 5,527,382 4,998,596
-4-6 months past due 1,331,966 2,806,973 1,930,839 2,806,973
7-12 months past due - 20 - 20
-greater than 1 year past due - - - -
Total accounts receivable $ 13,963,453 $ 9,057,741 $ 13,931,782 $ 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.

Off Balance Sheet Arrangements
We have no off balance sheet arrangements.

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 ~~June~~September 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.

14 15

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 ~~June~~September 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.~~During the three months ended September 30, 2023, there were no modifications, adoptions or terminations by any directors or officers to any contract, instruction or written plan for the purchase or sale of securities of the Company that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or non-Rule 10b5-1 trading agreements.

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)

15 16

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: ~~August 16,~~November 14, 2023 By: /s/ Zongyi Lian
Name: Zongyi Lian
Title: President and Chief Executive Officer (Principal Executive Officer)

Date: ~~August 16,~~November 14, 2023 By: /s/ Yuhua Huang
Name: Yuhua Huang
Title: Chief Financial Officer (Principal Financial and Accounting Officer)

16 17

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

Balance at July 1, 2023*		9,695,248	$	9,695	$	43,394,163		$	6,040,961	$	69,833,124	$	(9,863,451	)	$	109,414,492

Fraction shares issued due to reverse stock split		5,362		6		(6	)		-				--			-
Exercise of warrants issued to third parties in conjunction with debt issuance in 2021		7,338		7		(7	)		-		-		-			-
Stock issuance for convertible promissory notes payable		25,000		25		119,975			-		-		-			120,000
Net income		-		-		-			-		2,858,968		-			2,858,968
Foreign currency translation adjustment		-		-		-			-		-		(674,209	)		(674,209	)

Balance at September 30, 2023		9,732,948	$	9,733	$	43,514,125		$	6,040,961	$	72,692,092	$	(10,537,600	)	$	111,719,251


	For the six-months ended June 30,						For the nine-months ended September 30,
	2023			2022			2023			2022

Cash flows from operating activities
Net income	$	7,466,232		$	5,493,218		$	10,325,200		$	8,782,742
Adjustments to reconcile net income to cash provided by operating activities
Depreciation		4,805			10,169			9,465			12,494
Amortization of discounts and issuance cost of the notes		15,151			25,896			24,121			39,774
Gain on changes in fair value of common stock purchase warrants liability		(44,784	)		(222,651	)
(Gain) loss on changes in fair value of common stock purchase warrants liability								124,284			(35,542	)

Changes in operating assets and liabilities:
Accounts receivable		(5,597,334	)		(7,727,876	)		(5,568,912	)		(7,451,004	)
Amounts due from related parties		(1,158	)		-			(98	)		-
Inventories		239,546			(276,717	)		199,566			(194,529	)
Prepaid expenses and other current assets		339,335			1,183,520			335,230			1,168,383
Accounts payable		1,102,812			1,365,543			202,514			723,723
Amounts due to related parties		2,164			(22,417	)		(1,665	)		7,366
Income tax payable		1,551,492			1,112,391			1,171,069			1,208,810
Accrued expenses and other current liabilities		1,680,447			557,669			2,187,200			506,706
Net cash provided by operating activities		6,758,708			1,498,745			9,007,974			4,768,923

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		82,145			-
Repayments of convertible promissory notes payable		(35,000	)		-			(55,000	)		-
Net cash provided by financing activities		40,047,145			-			39,945,000			-

Effect of changes of foreign exchange rates on cash		(5,841,498	)		(2,516,649	)		(6,266,700	)		(5,383,354	)
Net increase in cash		40,964,356			(1,017,904	)
Net increase (decrease) in cash								42,686,274			(614,431	)
Cash, beginning of period		51,250,505			46,163,704			51,250,505			46,163,704
Cash, end of period	$	92,214,861		$	45,145,800		$	93,936,779		$	45,549,273
Supplemental disclosures of cash flow information
Income tax paid	$	2,961,494		$	1,045,215
							$	2,938,610		$	2,181,273
Non-cash financing activities
Cashless stock issuance for convertible promissory notes payable							$	22,338		$	-

	June 30, 2023		December 31 2022		September 30, 2023		December 31, 2022
Accounts receivable	$	13,963,453	$	9,057,741	$	13,931,782	$	9,057,741
Allowance for doubtful accounts		-		-		-		-
Accounts receivable, net	$	13,963,453	$	9,057,741	$	13,931,782	$	9,057,741

	June 30, 2023		December 31, 2022		September 30, 2023		December 31, 2022
Advance to suppliers	$	327,861	$	333,920	$	325,852	$	333,920
VAT input credits		-		355,482		-		355,482
Issue cost related to convertible promissory notes		74,047		81,614		69,566		81,614
Prepayment for land use right (i)		541,314		569,105		537,998		569,105
Security deposit (ii)		54,197		56,979		53,865		56,979
Others receivable (iii)		57,002		53,520		55,989		53,520
Prepaid expenses and other current assets	$	1,054,421	$	1,450,620	$	1,043,270	$	1,450,620

	June 30, 2023			December 31, 2022
Buildings	$	11,877		$	12,487
Vehicles		40,380			42,453
Construction in progress		10,351,603			10,883,051
Subtotal		10,403,860			10,937,991
Less: accumulated depreciation		(18,270	)		(14,381	)
Property, plant and equipment, net	$	10,385,590		$	10,923,610

	September 30, 2023			December 31, 2022
Buildings	$	11,804		$	12,487
Vehicles		40,132			42,453
Construction in progress		10,288,183			10,883,051
Subtotal		10,340,119			10,937,991
Less: accumulated depreciation		(20,439	)		(14,381	)
Property, plant and equipment, net	$	10,319,680		$	10,923,610

	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	$	-

	June 30, 2023					December 31, 2022
	Interest rate			Principal Amount		Carrying Amount			Principal Amount		Carrying Amount
Convertible Note - Talos Victory (Note 9 (b))		8	%	$	-	$	-		$	-		-
Convertible Note - Mast Hill (Note 9 (b))		8	%		725,000		658,988			740,000		635,535
Convertible Note - First Fire (Note 9 (b))		8	%		176,250		125,922			181,250		156,594
Convertible Note - LGH Note 9 (b))		8	%		202,500		194,094			207,500		188,987
Convertible Note - Fourth Man (Note 9 (b))		8	%		152,000		133,510			157,000		128,703
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	$	1,253,754		$	1,455,750	$	1,252,373
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

				September 30, 2023					December 31, 2022
	Interest rate			Principal Amount		Carrying Amount			Principal Amount		Carrying Amount
Convertible Note - Talos Victory (Note 9 (b))		8	%	$	-	$	-		$	-		-
Convertible Note - Mast Hill (Note 9 (b))		8	%		725,000		679,402			740,000		635,535
Convertible Note - First Fire (Note 9 (b))		8	%		156,250		146,654			181,250		156,594
Convertible Note - LGH Note 9 (b))		8	%		202,500		199,438			207,500		188,987
Convertible Note - Fourth Man (Note 9 (b))		8	%		152,000		137,882			157,000		128,703
Convertible Note - Jeffery Street Note 9 (b))		8	%		165,000		145,865			170,000		142,554
Convertible Note - Blue Lake Note 9 (b))Total		8	%		-		-			-		-
Total				$	1,400,750	$	1,309,241		$	1,455,750	$	1,252,373

Amortization of discounts for the nine months ended September 30, 2023							(74,886	)
Convertible promissory notes payable as of September 30, 2023						$	1,234,355

												June 30, 2023																		September 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 June 30, 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$)			Common stock purchase warrants liability as of September 30, 2023 (US$)
Convertible Note - Talos Victory (Note 9 (a))		355.5	%	$	0.0	%	$	1.3		5.14	%		14,803		5,369			20,172		522.6	%	$	0.0	%	$	1.1		5.46	%		14,803		28,758			43,561
Convertible Note - Mast Hill (Note 9 (a))		355.5	%		0.0	%		1.4		5.14	%		101,293		(101,293	)		-		522.6	%		0.0	%		-		5.46	%		101,293		(101,293	)		-
Convertible Note - First Fire (Note 9 (a))		355.5	%		0.0	%		1.4		5.14	%		33,919		12,315			46,234		522.6	%		0.0	%		1.1		5.46	%		33,919		65,246			99,165
Convertible Note - LGH Note 9 (a))		355.5	%		0.0	%		1.4		5.14	%		34,028		12,355			46,383		522.6	%		0.0	%		1.2		5.46	%		34,028		65,204			99,232
Convertible Note - Fourth Man (Note 9 (ab))		355.5	%		0.0	%		1.4		5.14	%		14,398		5,228			19,626		522.6	%		0.0	%		1.2		5.46	%		14,398		27,524			41,922
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 - Jeffery Street Note 9 (a))																				522.6	%		0.0	%		1.2		5.46	%		34,134		(7,697	)		26,437
Convertible Note - Blue Lake Note 9 (a))		355.5	%		0.0	%		1.4		5.14	%		24,382		8,851			33,233		522.6	%		0.0	%		1.2		5.46	%		24,382		46,542			70,924
Total										Total			256,957		(44,784	)		212,174										Total			256,957		124,284			381,241


	Three-Month Period Ended June 30,					Six-Month Period Ended June 30,				Three-Month Period Ended September 30,				Nine-Month Period Ended September 30,
	2023		2022			2023		2022		2023		2022		2023		2022
	US$		US$			US$		US$		US$		US$		US$		US$
Sales in PRC	$	9,108,145	$	8,104,365		$	18,395,711	$	16,262,309	$	7,423,695	$	8,159,260	$	25,819,405	$	24,421,569
Sales in Overseas
—Republic of China (ROC, or Taiwan)		1,900,147		1,851,955			4,019,287		3,856,534
-Republic of China (ROC, or Taiwan)											1,943,123		1,851,599		5,962,410		5,708,133
-South Korea		1,733,135		1,797,900			3,644,432		3,566,827		1,742,589		1,578,002		5,387,021		5,144,829
-Others		33,005		(1,286	)		148,463		61,811		14,199		34,157		162,662		95,968
Sub-total		3,666,287		3,648,569			7,812,182		7,485,172		3,699,910		3,463,758		11,512,093		10,948,930
Total Revenue	$	12,774,432	$	11,752,934		$	26,207,893	$	23,747,481	$	11,123,605	$	11,623,018	$	37,331,498	$	35,370,499

	●	● Revenues were ~~$12.8~~$11.1 million, ~~an increase~~a decrease of ~~8.4%~~4.3% from ~~$11.8~~$11.6 million in the ~~second~~third quarter of 2022

	●	● Gross profit was ~~$6.3~~$4.8 million, ~~an increase~~a decrease of ~~23.5%~~5.9% from $5.1 million in the ~~second~~third quarter of 2022

	●	● Gross profit margin was ~~49.0%~~42.9%, compared to ~~43.0%~~43.6% in the ~~second~~third quarter of 2022

	●	● Net income was ~~$4.7~~$2.9 million, compared to ~~$2.9~~$3.3 million in the ~~second~~third quarter of 2022

	●	● Total volume shipped was ~~590,140~~557,503 units, ~~an increase~~a decrease of ~~4.1%~~2.6% from ~~556,875~~572,241 units in the ~~second~~third quarter of 2022

(in US Dollar millions, except percentage)	Three-Month Period Ended June 30,						Change			Six-Month Period Ended June 30,						Change			Three-Month Period Ended September 30,						Change			Nine-Month Period Ended September 30,						Change
	2023			2022			%			2023			2022			%			2023			2022			%			2023			2022			%
Revenues	$	12.8		$	11.8			8.5	%	$	26.2		$	23.7			10.5	%	$	11.1		$	11.6			(4.3	)%	$	37.3		$	35.4			5.4	%
Cost of revenues		(6.5	)		(6.7	)		(3.0	)%		(13.9	)		(14.4	)		(3.5	)%		(6.3	)		(6.6	)		(4.5	)%		(20.2	)		(20.9	)		(3.3	)%
Gross profit		6.3			5.1			23.5	%		12.3			9.4			30.9	%		4.8			5.1			(5.9	)%		17.1			14.4			21.3	%
Total operating expenses		(0.2	)		(1.0	)		(80.0	)%		(1.9	)		(1.9	)		(0.0	)%		(0.5	)		(0.3	)		66.7	%		(2.4	)		(2.2	)		9.1	%
Operating income		6.1			4.1			48.8	%		10.4			7.5			38.7	%		4.3			4.7			(8.5	)%		14.7			12.2			20.5	%
Gain on changes of fair values of Common Stock Purchase Warrant		0.1			0.0			N/A			0.0			0.2			(100.0	)%

Loss on changes of fair values of Common Stock Purchase Warrant																				(0.2	)		(0.2	)		0.0	%		(0.1	)		0.0			N/A
Income before income taxes		6.2			4.1			51.2	%		10.4			7.7			35.1	%		4.0			4.5			(11.1	)%		14.4			12.2			18.0	%
Income tax expense		(1.5	)		(1.2	)		25.0	%		(2.9	)		(2.2	)		31.8	%		(1.1	)		(1.2	)		(8.3	)%		(4.1	)		(3.4	)		20.6	%
Net income	$	4.7		$	2.9			62.1	%	$	7.5		$	5.5			36.4	%	$	2.9		$	3.3			(12.1	)%	$	10.3		$	8.8			17.0	%

	For the Three-Month Period Ended June 30,															For the Three-Month Ended September 30,
	2023					2022					Change		Change			2023					2022					Change			Change
	Amount		%			Amount		%			Amount		%			Amount		%			Amount		%			Amount			%
	(in US Dollar millions except percentage)															(in US Dollar millions except percentage)
Revenue from sales to customers in PRC	$	9.1		71.1	%	$	8.1		68.6	%	$	1.0		12.3	%	$	7.4		66.7	%	$	8.1		69.8	%	$	(0.7	)		(8.6	)%
Revenue from sales to customers overseas		3.7		28.9	%		3.7		31.4	%		0.0		0.0	%		3.7		33.3	%		3.5		30.2	%		0.2			5.7	%
Total Revenues	$	12.8		100	%	$	11.8		100	%	$	1.0		8.5	%	$	11.1		100	%	$	11.6		100	%	$	(0.5	)		(4.3	)%

	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	%

	Revenues For the Three-Month Ended September 30,
	2023					2022					Change			Change
	Amount		%			Amount		%			Amount			Margin%
	(in US Dollars, except percentage)
Product categories by end applications
Automotive Touchscreens	$	2,945,460		26.5	%	$	2,841,960		24.5	%	$	103,500			3.6	%
Industrial Control Computer Touchscreens		2,297,924		20.7	%		2,609,467		22.5	%		(311,543	)		(11.9	)%
POS Touchscreens		1,738,935		15.6	%		1,989,250		17.1	%		(250,315	)		(12.6	)%
Gaming Touchscreens		1,742,589		15.7	%		1,578,004		13.5	%		164,585			10.4	%
Medical Touchscreens		1,398,203		12.6	%		1,579,007		13.6	%		(180,804	)		(11.5	)%
Multi-Functional Printer Touchscreens		1,000,494		9.0	%		1,024,278		8.8	%		(23,784	)		(2.3	)%
Others*		-		0.0	%		1,052		0.0	%		(1,052	)		(100.0	)%
Total Revenues	$	11,123,605		100.0	%	$	11,623,018		100.0	%	$	(499,413	)		(4.3	)%

	Three-Month Period Ended June 30,						Change					Three-Month Period Ended September 30,						Change
(in millions, except percentage)	2023			2022			Amount		%			2023			2022			Amount			%
Gross Profit	$	6.3		$	5.1		$	1.2		23.5	%	$	4.8		$	5.1		$	(0.3	)		(5.9	)%
Gross Profit Margin		49.0	%		43.0	%				6.0	%		42.9	%		43.6	%					(0.7	)%

	Three-Month Period Ended June 30,						Change						Three-Month Period Ended September 30,						Change
(in US dollars, except percentage)	2023			2022			Amount			%
(in millions, except percentage)													2023			2022			Amount		%
General and Administrative Expenses	$	56,907		$	443,146		$	(386,239	)		(87.2	)%	$	0.2		$	0.1		$	0.1		100.0	%
as a percentage of revenues		0.4	%		3.8	%					(3.4	)%		1.8	%		0.8	%				1.0	%

	Three-Month Period Ended September 30,						Change
(in US$ millions, except percentage)	2023			2022			Amount			%
Loss on changes in fair value of Common Stock Purchase Warrants	$	(0.2	)	$	(0.2	)	$	(0.0	)		0.0	%
as a percentage of revenues		1.8	%		1.7	%					0.1	%

	For the Six-Month Period Ended June 30,															For the Nine-Month Ended September 30,
	2023					2022					Change		Change			2023					2022					Change		Change
	Amount		%			Amount		%			Amount		%			Amount		%			Amount		%			Amount		%
	(in US Dollar millions except percentage)															(in US Dollar millions except percentage)
Revenue from sales to customers in PRC	$	18.4		70.3	%	$	16.2		68.5	%	$	2.2		13.6	%	$	25.8		69.2	%	$	24.5		69.2	%	$	1.3		5.3	%
Revenue from sales to customers overseas		7.8		29.7	%		7.5		31.5	%		0.3		4.0	%		11.5		30.8	%		10.9		30.8	%		0.6		5.5	%
Total Revenues	$	26.2		100	%	$	23.7		100	%	$	2.5		10.5	%	$	37.3		100	%	$	35.4		100	%	$	1.9		5.4	%

	Revenues For the Six-Month Period Ended June 30,																Revenues For the Nine-Month Ended September 30,
	2023					2022					Change			Change			2023					2022					Change			Change
	Amount		%			Amount		%			Amount			Margin%			Amount		%			Amount		%			Amount			Margin%
	(in US Dollars, except percentage)																(in US Dollars, except percentage)
Product categories by end applications
Automotive Touchscreens	$	6,444,890		24.6	%	$	5,917,676		24.9	%	$	527,214			8.9	%	$	9,390,350		25.2	%	$	8,759,635		24.8	%	$	630,715			7.2	%
Industrial Control Computer Touchscreens		5,094,856		19.4	%		4,642,261		19.6	%		452,595			5.7	%		7,392,780		19.8	%		7,251,728		20.5	%		141,052			1.9	%
POS Touchscreens		4,345,588		16.6	%		3,566,699		15.0	%		778,889			21.8	%		6,084,523		16.3	%		5,963,500		16.9	%		121,023			2.0	%
Gaming Touchscreens																		5,387,021		14.4	%		5,144,703		14.5	%		242,318			4.7	%
Medical Touchscreens		3,982,295		15.2	%		3,048,846		12.8	%		933,449			30.6	%		5,380,498		14.4	%		4,627,854		13.1	%		752,644			16.3	%
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	%		3,696,326		9.9	%		3,618,124		10.2	%		78,202			2.2	%
Others*		-		0.0	%		3,903		0.0	%		(3,903	)		(0.0	)%		-		0.0	%		4,955		0.0	%		(4,955	)		(100.0	)%
Total Revenues	$	26,207,893		100.0	%	$	23,747,481		100.0	%	$	2,460,412			10.5	%	$	37,331,498		100.0	%	$	35,370,499		100.0	%	$	(1,960,999	)		5.4	%

	Six-Month Period Ended June 30,						Change					Nine-Month Period Ended September 30,						Change
(in millions, except percentage)	2023			2022			Amount		%			2023			2022			Amount		%
Gross Profit	$	12.3		$	9.4		$	2.9		30.9	%	$	17.1		$	14.4		$	2.7		18.8	%
Gross Profit Margin		46.9	%		39.4	%				7.5	%		45.7	%		40.8	%				4.9	%

	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	)%

	Nine-Month Period Ended September 30,						Change
(in millions, except percentage)	2023			2022			Amount			%
Gain (loss) on changes in fair value of Common Stock Purchase Warrants	$	(0.2	)	$	0.0		$	(0.2	)		N/A
as a percentage of revenues		1.8	%		0.0	%					1.8	%

	Six-Month Period Ended June 30,						Nine-Month Period Ended September 30,
(in US Dollar millions)	2023			2022			2023			2022
Net cash provided by operating activities	$	6.8		$	1.5		$	9.0		$	4.8
Net cash provided by investing activities		-			-			-			-
Net cash provided by financing activities		40.0			-
Net cash used in financing activities								39.9			-
Effect of foreign currency exchange rate changes on cash and cash equivalents		(5.8	)		(2.5	)		(6.2	)		(5.4	)
Net increase (decrease) in cash and cash equivalents		41.0			(1.0	)		42.7			(0.6	)
Cash and cash equivalents at the beginning of period		51.2			46.1			51.2			46.1
Cash and cash equivalents at the end of period	$	92.2		$	45.1		$	93.9		$	45.5

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: ~~August 16,~~November 14, 2023	By:	/s/ Zongyi Lian
	Name:	Zongyi Lian
	Title:	President and Chief Executive Officer (Principal Executive Officer)

Date: ~~August 16,~~November 14, 2023	By:	/s/ Yuhua Huang
	Name:	Yuhua Huang
	Title:	Chief Financial Officer (Principal Financial and Accounting Officer)