WETH 10-K & 10-Q changes, risk factors and insider trading
Wetouch Technology Inc. · Nasdaq · Computer Peripheral Equipment, Nec · CIK 1826660 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
Removed heading “If our preferential tax treatments and government subsidies are revoked or become unavailable or if the calculation of our tax liability is successfully challenged by the PRC tax authorities, we may be required to pay tax, interest and penalties in excess of our tax provisions.”
Removed heading “We may not be able to adequately protect and maintain our intellectual property.”
Largest changes
“If our preferential tax treatments and government subsidies are revoked or become unavailable or if the calculation of our tax liability is successfully challenged by the PRC tax authorities, we may be required to pay tax, interest and penalties in excess of our tax provisions.”see in full comparison
“The Chinese government has provided tax incentives to our former subsidiary in Mainland China, Sichuan Wetouch, including reduced enterprise income tax rates. For example, under the PRC Enterprise Income Tax Law and its implementation rules, the statutory enterprise income tax rate is 25%. However, the income tax of an enterprise that has been determined to be a qualified enterprise located in western region of Mainland China can be reduced to a preferential rate of 15%. The qualification of preferential tax rate is effective for a renewable three-year permitted. …”see in full comparison
“Our success will depend on our ability to continue to develop and market our products. We have five pending patent applications as of the date of this Annual Report. No assurance can be given that such patents will not be challenged, invalidated, infringed or circumvented, or that such intellectual property rights will provide a competitive advantage to us. Also, litigation may be necessary to enforce our intellectual property rights or determine the validity and scope of the proprietary rights of others. …”see in full comparison
“We may not be able to adequately protect and maintain our intellectual property.”see in full comparison
For the year ended December 31,see in full comparison2024,2025, our top five customers accounted for approximately22.0%,24.3%,19.1%,17.3%,15.3%,15.6%,14.5%13.3%, and11.5%,11.1%, respectively, of our total revenues.For the year ended December 31, 2023, our top six customers accounted for approximately 22.5%, 16.5%, 15.6%, 14.1%, 11.3% and 10.1%, respectively, of our total revenues.
On August 6, 2021, Sichuan Vtouch entered into a contract with the Chengdu Wenjiang District Planning and Natural Resources Bureau for the purchase of a land use right for a parcel of land spanning 131,010 square feet, for a consideration of approximatelysee in full comparisonRMB3,925,233RMB3,925,234 (equivalent to$537,755$561,301) for the Company’s new facility. The Company paid the consideration in full on November 18, 2021. Wearewillinobtainthe process of obtainingthe certificate of land use right for the new parceland expect to receive the certificatefrom the local government in the upon the completion of the new facility by the firstquarterhalf of2026.2027. However, there is no assurance that we will be able to obtain the required certificate of land use right in a timely manner, or at all. The failure of obtaining the certificate will adversely affect our business operations. Additionally, the development of this site is subject to various regulatory approvals, including construction land planning permit (received in January 2022), construction project planning permit (received in January 2022), and construction engineering license (received July 2022). Failure to obtain additional approvals from the local government, if required, will subject us to fines or suspension of the projects in accordance with relevant PRC laws and regulations.
Full comparison: every changed paragraph (13)
COVID-19 as well
as other epidemics, natural disasters, terrorist activities, political unrest, and other outbreaks could disrupt our delivery and operations,
which could materially and adversely affect our business, financial condition, and results of operations .operations.
For the year ended December
31, 2024,2025, our top five customers accounted for approximately 22.0%,24.3%, 19.1%,17.3%, 15.3%,15.6%, 14.5%13.3%, and 11.5%,11.1%, respectively, of our total revenues.
For the year ended December 31, 2023, our top six customers accounted for approximately 22.5%, 16.5%, 15.6%, 14.1%, 11.3% and 10.1%, respectively,
of our total revenues.
For the year ended December 31, 2024, our top five customers accounted for approximately 22.0%, 19.1%, 15.3%, 14.5% and 11.5%, respectively, of our total revenues.
On August 6, 2021, Sichuan
Vtouch entered into a contract with the Chengdu Wenjiang District Planning and Natural Resources Bureau for the purchase of a land use
right for a parcel of land spanning 131,010 square feet, for a consideration of approximately RMB3,925,233RMB3,925,234 (equivalent to $537,755$561,301) for
the Company’s new facility. The Company paid the consideration in full on November 18, 2021. We arewill inobtain the process of obtaining
the certificate of land
use right for the new parcel and expect to receive the certificate from the local government in the upon the completion of the new facility by the first quarter
half of 2026.2027. However,
there is no assurance that we will be able to obtain the required certificate of land use right in a timely manner,
or at all. The failure
of obtaining the certificate will adversely affect our business operations. Additionally, the development of this
site is subject to various
regulatory approvals, including construction land planning permit (received in January 2022), construction
project planning permit (received
in January 2022), and construction engineering license (received July 2022). Failure to obtain additional
approvals from the local government,
if required, will subject us to fines or suspension of the projects in accordance with relevant PRC
laws and regulations.
As of the date of this Annual
Report, we estimate to complete the building construction by the endfirst half of 20252027 and commence production in by the first quarterend of 2026,2027, assuming
we have obtained the land use right by then, but there is no assurance and we may need extended time to achieve our business plan. If
we fail to complete such construction prior to estimated period and the extended period, if any, we will have to cease all or part of
our operations, and as a result, our business, financial condition and results of operations may be materially and adversely affected.
We are constructing new facilities
and office buildings on the new parcel located in Sichuan Province, China. As of the date of this Annual Report, we estimate receiving
the certificate of land use right from the local government in the first quarterhalf of 2026.2027. We plan to complete the building construction by
first half of 2027 and commence production by the end of 2025 and commence production in the first quarter of 2026.2027.
Due
to the withdrawal of the land use right to the Property and cancellation of our ownership certificates pertaining to the buildings on
the Property by the local government pursuant to the Guidelines and the Compensation Agreement, on August 6, 2021, Sichuan Vtouch entered
into a contract with the Chengdu Wenjiang District Planning and Natural Resources Bureau for the purchase of a land use right for a parcel
of land spanning 131,010 square feet, for a consideration of approximately RMB3,925,233RMB3,925,234 (equivalent to $537,755$561,301) for the Company’s
new facility. The Company paid the consideration in full on November 18, 2021. We are in the process of obtaining the certificate of land
use right for the new parcel and expect to receive the certificate from the local government in the first quarterhalf of 2026.2027.
As
of the date of this Annual Report, we estimate to finish the building construction by the endfirst half of 20252027 and commence production in by
the first
quarterend of 2026,2027, but there is no assurance and we may need extended time to achieve our business plan. If we fail to complete such acquisition
and construction within the estimated period, if any, we will have to cease all or part of our operations, and as a result, our business,
financial condition and results of operations may be materially and adversely affected.
If our preferential
tax treatments and government subsidies are revoked or become unavailable or if the calculation of our tax liability is successfully challenged
by the PRC tax authorities, we may be required to pay tax, interest and penalties in excess of our tax provisions.
The
Chinese government has provided tax incentives to our former subsidiary in Mainland China, Sichuan Wetouch, including reduced enterprise
income tax rates. For example, under the PRC Enterprise Income Tax Law and its implementation rules, the statutory enterprise income tax
rate is 25%. However, the income tax of an enterprise that has been determined to be a qualified enterprise located in western region
of Mainland China can be reduced to a preferential rate of 15%. The qualification of preferential tax rate is effective for a renewable
three-year permitted. As we have dissolved Sichuan Wetouch, and its business and operations have been assumed by Sichuan Vtouch, Sichuan
Vtouch is planning to apply for the preferential rate of 15% as a qualified enterprise with the PRC tax authorities. As of the date of
this Annual Report, we have not applied for the preferential rate of 15%. If Sichuan Vtouch later applies but its application for the
qualification of preferential tax rate benefit is not approved, our PRC subsidiary will still be subject to the statutory enterprise income
tax rate of 25%. Further, in the ordinary course of our business, we are subject to complex income tax and other tax regulations, and
significant judgment is required in the determination of a provision for income taxes. Although we believe our tax provisions are reasonable,
if the PRC tax authorities successfully challenge our position and we are required to pay tax, interest, and penalties in excess of our
tax provisions, our financial condition and results of operations would be materially and adversely affected.
We may not be able
to adequately protect and maintain our intellectual property.
Our
success will depend on our ability to continue to develop and market our products. We have five pending patent applications as of the
date of this Annual Report. No assurance can be given that such patents will not be challenged, invalidated, infringed or circumvented,
or that such intellectual property rights will provide a competitive advantage to us. Also, litigation may be necessary to enforce our
intellectual property rights or determine the validity and scope of the proprietary rights of others. The outcome of such potential litigation
may not be in our favor and any success in litigation may not be able to adequately protect our rights. Such litigation may be costly
and divert management attention away from our business. An adverse determination in any such litigation would impair our intellectual
property rights and may harm our business, prospects and reputation. Enforcement of judgments in China is uncertain and even if we are
successful in such litigation it may not provide us with an effective remedy.
Furthermore, we may also face
export controls or sanctions-related or other trade-related restrictions on transactions with certain
customers, business partners and other persons. The Entity List maintained by the U.S. Department of Commerce identifies foreign parties
parties that are prohibited from acquiring —- whether by export, reexport, or transfer in-country —- some or all items subject
to the U.S. Export
Administration Regulations (“EAR”), unless the exporter secures a license. Licenses, and exceptions
to the license requirement,
are rarely granted to exporters. Exporting, reexporting or transferring items subject to the EAR in violation
of licensing requirements
could result in criminal and/or civil penalties. These restrictions, and similar or more expansive restrictions
or sanctions that may
be imposed by the United States or other jurisdictions in the future, may adversely affect our ability to work
with certain future customers
and business partners, which would harm our business. Furthermore, our association with customers or business
partners that are or become
subject to U.S. regulatory scrutiny or export controls- or sanctions-related restrictions could subject
us to actual or perceived reputational
harm among current or prospective investors, suppliers or customers, other parties doing business
with us, or the general public. Any
such reputational harm could result in the loss of investors, suppliers or customers, which could
harm our business, financial conditions
or prospects.
Management's Discussion & Analysis (MD&A)
New heading “Construction of our new facility”
New heading “Holding Company Structure”
New heading “Cash and Other Assets Transfers between the Holding Company and Its Subsidiaries”
New heading “Restrictions on Our Ability to Transfer Cash Out of China and to U.S. Investors”
New heading “Legal Proceedings”
New heading “Land use right, net”
Removed heading “Research and Development Expenses”
Largest changes
“Within our direct holding structure, the cross-border transfer of funds from Wetouch to its PRC subsidiary is permitted under laws and regulations of the PRC currently in effect. Specifically, Wetouch is permitted to provide funding to its PRC subsidiary in the form of shareholder loans or capital contributions, subject to satisfaction of applicable government registration, approval and filing requirements in China. There are no quantity limits on Wetouch’s ability to make capital contributions to its PRC subsidiary under the PRC law and regulations. …”see in full comparison
“Restrictions on Our Ability to Transfer Cash Out of China and to U.S. Investors”see in full comparison
“The PRC government’s significant discretion and authority in regulating our operations and its oversight and control over offerings conducted overseas by, and foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors. Implementation of industry-wide regulations in this nature may cause the value of our securities to significantly decline or become worthless. For more details, see “Item 1.A. …”see in full comparison
“We face various risks and uncertainties relating to doing business in China. Our business operations are primarily conducted in China, and we are subject to complex and evolving PRC laws and regulations. For example, we face risks associated with regulatory approvals on offshore offerings, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy, which may impact our ability to conduct certain businesses, accept foreign investments, or list and conduct offerings on a United States or other foreign exchange. …”see in full comparison
“Under current PRC law, dividend payments by our PRC subsidiary are limited to accumulated profits determined in accordance with PRC accounting standards and are subject to statutory reserve requirements. Dividends to the Company are also subject to withholding tax, generally 10%, but reduced to 5% if treaty conditions are met. There is no assurance that the reduced rate will apply. For more details, see “Item 1A. …”see in full comparison
“Risks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations in China, could result in a material adverse change in our operations and cause our Common Stock to decrease in value or become worthless. For more details, see “Item 1.A. …”see in full comparison
Full comparison: every changed paragraph (102)
We were originally incorporated under the laws of the state of Nevada in August 1992. On October 9, 2020, we entered into the Share Exchange Agreement with BVI Wetouch and all the shareholders of BVI Wetouch, to acquire all the issued and outstanding capital stock of BVI Wetouch in exchange for the issuance to such shareholders an aggregate of 28 million shares of our common stock. The Reverse Merger closed on October 9, 2020. As a result of the Reverse Merger, BVI Wetouch became our wholly-owned subsidiary.
The Company is a Nevada holding
company with no material operations of its own. We conduct substantially all of our operations through our subsidiary in mainland China,
which we control through BVI Wetouch. See “Item 1. Business – Corporate History and Structure” for more details.
Because our operations are
primarily in China, we are subject to complex and evolving PRC laws and regulations. These include restrictions on capital flows, dividend
payments, currency conversion, cybersecurity and data privacy, and governmental discretion over overseas securities offerings. These risks
could materially affect our ability to transfer funds, conduct offerings, or continue operations in their current form. See “Item
1A. Risk Factors—Risks Related to Doing Business in China.”
As of March 31, 2025, the
Company has contributed RMB 348.0 million (US$47.7 million) to its PRC subsidiary through intermediate holding companies, which were accounted
for as long-term investments. These funds have been used by our PRC subsidiary in its operations. To date, no dividends or other distributions
have been made by our PRC subsidiary to the Company. We may rely on future distributions from our PRC subsidiary to fund our holding company
obligations, subject to PRC law and restrictions. For more details, see “Item 1A. Risk Factors—Risks Related to Doing Business
in China—As a holding company, we conduct our operations primarily through our PRC subsidiary and face risks and uncertainties associated
with this structure.”
Under current PRC law, dividend
payments by our PRC subsidiary are limited to accumulated profits determined in accordance with PRC accounting standards and are subject
to statutory reserve requirements. Dividends to the Company are also subject to withholding tax, generally 10%, but reduced to 5% if treaty
conditions are met. There is no assurance that the reduced rate will apply. For more details, see “Item 1A. Risk Factors—Risks
Related to Doing Business in China—Uncertainties with respect to the PRC legal system, including the enforcement of laws and changes
in laws and regulations, could adversely affect us and limit the legal protections available.”
We currently do not have cash management policies
dictating how funds are transferred between the Company and its subsidiaries. Most of our cash is maintained in Renminbi in mainland China
and may be subject to PRC restrictions on outbound transfers. For details, see “Item 1A. Risk Factors - Risks Related to Doing
Business in China - Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the
value of your investment.”
Through
our wholly ownedwholly-owned subsidiaries, BVI Wetouch, HK Wetouch, and Sichuan Vtouch, we are engaged in the research, development, manufacturing,
sales and servicing of medium-medium to large-sizedlarge sized projected capacitive touchscreens. We are specialized in large-format touchscreens, which
are developed and designed for a wide variety of markets and used in by the financial terminals, automotive, POS, gaming, lottery, medical,
HMI, and other specialized industries. Our product portfolio comprises medium-medium to large-sizedlarge sized projected capacitive touchscreens ranging
from 7.0 inch to 42 inch screens.
Construction of our new facility
We have been actively engaged in the construction of our new production facilities and office buildings in Chengdu Medicine City (Technology Park), Wenjiang District, Chengdu, Sichuan Province, People’s Republic of China since the summer of 2023. The Company has planned to increase the scope of facility construction by adding a touch machine construction area. Due to the delayed supply of construction materials, the project has been progressed slowly than expected.
As of the date of this Annual Report, the Company estimated the construction to be completed by the first half of 2027 and commence production by the end of 2027. The total capital requirements for the new facility construction totaled approximately $14.4 million and $13.3 million have been recorded in the construction in progress as of December 31, 2025. The Company primarily fund the project with our existing cash on hand and cash flows generated from operations, and we may seek additional financing if needed to support the timely completion of the project.
Since
our incorporation, we have effected two reverse stock splits of our common stock, including a 1-for-70 reverse split in 2020 and a 1-for-20
reverse split in 2023, and all share and per share information in this Annual Report has been retroactively adjusted to reflect these
actions. For more details, see “Item 1. Business - Corporate History and Structure - Reverse Stock Splits.”
Revenues
were $42.3$45.1 million
for the year ended December 31, 2024,2025, representing an increase of $2.6$2.8 million, or 6.5%,6.6%, compared with $39.7$42.3 million
for the same period
in 2023.2024. This was mainly due to the increase of 4.8%6.5% in sales volume, and an increase of 3.2%0.1% in the average selling
price of our products
in RMB, and 1.6%0.1% negativepositive impact from exchange rate due to depreciationappreciation of RMB against US dollars, as compared with
those of the same
period in 2023.2024.
For the year ended December
31, 2024,2025, revenue from the PRC domestic market decreasedincreased by $0.3$3.6 million or 1.2%,13.1%, as a combined result of (i) thean decreaseincrease of 1.6%13.7%
in in
sales volume, primarily attributable to weakened market demand, consistent with the overall macroeconomic conditionsparticularly in Chinamedical intouchscreens, 2024,multi-functional printer touchscreens, industrial control computer touchscreens,
automotive touchscreens, POS touchscreens and POS touchscreens, (ii) 1.6%0.1% negativepositive impact from exchange rate due to depreciationappreciation of RMB
against US dollars,dollars partially offset by (iii) ana increase
decrease of 2.0%0.6% in the average salesRMB selling price of our products in RMB,the domestic market,
and as(iii), compared with those of the same period in 2023.2024.
TheAs increasefor the RMB selling price,
ofthe 2.0% in sales pricedecrease of our products in RMB0.6% was mainly due to the marketinglower initiatives to enhance salesdemand of newhigher modelsselling priced products of higher-endtouchscreen machines in the PRC domestic
productsmarket, suchincluding asthe decreased average RMB selling price of 4.9% in medical touchscreens,touchscreens and 1.7% in automotive touchscreen,touchscreens, andpartially
offset multi-functionalby printerthe increased average RMB selling price of 7.0% in POS touchscreens during the year ended December
31, 2024.2025.
The Company has taken proactive efforts to market new models and efforts to obtain new customers in existing markets, our sales increased by 9.7% in South China, and 10.6% in East China, and 17.9% in Southwest China during the year ended December 31, 2025.
Overseas Market
During the year ended December
31, 2024, the Company undertook proactive marketing initiatives for new models and sought to obtain new customers in order to reduce the
impact the weakening macroeconomic conditions in China. Our sales increased by 6.0% in Southwest China, partially offset by a decrease
of 2.4% in East China, and 0.8% in South China during the year ended December 31, 2024, Overseas Market For the year
ended December 31, 2024,2025, revenuerevenues from overseas marketsmarket was $14.9$14.2 million as compared to $12.1$14.9 million of the same period of 2023,2024, representing
ana increasedecrease ofby $2.8$0.7 million, or 24.1%,4.9%, primarilymainly due to i) ana increasedecrease of 17.9%6.0% in sales volume,volume particularlydue drivento bydecreased highersales demand
for the automotive touchscreens,in gaming touchscreens, touchscreens
and industrial control touchscreens, (ii) 6.8% increase in average RMB selling price
of the products, particularly in the product of industrial control touchscreens and automotivecomputer touchscreens, as the Company had greater
pricing power due to the higher demand for the products during the year ended December 31, 2024, partially offset by (ii) an increase of 1.0% in average selling price in RMB, and (iii)
0.1% thepositive 1.6% negative
impact from exchange rate due to depreciationappreciation of RMB against US dollars, compared with those of the same period inof 2023.2024.
The Company continued
to shift production mix from traditional lower-end
products productssuch as automotive touchscreens to high-end touchscreensproducts usedsuch inas automotiveindustrial control computer touchscreens, gaming touchscreens, POS
medical touchscreens, and industrialmulti-functional control computerprinter touchscreens, primarily due to (i) greater growth potential of computer screen models
in China and overseas, and China,
(ii) the stronger demand foron higher-end touchscreenstouch screens made with better materials and better quality.
Gross profit was $13.6$14.4 million
during the year ended December 31, 2024,2025, compared to $17.2$13.6 million in the same period ofin 2023.2024. Our gross profit margin decreased to 32.2%31.8%
during the year ended December 31, 20242025 as compared to 43.3%32.2% for the same period of 2023,2024, primarily due to i) an increase of 29.9%7.0% in cost
cost of goods sold, andmainly ii)in sales discount to certain long-term customers at year-end. During the year ended December 31, 2024, we had
an increase of 31.8%3.9% in labor costs due to additional hiring of technicians, and an increase of 5.7% in costs
of raw materials, among which the chip cost accounted for 43%,11.1%, and ii) sales discount of $1.2 million (accounted for 2.6% of the revenues)
to certain long-term customers at year-end of 2025, partially offset by the increase of 24.3%revenue ofby labor6.8%, costsparticularly high-end products
duesuch toas additionalindustrial hiringcontrol ofcomputer technicians.touchscreens, ChipPOS coststouchscreens, increasedmedical startingtouchscreens, inand multi functional printer touchscreens
during the firstyear quarterended ofDecember 202431, and stabilized by the third quarter
of 2024.2025.
Selling expenses were $0.8$0.6
million for the yearyears ended December 31, 2024,2025, compared to $0.6$0.8 million in the same period in 2023,2024, representing
ana increasedecrease of $0.2 million, or 133.3%,25.0%, primarily due to anthe increasecontinued decrease in traveling and transportation expenses ofas our selling
and marketing
team tocontinued visitthe customerspractice andof attendonline exhibitionsclient in ordercommunications to promote thesales increasesince end of sales during the year ended December 31, 2024.
General and administrative
expenses were $3.5$3.8 million for the year ended December 31, 2024,2025, compared to $3.8$3.5 million in the same period in 2023,2024, representing aan
increase decrease
of $0.3 million, or 7.9%.8.6%. The decreaseincrease was primarily due to i)the accrued placement agent feesincrease of $1.2$0.3 million relatedin toprofessional thefees, private$0.1 placementmillion
consentin agreementallowance withfor representativescredit loss, $0.2 million in impairment loss of theconstruction privatein placementprogress, thatand took$0.4 placemillion onin Januaryamortization 19,of 2023,right-of-use
assets, and $0.1 million of payroll expenses, partially offset by onlythe ii) increase
of amortized consulting feesdecrease of $0.6$0.9 million of amortization of prepaid marketing research
fees (see NOTENote 4- PREPAID EXPENSES AND OTHER CURRENT ASSETS4 of the accompanying financial statements),
and $0.1 million of miscellaneous expenses including $44,862 allowance for credit losses of advance to vendors and $54,873 provision for
obsolete inventory..
Research and Development Expenses
Research and development (“R&D”)
expenses were nil and $84,551 for the years ended December 31, 2024 and 2023, respectively. The Company did not incur any research and
development expenses during the year ended December 31, 2024.
Total operating income was
$9.3 $10.0 million for the year ended December
31, 20242025 as compared to $12.7$9.3 million forof the same period in 2023, a decrease of $3.4 million
or 26.8%. The decrease was2024, primarily due to lower higher
gross profit,profit higherand lower selling expenses,
partially offset by lowerhigher general & administration expenses, andlower research and development expenses.expenses
In connection with the
issuance issuance
of convertible promissory notes in October, November and December, 2021, the Company also issued seven (7) three-year
warrant warrant
(the “ Note Warrants”) to purchase an aggregate of 1,800,000 shares of the Company’s common stock
(the “Warrant
Shares”) (see NOTE 1011 — CONVERTIBLE PROMISSORY NOTES PAYABLEPAYABLE- b) Warrants).
The Note Warrant was valid for three years and expired during the year ended December 31, 2024.
GainWe recorded gain of $378,371
on changes in fair value
of common stock purchase warrants was $378,371 for the year ended December 31, 2024, as compared to a loss of $121,413 in the same period
of 2023.2024.
Under PRC CIT Law, domestic enterprises and foreign investment enterprises (the “FIEs”) are usually subject to a unified 25% enterprise income tax rate. The Company’s PRC subsidiary Sichuan Vtouch is subject to a 25% income tax rate.
The effective income
tax rate for the yearsyear ended December 31, 20242025 and 20232024 wasstayed 30.6%at 29.5% and 33.1%,30.6%, respectively.
Our PRC subsidiary
had $103.7$118.4 million of cash as of December 31, 2024,2025, which isare planned to be indefinitely reinvested in our business operations in the PRC.
DistributionsThe distributions from our PRC subsidiary to our stockholders would beare subject to the U.S. federal income tax at 21%, less any applicable foreign
foreign tax credits. Due to our policy of indefinitely reinvesting our earnings in our PRC business, we have not provided for deferred income
income tax liabilities related to PRC withholding income tax on undistributed earnings of our PRC subsidiary.
As a result of the above factors,
we had a net income of $6.0$7.2 million in the year ended December 31, 2024 compared2025compared to a net income of $8.3$6.0 million in the same period of
2023.2024.
As of December 31, 2024,2025, we
had current assets
of $114.1$126.1 million, consisting of $103.7$118.4 million in cash, $7.5$6.5 million in accounts receivable, $0.1 million$45,202 in inventories,
and $2.8$1.2 million
in prepaid expenses and other current assets.assets Our current liabilities as of December 31, 20242025 were $3.0$3.2 million, which
is comprised of $1.3
$1.1 million in accounts payable, $0.1$0.3 million in amounts due to a related parties,party, $1.0$1.4 million in accrued expenses and other current
liabilities liabilities. and $0.6
$0.5 million in operating lease liabilities, current portion. We also had $0.5 million in operating lease liabilities,
non- current as of December 31, 2024.
Net cash provided by operating
activities was $1.1
$7.4 million for the year ended December 31, 2024,2025, as compared to $12.7$1.1 million provided by operating activities for the
same period in 2023,
2024, representing aan decreaseincrease of $11.6$6.3 million, or 91.3%.572.7%.
The positive cash flow for
the year ended December 31, 2024 was primarily due to i) $6.0 million net income during the year ended December 31, 2024, ii) the increase
of $0.6 million in accounts payable and $0.1 million in amounts due to a related party, partially offset by iii) the increase of $0.4
million gain on changes in fair value of common stock purchase warrants liability, $0.2 million in accounts receivable and $1.8 million
in prepaid expenses and other current assets (mainly in prepaid $0.9 million of consulting service fees and $1.0 million in market research
fees) , and iv) the decrease of $3.3 million in accrued expenses and other current liabilities.
The positive cash flow
of $7.4 million for
the year ended December 31, 20232025 was primarily due to i) $8.3$7.2 million net income during the year ended December 31, 2023;income, ii) $0.2 million impairment
loss of construction in progress and $0.6 million of amortization of operating right-of-use assets, iii) the decrease
of $1.2 $1.3
million in accounts receivable, $0.2net, in inventory and $0.3$1.6 million in prepaid expenses and other current assets, iii) the increase
of $3.1$0.1 million in
amounts due to a related party, $0.4 million in accrued expenses and other current liabilities, and $0.6 million in operating lease
liabilities, partially offset by iv) the increase of $4.4 million in long-term prepayment, reclassified from construction in
progress due to delayed schedule, and the decrease of $0.7$0.2 million in accounts
payable.
The positive cash flow for the year ended December 31, 2024 was primarily due to i) $6.0 million net income during the year ended December 31, 2024, ii) the increase of $0.6 million in accounts payable and $0.1 million in amounts due to a related party, partially offset by iii) the decrease of $0.4 million gain on changes in fair value of common stock purchase warrants liability, $0.3 million in accounts receivable and $1.8 million in prepaid expenses and other current assets (mainly in prepaid $0.9 million of consulting service fees), and iv) the decrease of $3.3 million in accrued expenses and other current liabilities.
Investing ActivitiesActivity
Net cash used in investing
activities for the
year ended December 31, 2025 and 2024 wasstayed at $0.3 millionmillion, forrespectively, representing the purchase of property, plant and equipment and
and construction in progress.
Net cash used in investing
activities for the year ended December 31, 2023 was $2.3 million for the purchase of property, plant and equipment.
There was no cash flow in financing activities for the year ended December 31, 2025.
As of December 31, 2025, our cash and cash equivalents were $118.4 million, as compared to $103.8 million at December 31, 2024.
Net cash provided by financing
activities was $40.0 million for the year ended December 31, 2023, consisting of $40.0 million proceeds from a private placement, partially
offset by the repayment of $55,000 in convertible promissory note payable.
Our Days Sales Outstanding
(“DSO”) has
decreased to 56 days for the year ended December 31, 2025 from 64 days for the year ended December 31, 2024 from 75 days for the year ended December 31, 2023 due to
our faster collection of accounts receivables.2024.
The majority of the Company’s
revenues and
expenses were denominated primarily in RMB,Renminbi (“RMB”), the currency of the People’s Republic of China. There is no assurance
that 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.
The majority of the Company’s revenues and expenses were denominated 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.
Holding Company Structure
Wetouch is a holding company incorporated in Nevada with no material operations of its own. We conduct substantially all of our operations through our subsidiary established in mainland China. Our equity structure is a direct holding structure, that is, Wetouch, a Nevada corporation listed in the U.S., controls Sichuan Vtouch though BVI Wetouch. See “Item 1. Business – Corporate History and Structure” for more details.
We face various risks and uncertainties relating to doing business in China. Our business operations are primarily conducted in China, and we are subject to complex and evolving PRC laws and regulations. For example, we face risks associated with regulatory approvals on offshore offerings, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy, which may impact our ability to conduct certain businesses, accept foreign investments, or list and conduct offerings on a United States or other foreign exchange. These risks could result in a material adverse change in our operations and the value of our common stock, significantly limit or completely hinder our ability to continue to offer securities to investors, or cause the value of such securities to significantly decline. For a detailed description of risks relating to doing business in China, see “Item 1.A. Risk Factors—Risks Related to Doing Business in China.”
The PRC government’s significant discretion and authority in regulating our operations and its oversight and control over offerings conducted overseas by, and foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors. Implementation of industry-wide regulations in this nature may cause the value of our securities to significantly decline or become worthless. For more details, see “Item 1.A. Risk Factors—Risks Relating to Doing Business in China— Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations. The PRC government has recently indicated an intent to exert more oversight and control over overseas securities offerings and other capital markets activities and foreign investment in China-based companies like us. Any such action, once taken by the PRC government, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or in extreme cases, become worthless.”
Risks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations in China, could result in a material adverse change in our operations and cause our Common Stock to decrease in value or become worthless. For more details, see “Item 1.A. Risk Factors—Risks Relating to Doing Business in China— Uncertainties with respect to the PRC legal system, including uncertainties regarding the enforcement of laws and sudden and unexpected changes in laws and regulations in China, could adversely affect us and limit the legal protections available to you and us.”
Cash and Other Assets Transfers between the Holding Company and Its Subsidiaries
As of March 31, 2026, Wetouch made cumulative capital contributions of RMB348.0 million (US$49.8 million) to its PRC subsidiary through intermediate holding companies and were accounted as long-term investments of Wetouch. As of the date of this Annual Report, these funds have been used by the Company’s PRC subsidiary for its operations.
To date, there have not been any dividends or other distributions from our PRC subsidiary to Wetouch. Wetouch, as a holding company, may rely on dividends and other distributions on equity paid by its PRC subsidiary for its cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to its stockholders, subject to Wetouch’s charter and Nevada law, or to service any expenses and other obligations it may incur.
Within our direct holding structure, the cross-border transfer of funds from Wetouch to its PRC subsidiary is permitted under laws and regulations of the PRC currently in effect. Specifically, Wetouch is permitted to provide funding to its PRC subsidiary in the form of shareholder loans or capital contributions, subject to satisfaction of applicable government registration, approval and filing requirements in China. There are no quantity limits on Wetouch’s ability to make capital contributions to its PRC subsidiary under the PRC law and regulations. However, the PRC subsidiary may only procure stockholder loans from HK Wetouch in an amount equal to the difference between its registered capital and total investment amount as recorded in the Chinese Foreign Investment Comprehensive Management Information System or 2.5 times of its net assets, at the discretion of such PRC subsidiary. For additional information, see “Item 1.A. Risk Factors—Risks Related to Doing Business in China —PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of any offerings or financings to make loans or additional capital contributions to our Chinese subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.”
The PRC Enterprise Income Tax Law (the “EIT Law”) and its implementation rules provide that a withholding tax at a rate of 10% will be applicable to dividends payable by PRC companies to non-PRC-resident enterprises unless reduced under treaties or arrangements between the PRC central government and the governments of other countries or regions where the non-PRC resident enterprises are tax resident. Pursuant to the tax agreement between mainland China and the Hong Kong Special Administrative Region, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10%. However, if the relevant tax authorities determine that our transactions or arrangements are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax in the future. Accordingly, there is no assurance that the reduced 5% withholding rate will apply to dividends received by our Hong Kong subsidiary from our PRC subsidiaries. This withholding tax will reduce the amount of dividends we may receive from our PRC subsidiaries.
There is no assurance that the PRC government will not intervene or impose restrictions on the ability of us or our subsidiary to transfer cash. Most of our cash is in Renminbi, and the PRC government could prevent the cash maintained in our bank accounts in mainland China from leaving mainland China, could restrict deployment of the cash into the business of our subsidiaries and restrict the ability to pay dividends. For details regarding the restrictions on our ability to transfer cash between us, and our subsidiaries, see “Item 1A. Risk Factors—Risks Related to Doing Business in China — Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.” We currently do not have cash management policies that dictate how funds are transferred between our holding company and our subsidiaries.
Restrictions on Our Ability to Transfer Cash Out of China and to U.S. Investors
Our PRC subsidiary’s ability to distribute dividends is based upon its distributable earnings. Current PRC regulations permit our PRC subsidiary to pay dividends to its shareholders only out of its accumulated profits, if any, as determined in accordance with PRC accounting standards and regulations. In addition, under PRC law, our PRC subsidiary is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. These reserves are not distributable as cash dividends. If our PRC subsidiary incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability to pay dividends to Wetouch.
To address persistent capital outflows and the RMB’s depreciation against the U.S. dollar in the fourth quarter of 2016, the People’s Bank of China and the State Administration of Foreign Exchange, or SAFE, implemented a series of capital control measures in the subsequent months, including stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments and shareholder loan repayments. The PRC government may continue to strengthen its capital controls and our PRC subsidiary’s dividends and other distributions may be subject to tightened scrutiny in the future. The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of mainland China. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any.
What changed in the latest 10-Q
Risk Factors
We could not find a separate Risk Factors item in the latest 10-Q. Some companies leave it out of quarterly reports; see the annual 10-K risk factors and the original filing. Open the filing on SEC.gov.
Management's Discussion & Analysis (MD&A)
New heading “Share-based Compensation Expenses”
New heading “Results of Operations - Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025”
New heading “The following table summarizes the breakdown of revenues by categories in US dollars:”
New heading “Gross Profit and Gross Profit Margin”
New heading “Selling Expenses”
New heading “General and Administrative Expenses”
New heading “Share-based Compensation Expenses”
New heading “Operating Income”
Largest changes
“Results of Operations - Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025”see in full comparison
“The following table summarizes the breakdown of revenues by categories in US dollars:”see in full comparison
Full comparison: every changed paragraph (59)
As of MarchJune 31,30, 2026, the Company has contributed
RMB 348.0 million (US$50.4US$51.3 million) to its PRC subsidiary through intermediate holding companies,
which were accounted for as long-term
investments. These funds have been used by our PRC subsidiary in its operations. To date, no dividends
or other distributions
have been made by our PRC subsidiary to the Company. We may rely on future distributions from our PRC subsidiary
to fund our holding
company obligations, subject to PRC law and restrictions. For more details, see “Item 1A. Risk Factors—Risks
Related to
Doing Business in China—As a holding company, we conduct our operations primarily through our PRC subsidiary and face
risks and
uncertainties associated with this structure.”
We sell our touchscreen products both domestically
in China and internationally,
covering major areas in Mainland China, including but not limited to the eastern, southern, northern and
southwest regions of Mainland
China, Taiwan, South Korea, and Germany. We believe that we have established a strong client base, although
our revenues remain concentrated
among a limited number of major customers, as described in Note 13 to the condensed consolidated financial
statements. For the three months
ended MarchJune 31,30, 2026 and 2025, our domestic sales accounted for approximately 67.5%68.6% and 67.4%,67.7%, respectively,
of our revenues, and our
international sales accounted for approximately 32.5%31.4% and 32.6%,32.3%, respectively, of our revenues. For the six
months ended June 30, 2026 and 2025, our domestic sales accounted for approximately 68.0% and 67.5%, respectively, of our revenues,
and our international sales accounted for approximately 32.0% and 32.5%, respectively, of our revenues..
As of the date of this Quarterly report, the
Company estimated the
construction to be completed by the first half of 2027 and commence production by the end of 2027. The total capital
requirements for
the new facility construction totaled approximately $36.7$14.8 million (RMB253and $9.1 million) and $13.7 million (RMB 94.6 million) have been recorded
in the construction
in progress as of MarchJune 31,30, 2026. The Company primarily fund the project with our existing cash on hand and cash flows
generated from
operations, and we may seek additional financing if needed to support the timely completion of the project.
Highlights for the three-month period ended
MarchJune 31,30, 2026 include:
Three Months Ended MarchJune 31,30, 2026 Compared
to Three Months Ended MarchJune 31,30, 2025
We generated revenue of $16.3$14.0 million for the
three months ended MarchJune 31,30, 2026, an increase of $1.0$1.6 million, or 6.5%,12.9%, compared to $15.3$12.4 million in the same period of last year. This
was due to an increase of 0.1%7.8% in sales volume, an increase of 1.5% in the average selling price of our products , and 4.8%6.0% positive impact
from exchange rate due to appreciation of RMB against US dollars,
partially offset by a decrease of 1.7% in the average selling price of our products in RMB compared with that of the same period of last
year.
For the three months ended June 30, 2026, revenue from the PRC domestic market increased by $1.2 million, or 14.3%, as a combined result of (i) an increase of 7.3% in sales volume in all types of touchscreen products in the PRC market, (ii) an increase of 0.3% in the average selling price of our products in RMB, and (iii) 6.0% positive impact from exchange rate due to appreciation of RMB against US dollars, compared with that of the same period of last year As for the RMB selling price, the increase of 0.3% was mainly due to the higher demand of higher selling priced products of touchscreen machines such as automotive touchscreens and industrial control computer touchscreens in the PRC market, yet the overall price change was not significant during the three-month period ended June 30, 2026, as compared to the same period of last year.
For the three months ended March 31, 2026, revenue from the PRC domestic
market increased by $0.7 million, or 6.8%, as a combined result of: (i) an increase of 2.7% in the average RMB selling price of our products,
and 4.8% positive impact from exchange rate due to appreciation of RMB against US dollars, partially offset by (iii) a decrease of 1.1%
in sales volume due to higher pricing offset by the lower demand in broader types of touchscreens exclusive of the medial touchscreens,
compared with that of the same period of last year.
As for the RMB selling price, the increase of 2.7% was mainly due to
the higher demand of higher selling priced products of touchscreen machines in the PRC domestic market, average RMB selling price of 10.8%
in medical touchscreens and 1.0% in automotive computer touchscreens during the three-month period ended March 31, 2026.
Due to our proactive efforts to market new models
and efforts to obtain
new customers and penetrate into new regions, our sales increased by 9.1%8.6% in East China, 7.1% in South China and
6.3% in Southwest China, partially offset by a decrease of 1.8% in
South China and 1.8% in East China during the three months ended MarchJune 31,30, 2026.2026, as compared to the same period of last year.
For the three-month period ended MarchJune 31,30, 2026,
revenues from the
overseas market were $5.3$4.4 million as compared to $5.0$4.0 million of the same period of 2025, representing an increase
by $0.3$0.4 million, or
6.0%, 10.0%, primarily due to (i) 2.4%8.8% increase in sales volume because of higher demand on automotive computer touchscreens and
gaming touchscreens,
and (ii) 4.8%6.0% positive impact from exchange rate due to appreciation of RMB against US dollars, partially offset
by (iii) a decrease of 1.0%
5.8% in the average selling price of our products in RMB (mainlycompared inwith medicalthat touchscreensof andthe gamingsame touchscreens),period of last year. compared
to the same period of last year.
The Company continued to shift production mix
from traditional lower-end products to high-end products such as medical touchscreens, gaming touchscreen, automotive touchscreens, POS touchscreens, industrial
control computer touchscreens, and multi-functional printer touchscreens, primarily due to (i) greater growth potential of computer screen
models in China
and overseas market, and (ii) the stronger demand on higher-end touch screens made with better materials and better quality.
Gross profit was $5.8$4.9 million in the firstsecond quarter
ended MarchJune 31,
30, 2026, compared to $5.7$4.1 million in the same period of 2025. Our gross profit margin decreasedincreased to 35.7%34.9% for the firstsecond quarter ended March
31,of 2026, as compared to 36.9%33.1% for the same period of 2025, primarily due to the increase of sales of 12.9%, particularly high-end products
such as the profit margin increased by 3.33% in industrial computer control touchscreens sold in PRC market, and partially
offset by an increase of 8.7% in cost of goods sold, consisting of
an increase of 10.5%3.4% in labor costs due to additional hiring of technicians, and an increase of 2.7%2.2% in costs of materials,materials
(mainly and partially
offset byin the increaseprice of revenuechip by 6.5%, particularly high-end products as stated abovecosts) during the three months ended MarchJune 31,30, 2026.
Selling expenses were $0.2 million for the three-month
period ended MarchJune 31,30, 2026, compared to $0.1 million in the same period in 2025, representing an increase of $0.1 million. The increase
was primarily due to the increase of traveling expenses visiting clients during the three months ended MarchJune 31,30, 2026.
General and administrative expenses were $0.6$0.5
million for the three-month period ended MarchJune 31,30, 2026, compared to $1.6$0.9 million in the same period in 2025, representing a decrease
of $1.0$0.4 million, or 62.5%.44.4%. The decrease was primarily due to the absence in the firstsecond quarter of 2026 of approximately $0.5$0.4 million
of amortization expense related to prepaid three-year consulting service fees that was recordedexpired duringon theMay first quarter of31, 2025, partially
offset by an
increase of approximately $0.4$0.1 million in professional fees during the firstsecond quarter of 2026.
Share-based Compensation Expenses
Share-based compensation expenses were $1.0 million for the three-month period ended June 30, 2026, compared to nil in the same period in 2025, representing an increase of $1.0 million.
On May 11, 2026, the Compensation Committee of the Board approved the grant of 600,000 common stock to three independent consultants who contribute to the success of the Company’s operations in overseas market. The Award vested immediately upon grant, with the fair value of vested shares determined by the market closing price of common stock at the grant date. Accordingly, the Company recorded share-based compensation expenses of $1,032,000 for the three and three months ended June 30, 2026 (see Note 12).
Total operating income was $5.1$3.2 million for the
three-month period
ended MarchJune 31,30, 2026 as compared to $4.1$3.1 million of the same period of last year, primarily due to higher revenues
and gross profit, and
lower general and administrative expenses, partially offset by the higher selling expenses and share-based compensation
expenses for the three-month period ended MarchJune 31,
30, 2026.
The effective income tax rates for the three-month
period ended MarchJune 31,30, 2026 and 2025 were 24.3%32.1% and 36.5%,28.1%, respectively.
As a result of the above factors, we had aour net income
stayed offlat $3.9at $2.2 million
in for the firstsecond quarter of 2026 comparedand to2025, a net income of $2.6 million in the same quarter of 2025.respectively.
Results of Operations - Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
Revenues
We generated revenue of $30.3 million for the six months ended June 30, 2026, an increase of $2.6 million, or 9.4%, compared to $27.7 million in the same period of last year. This was mainly due to an increase of 3.5% in sales volume, an increase of 3.5% in the average RMB selling price of our products, and 5.4% positive impact from exchange rate due to appreciation of RMB against US dollars, compared with those of the same period of last year.
(i) PRC market
For the six months ended June 30, 2026, revenue from PRC market increased by $1.9 million or 10.2% as a combined result of (i) an increase of 2.7% in sales volume, particularly in industrial control computer touchscreens, POS touchscreens, multi-function printer touchscreens and multi-functional printer touchscreens, (ii) an increase of 1.6% in the average RMB selling price of our products, and (iii) 5.4% positive impact from exchange rate due to appreciation of RMB against US dollars, compared with those of the same period of last year.
As for the RMB selling price, the increase of 1.6% was mainly due to the higher demand of higher selling priced products of touchscreen machines in the PRC domestic market, including the increase in average RMB selling price of 5.6% in medical touchscreens, 0.9% in automotive touchscreens, and partially offset by the decrease in average RMB selling price of 0.1% in POS touchscreens and multi-functional printer touchscreens during the six-month period ended June 30, 2026.
The Company has taken proactive efforts to market new models and efforts to obtain new customers and penetrate into new regions, our sales increased by 7.8% in Southwest China, and 2.8% in East China, and 2.2% in South China during the six-month period ended June 30, 2026.
(ii) Overseas market
For the six months ended June 30, 2026, revenues from the overseas market were $9.7 million as compared to $9.0 million of the same period of 2025, representing an increase by $0.7 million, or 7.8%, primarily due to (i) 5.3% increase in sales volume because of higher demand on automotive touchscreens and gaming touchscreens, partially offset by the decrease in medical touchscreens, and (ii) 5.4% positive impact from exchange rate due to appreciation of RMB against US dollars, partially offset by a decrease of 3.2% in the average selling price of our products in RMB compared with that of the same period of last year. compared to the same period of last year
The following table summarizes the breakdown of revenues by categories in US dollars:
The Company continued to shift production mix from traditional lower-end products such as touchscreens used in industrial control computer industries to high-end products such as medical touchscreens, automotive touchscreens and POS touchscreens, primarily due to (i) greater growth potential of computer screen models in China, (ii) the stronger demand on higher-end touch screens made with better materials and better quality.
Gross Profit and Gross Profit Margin
Gross profit was $10.7 million during the six months ended June 30, 2026, compared to $9.7 million in the same period of 2025. Our gross profit margin increased to 35.3% for the six months ended June 30, 2026, as compared to 35.2% for the same period of 2025, primarily due to the increase of revenues by 8.4%, particularly high-end products such as the increase of growth margin of 1.8% in automotive touchscreens, and 1.7% in industrial control computer touchscreens, partially offset by the increase in cost of goods sold by 2.4% for the six months ended June 30, 2026.
Selling Expenses
Selling expenses were $0.3 million for the six-month period ended June 30, 2026, compared to $0.2 million in the same period in 2025, representing an increase of $0.1 million, or 50.0%. The increase was primarily due to increase of traveling expenses by sales team visiting clients to market the products during the six-month period ended June 30, 2026
General and Administrative Expenses
General and administrative (G&A) expenses were $1.1 million for the six months ended June 30, 2026, compared to $2.5 million in the same period in 2025, representing a decrease of $1.4 million, or 56.0%. The decrease was primarily due to the absence during the six months of 2026 of approximately $0.9 million of amortization expense related to prepaid three-year consulting service fees that was expired in May, 2025, and an increase of approximately $0.1 million in professional fees during the first half of 2026.
Share-based Compensation Expenses
Share-based compensation expenses were $1.0 million for the six-month period ended June 30, 2026, compared to nil in the same period in 2025, representing an increase of $1.0 million.
On May 11, 2026, the Compensation Committee of the Board approved the grant of 600,000 common stock to three independent consultants who contribute to the success of the Company’s operations in overseas market. The Award vested immediately upon grant, with the fair value of vested shares determined by the market closing price of common stock at the grant date. Accordingly, the Company recorded share-based compensation expenses of $1,032,000 for the three and six months ended June 30, 2026 (see Note 12).
Operating Income
Total operating income was $8.3 million for the six months ended June 30, 2026 as compared to $7.1 million of the same period of last year due to higher gross profit, lower general and administrative expenses, partially offset by the higher selling expenses and share-based compensation expenses.
Income Taxes
The effective income tax rates for the six months ended June 30, 2026 and 2025 were 27.3% and 32.8%, respectively.
Net Income
As a result of the above factors, we had a net income of $6.0 million in the six months ended June 30, 2026 as compared to $4.8 million of the same period of last year
As of MarchJune 31,30, 2026, we had current assets of
$132.7$138.0 million, consisting of $120.5$127.5 million in cash and cash equivalent, $11.1$9.3 million in accounts receivable, $29,060$9,185 in inventories,
and $1.1 million in prepaid expenses and other current assets. Our current liabilities as of MarchJune 31,30, 2026 were $4.1$3.8 million, which is
comprised of $0.9 million in accounts payable, $0.3$0.4 million in amounts due to a related party, $1.2$0.9 million income tax payable, $1.3$1.4
million million
in accrued expenses and other current liabilities. and $0.4$0.2 million in operating lease liabilities, current portion.
The following is a summary of our cash flows
provided by (used in) operating,
investing, and financing activities for the three-month periods ended MarchJune 31,30, 2026 and 2025:
Net cash provided by operating activities was
$0.5$5.5 million for the threesix months ended MarchJune 31,30, 2026 as compared to net cash provided by operating activities of $2.0$4.7 million for the
same period of the last year.
The positive cash flow for the threesix months ended
MarchJune 31,30, 2026 was primarily due to i) $3.9$6.0 million net income, adjusted by an increase of $1.0 million share-based compensation expenses
and $0.3 million of amortization of operating right-of-use assets, ii) the increase of $1.2$0.9 million in income tax payable,payable and $0.1 million
due to a related party, and partially offset by iii) the increase of $4.4$2.6 million in accounts receivable and iv) the decrease
of $0.1$0.2 million in accounts payable.
The positive cash flow for the threesix months ended
June March 31,30, 2025 was
primarily due to i) $2.5$4.8 million net income, ii) $0.3 million of amortization of operating right-of-use assets, iii)
the decrease of $0.6$0.9 million in prepaid expenses and current assets, iii) the increase
of in $0.3$0.2 million accounts payable, $0.3$0.5 million
due to a related party,parties, $1.3$0.9 million in tax payable and $0.6$0.4 million in accrued expenses
and current liabilities, partially offset by
iv) the increase of $3.5$3.1 million in accounts receivable.receivable and v) the decrease of $0.3 million in operating lease liabilities.
There were no cash flows from investing activities
for the three-monthsix-month period ended MarchJune 31,30, 2026 and 2025.
There were no cash flows from financing activities
for the
three-month six-month period ended MarchJune 31,30, 20262026, and 2025.
As of MarchJune 31,30, 2026, our cash and cash
equivalents equivalents
were $120.5$127.5 million, as compared to $118.4 million onat December 31, 2025.
Days Sales Outstanding (“DSO”) has
decreased to 4847 days for the three-monthsix periodmonths ended MarchJune 31,30, 2026 from 56 days for the year ended December 31, 2025.
There have been no changes to the Company’s
holding company structure during the threesix months ended MarchJune 31,30, 2026. For more details, refer to the Company’s holding company structure
structure disclosures set forth in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results
of Operations-
Holding Company Structure” of the 2025 Form 10-K.
As of MarchJune 31,30, 2026, the Company had commitment
of RMB7.3 million (equivalent to $1.06$1.08 million) for construction in progress.
We had no off-balance sheet arrangements as of
MarchJune 31,30, 2026.
WETH insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding WETH (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Renaissance Technologies | 2026-06-30 | 161,558 | $195.5K | 0.0% | Added 186% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 26,476 | $32.0K | 0.0% | New position |