Wetouch Technology Inc. 10-Q

Item 1. Financial Statements WETOUCH TECHNOLOGY INC. AND ITS SUBSIDIARIES INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets at March 31, 2026 and December 31, 2025 (Unaudited) F-1 Condensed Consolidated Statements of Income and Comprehensive Income (Loss) for the Three Months Ended March 31, 2026 and 2025 (Unaudited) F-2 Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2026 and 2025 (Unaudited) F-3 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 2025 (Unaudited) F-4 Notes to Condensed Consolidated Financial Statements F-5 - F-19 1 WETOUCH TECHNOLOGY INC. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, 2026 December 31, 2025 (Unaudited) ASSETS CURRENT ASSETS Cash $ 120,518,189 $ 118,363,448 Accounts receivable, net 11,059,940 6,505,038 Inventories 29,060 45,202 Prepaid expenses and other current assets 1,116,411 1,189,616 TOTAL CURRENT ASSETS 132,723,600 126,103,304 Property, plant and equipment, net 9,008,142 8,885,976 Land use right, net 542,910 544,118 Operating right-of-use assets 370,689 521,454 Deferred tax assets, net 71,201 71,223 Long-term prepayment 4,573,164 4,510,973 TOTAL ASSETS $ 147,289,706 $ 140,637,048 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable $ 937,337 $ 1,063,759 Due to a related party 321,310 286,311 Income tax payable 1,202,262 - Accrued expenses and other current liabilities 1,285,170 1,372,047 Operating lease liabilities 370,689 521,454 TOTAL CURRENT LIABILITIES 4,116,768 3,243,571 TOTAL LIABILITIES $ 4,116,768 $ 3,243,571 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS’ EQUITY Common stock, $ 0.001 par value, 65,000,000 shares authorized, 11,931,534 and 11,931,534 issued and outstanding as of March 31, 2026 and December 31, 2025, respectively $ 11,932 $ 11,932 Additional paid in capital 52,501,680 52,501,680 Statutory reserve 8,073,968 8,073,968 Retained earnings 85,656,190 81,789,884 Accumulated other comprehensive loss ( 3,070,832 ) ( 4,983,987 ) TOTAL STOCKHOLDERS’ EQUITY 143,172,938 137,393,477 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 147,289,706 $ 140,637,048 The accompanying notes are an integral part of these condensed consolidated financial statements. F- 1 WETOUCH TECHNOLOGY INC. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE LOSS (Unaudited) For the Three Months Ended March 31, 2026 2025 (Unaudited) (Unaudited) REVENUES $ 16, 312,169 $ 15,289,578 Cost of revenues ( 10,488,869 ) ( 9,647,947 ) GROSS PROFIT 5,823,300 5,641,631 OPERATING EXPENSES Selling expenses ( 157,953 ) ( 102,457 ) General and administrative expenses ( 579,003 ) ( 1,566,440 ) Total operating expenses ( 736,956 ) ( 1,668,897 ) INCOME FROM OPERATIONS 5,086,344 3,972,734 OTHER INCOME Interest income 23,147 61,094 TOTAL OTHER INCOME 23,147 61,094 INCOME BEFORE INCOME TAX EXPENSE 5,109,491 4,033,828 INCOME TAX EXPENSE ( 1,243,185 ) ( 1,471,106 ) NET INCOME $ 3,866,306 $ 2,562,722 OTHER COMPREHENSIVE INCOME (LOSS) Foreign currency translation adjustment 1,913,155 732,380 COMPREHENSIVE INCOME $ 5,779,461 $ 3,295,102 EARNINGS PER COMMON SHARE Basic $ 0.32 $ 0.21 Diluted $ 0.32 $ 0.21 WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING* Basic 11,931,534 11,931,534 Diluted 11,931,534 11,931,534 The accompanying notes are an integral part of these condensed consolidated financial statements. F- 2 WETOUCH TECHNOLOGY INC. AND ITS 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’ Shares Amount capital reserve Earnings loss equity Balance as of December 31 2024 11,931,534 $ 11,932 $ 52,501,680 $ 8,073,968 $ 74,629,374 $ ( 10,631,289 ) $ 124,585,665 Net income - - - - 2,562,722 - 2,562,722 Foreign currency translation adjustment - - - - - 732,380 732,380 Balance as of March 31, 2025 11,931,534 $ 11,932 $ 52,501,680 $ 8,073,968 $ 77,192,096 $ ( 9,898,909 ) $ 127,880,767 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 as of December 31 2025 11,931,534 $ 11,932 $ 52,501,680 $ 8,073,968 $ 81,789,884 $ ( 4,983,987 ) $ 137,393,477 Net income - - - - 3,866,306 - 3,866,306 Foreign currency translation adjustment - - - - - 1,913,155 1,913,155 Balance as of March 31, 2026 11,931,534 $ 11,932 $ 52,501,680 $ 8,073,968 $ 85,656,190 ( 3,070,832 ) $ 143,172,938 The accompanying notes are an integral part of these condensed consolidated financial statements. F- 3 WETOUCH TECHNOLOGY INC. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Three Months Ended March 31, 2026 2025 (Unaudited) (Unaudited) Cash flows from operating activities Net income $ 3,866,306 $ 2,562,722 Adjustments to reconcile net income to cash provided by operating activities Allowance for credit loss 12 45,739 (Reversal) of provision for obsolete inventory ( 4,012 ) ( 25,276 ) Depreciation and amortization 9,020 2,471 Amortization of operating Right-of-use assets 157,410 156,014 Changes in operating assets and liabilities: Accounts receivable ( 4,449,866 ) ( 3,545,017 ) Inventories 20,719 ( 8,289 ) Prepaid expenses and other current assets 75,316 554,764 ) Deferred tax assets, net 1,000 ( 5,383 ) Accounts payable ( 140,602 ) 322,661 Amounts due to related parties 34,999 250,959 Income tax payable 1,198,125 1,290,429 Accrued expenses and other current liabilities ( 89,876 ) 589,309 Operating lease liabilities ( 159,050 ) ( 151,375 ) Net cash provided by operating activities 519,501 2,039,728 Cash flows from investing activities Net cash used in investing activities - - Cash flows from financing activities Net cash provided by financing activities - - Effect of changes of foreign exchange rates on cash 1,635,240 607,512 Net increase in cash 2,154,741 2,647,240 Cash, beginning of period 118,363,448 103,760,324 Cash, end of period $ 120,518,189 $ 106,407,564 Supplemental disclosures of cash flow information Income tax paid $ - $ - Lease liabilities arising from obtaining right-of-use assets $ 1,640 $ 47,251 The accompanying notes are an integral part of these condensed consolidated financial statements. F- 4 WETOUCH TECHNOLOGY INC. AND ITS SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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 the Company’s 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, the Company 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 became a wholly-owned subsidiary of the Company. 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 the “PRC”). Sichuan Wetouch is primarily engaged in the business of research and development, manufacture, and distribution of touchscreen displays to customers both in the PRC and overseas. The touchscreen products, which are manufactured by the Company, are primarily for use financial terminals, automotive, Point of Sales, gaming, lottery, medical, Human-Machine Interface (HMI), and other specialized industries. 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 accordingly. Corporate History of BVI Wetouch 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 (the “SAR”) on December 3, 2020. On March 2, 2021, HK Wetouch acquired all shares of Hong Kong Wetouch. Due to the fact that Hong Kong Wetouch and HK Wetouch are both under the same sole stockholder, the acquisition is accounted for under common control. In June 2021, Hong Kong Wetouch started its dissolution process pursuant to the minutes of its special stockholder meeting and was dissolved on March 18, 2022. Sichuan Wetouch was formed on May 6, 2011 in the PRC and became a Wholly Foreign-Owned Enterprise (“WFOE”) in PRC on February 23, 2017. On July 19, 2016, Sichuan Wetouch was 100 % held by HK Wetouch. On December 30, 2020, Sichuan Vtouch was incorporated in Chengdu, Sichuan, under the PRC laws. In March 2021, pursuant to local PRC government guidelines on local environmental issues and the national plan, Sichuan Wetouch was under the government directed relocation order. Sichuan Vtouch took over the operating business of Sichuan Wetouch. On March 30, 2023, an independent third party acquired all shares of Sichuan Wetouch for a nominal amount. As a result of the above restructuring, HK Wetouch became the sole stockholder of Sichuan Vtouch. F- 5 The following diagram illustrates the Company’s current corporate structure: NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Presentation and Principles of Consolidation 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 (the “SEC”). The condensed consolidated balance sheet as of December 31, 2025 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, 2025, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended. In the opinion of the management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the financial position as of March 31, 2026, the results of operations and cash flows for the three-month periods ended March 31, 2026 and 2025 have been made. However, the results of operations included in such financial statements may not necessarily be indicative of annual results. (b) Uses of Estimates In preparing the consolidated financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date of the consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, the allowance for estimated uncollectible receivables, fair values of financial instruments, inventory valuations, useful lives of property, plant and equipment, the recoverability of long-lived assets, provision necessary for contingent liabilities, revenue recognition and realization of deferred tax assets. Actual results could differ from those estimates. F- 6 (c) 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 2025 audited consolidated financial statements. Other than the revised accounting policies on lease and segment reporting as below, during the three-month periods ended March 31, 2026, there were no significant changes made to Wetouch significant accounting policies. (d) Property, plant and equipment, net Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization of property and equipment is provided using the straight-line method over their expected useful lives, as follows: Useful life Buildings 20 years Machinery and equipment 10 years Vehicles 4 years Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of income and other comprehensive income in other income or expenses. Construction in progress, funded by Company’s working capital, represents manufacturing facilities and office building under construction, is stated at cost and transferred to property, plant and equipment when it is substantially ready for its intended use. No depreciation is recorded for construction in progress. The construction of the new facility was delayed first due to the impact of COVID 19 and later the supply of the construction materials. The management estimate that construction in progress for our new facilities will be completed by the end of first half of 2027 and will transfer construction in progress to property, plant and equipment to start depreciation. F- 7 (e) Land use right, net A land use right in the PRC represents an exclusive right to occupy, use and develop a piece of land during the contractual term of the land use right. Land use right is usually paid in one lump sum at the date the right is granted or at the date of the prepayment pursuant to the land use right transfer contract with the local government. The prepayment usually covers the entire duration period of the land use right. The lump sum advance payment is capitalized and recorded as land use right and then charged to expense on a straight-line basis over the period of the right. On August 6, 2021, Sichuan Vtouch entered into a contract with Chengdu Wenjiang District Planning and Natural Resources Bureau (“Wenjiang Bureau”) for the purchase of a land use right of a parcel of land of 131,010 square feet ( 12,171 . 28 square meters) for a consideration of RMB 3,925,234 (equivalent to $ 569,039 ) for the Company’s new facility. The Company paid the consideration in full by November 18, 2021 and recorded in the prepayment. Pursuant to the contract, Sichuan Vtouch will construct a new facility on this parcel according to the specifications. Once the Project is fully completed, Wenjiang Bureau shall transfer the title of land use right to Sichuan Vtouch for 20 years. The Company’s new facility started in August 2021 yet was delayed and suspended due to the outbreak of Covid-19 and government-ordered shutdowns in China. The Company has rescheduled and extended the completion by first half of 2027 with the production at the new facilities will commencing by the end of 2027. During the years ended December 31, 2025, management assessed the probability of the obtaining the land use right upon the completion of the new facility, reclassified prepayment of RMB 3,925,234 (equivalent to $ 569,039 ) to land use right, started the amortization by a useful life of approximately 16 years. The amortization expense of land use rights was US$ 8,680 and nil for the three months ended March 31, 2026 and 2025, respectively, and included in general and administrative expenses. Useful life Land use right 16 years (f) Impairment of long-lived Assets Long-lived assets, such as property, plant and equipment, land use rights, are reviewed for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Recoverability of a long-lived asset or asset group to be held and used is measured by a comparison of the carrying amount of an asset or asset group to the estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying value of an asset or asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount that the carrying value exceeds the estimated fair value of the asset or asset group. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. Assets to be disposed are reported at the lower of carrying amount or fair value less costs to sell, and are no longer depreciated. There was $ nil impairment of construction in progress recognized for the three months ended March 31, 2026 and 2025, respectively. F- 8 (g) Recent accounting pronouncements Recently issued accounting pronouncements not yet adopted In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), and in January 2025, the FASB issued ASU No. 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. This guidance will be applied either prospectively or retrospectively. The Company is currently evaluating the impact from the adoption of this ASU on its consolidated financial statements. In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient and accounting policy election to allow entities to measure expected credit losses on certain trade receivables and contract assets using a provision matrix approach. ASU 2025-05 is effective for annual periods beginning after December 15, 2025, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this guidance on our consolidated financial statements and related disclosures. In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities, which provides updated guidance on how to recognize, measure, and present government grants. The ASU will be effective for annual reporting periods beginning after December 15, 2028, including interim periods within those fiscal years. with early adoption permitted. The Company is currently evaluating the impact of this guidance on our consolidated financial statements and related disclosures. Recently issued accounting pronouncements adopted In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which aims to improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 and early adoption is permitted. The Company adopted ASU 2023-09 on January 1, 2025, on a prospective basis (see note 14). The adoption did not have a material impact on the consolidated financial statements and related disclosures. Other accounting standards that have been issued by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on, or are unrelated to, its consolidated financial condition, results of operations, cash flows or disclosures. F- 9 NOTE 3 — ACCOUNTS RECEIVABLE Accounts receivable consists of the following: March 31, 2026 December 31, 2025 (Unaudited) Accounts receivable $ 11,060,456 $ 6,505,535 Allowance for credit losses ( 516 ) ( 497 ) Accounts receivable, net $ 11,059,940 $ 6,505,038 The Company’s accounts receivable primarily includes balance due from customers when the Company’s products are sold and delivered to customers. The following table provides an analysis of the aging of accounts receivable as of March 31, 2026 and December 31, 2025: March 31, 2026 December 31, 2025 (Unaudited) Current $ 6,936,884 $ 2,866,497 1-3 months past due 4,064,186 2,946,141 4-6 months past due 49,719 657,474 6-12 months past due 9,151 34,926 Total accounts receivable $ 11,059,940 $ 6,505,038 NOTE 4 — PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consist of the following: March 31, 2026 December 31, 2025 (Unaudited) Advance to suppliers $ 24,040 $ 3,638 Security deposit (i) 56,973 56,198 Prepaid market research fees (ii) 955,000 955,000 Interest receivable (ii) 68,693 60,570 Tax receivable (iii) - 105,370 Others receivable (iv) 11,705 8,840 Prepaid expenses and other current assets $ 1,116,411 $ 1,189,616 (i) On July 28, 2021, Sichuan Vtouch made a security deposit of RMB 393,000 (equivalent to $ 56,973 ) to Chengdu Cross-Strait Science and Technology Industry Development Park Management Committee to obtain a construction license for its new facility. This deposit will be refunded upon the completion of the new facility. (ii) On February 29, 2024, the Company advanced market research fees $ 70,000 and $ 855,000 , respectively, to two unrelated individuals, Mr. Chien Hui Chueh and Mr. Cheung Ming Lin, in relation to the Company’s market research service overseas. The two individuals signed borrowing contracts with a principal amount of $ 70,000 and $ 855,000 , respectively, on February 29, 2024. Those contracts were issued to the Company to evidence the advances, bearing 3.45 % interest per annum, and payable on February 28, 2025, and later extended till August 29, 2026. (iii) Tax receivable mainly includes prepaid corporate income tax and value-added tax (VAT) refundable. (iv) Other receivables are mainly employee advances and prepaid expenses. F- 10 NOTE 5 — PROPERTY, PLANT AND EQUIPMENT, NET March 31, 2026 December 31, 2025 Buildings $ 12,485 $ 12,315 Machinery and equipment 8,118 8,008 Vehicles 42,448 41,871 Construction in progress 8,985,587 8,863,391 Sub total 9,048,639 8,925,585 Less: accumulated depreciation ( 40,497 ) ( 39,609 ) Property, plant and equipment, net $ 9,008,142 8,885,976 ) Depreciation expense was $ 340 and $ 2,471 for the three-month period ended March 31, 2026 and 2025, respectively As of March 31, 2026, the Company had commitment of RMB 7.3 million (equivalent to $ 1.06 million) for construction in progress of our new facility. NOTE 6 — OPERATING LEASE In March 2021, pursuant to the local PRC government guidelines on local environmental issues and the national plan, the Company was under the government directed relocation order to relocate from a parcel of state-owned land where we maintained our executive offices, research and development facilities and factories. The Company received a total amount of RMB 115.2 million (approximately $ 16.7 million) from the local government (see ITEM 2. PROPERTIES AND FACILITIES) to start the construction of the new facility in a neighboring Chengdu Wenjiang District. On March 16, 2021, in order to minimize interruption of the Company’s 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 liability company owned by the local government, to lease the property, and all buildings, facilities and equipment thereon (the “Demised Properties) of Sichuan Wetouch, commencing from April 1, 2021 until December 31, 2021 at a monthly rent of RMB 300,000 ($ 43,491 ), which period was extended to October 31, 2022. The lease was renewed on October 30, 2022, October 30, 2023, August 9, 2024 and September 29, 2025, respectively , with a monthly rent of RMB 400,000 ($ 57,988 ), the term of which has been extended to October 31, 2026 for the use of the Demised Properties. Management makes estimates and assumptions to use the leasing property till the end of October 2026, and applies ASU 2016-02 “Leases (Topic 842) as practical expedients during the three months ended March 31, 2026. Both operating lease expense and short-term lease expense are recognized in cost of revenues and general and administrative expenses. The components of lease expense for the three months ended March 31, 2026 and 2025 were as follows: For the Three Months Ended March 31, 2026 2025 Lease expense (Unaudited) (Unaudited) Operating lease expense $ 159,050 $ 151,375 F- 11 The balances for the operating leases where the Company is the lessee are presented as follows: March 31, 2026 December 31, 2025 (Unaudited) Operating lease right-of-use assets $ 370,689 $ 521,454 Lease liabilities – current $ 370,689 $ 521,454 The following is a schedule, by years, of maturities of lease liabilities as of March 31, 2026: Operating lease 2026 lease payment (till October 31, 2026 $ 372,398 Less: imputed interest ( 1,709 ) Present value of lease liabilities $ 370,689 Lease term and discount rate: For the Three Months Ended March 31, 2026 2025 Weighted-average remaining lease term (years) (Unaudited) Operating lease 0.58 1.6 Weighted-average discount rate Operating lease 1.38 % 1.09 % Supplemental cash flow information related to leases where the Company was the lessee for the three months ended March 31, 2026 and 2025 was as follows: For the Three Months Ended March 31, 2026 2025 (Unaudited) Cash payments for operating lease $ 159,050 $ 151,375 Lease liabilities arising from obtaining right-of-use assets 1,640 47,251 F- 12 NOTE 7 — LONG-TERM PREPAYMENT March 31, 2026 December 31, 2025 Prepaid equipment $ 32,618 $ 32,174 Prepaid construction in progress 4,540,546 4,478,799 Total long-term prepayment $ 4,573,164 $ 4,510,973 In 2021, for the purpose of construction of our new facility ( NOTE 5 — PROPERTY, PLANT AND EQUIPMENT, NET ), the Company prepaid equipment of RMB 225,000 (equivalent to $ 32,618 ) to an external equipment provider, and prepaid construction in progress of RMB 20,319,674 (equivalent to $ 2,945,734 ) and RMB 11,001,014 (equivalent to $ 1,594,812 ) to two third party constructors. Due to the delayed of construction work incomplete, the Company reclassified the above amount to long-term prepayment. Upon the completion of the new facility, the management will reclass them to property, plant and equipment. NOTE 8 — RELATED PARTY TRANSACTIONS Amounts due to a related party are as follows: Relationship March 31, 2026 December 31, 2025 Note (Unaudited) Chengdu Wetouch Intelligent Optoelectronics Co., Ltd. Affiliate of Ms. Jiaying Cai, director of the Company $ 321,310 $ 286,311 Payable to affiliate for expenses paid on behalf of the Company Total $ 321,310 $ 286,311 Chengdu Wetouch Intelligent Optoelectronics Co., Ltd., was incorporated on January 28, 2021 in Chengdu, Sichuan Province under the laws of PRC, with Ms. Jiaying Cai, our former director and secretary of the Company, and the niece of Mr. Guangrong Cai, the Chairman of the Company, as its sole shareholder holding 100 % of its equity interests. F- 13 NOTE 9 — INCOME TAXES Wetouch Wetouch is subject to a tax rate of 21 % per beginning 2018, and files a U.S. federal income tax return. BVI Wetouch Under the current laws of the British Virgin Islands, BVI Wetouch, a wholly owned subsidiary 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 subject to profit taxes in Hong Kong at a progressive rate of 16.5 %. PRC 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. Sichuan Vtouch is subject to a 25 % income tax rate. 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 CIT Law and its implementation rules impose a withholding income tax at 10 %, unless reduced by a tax treaty or arrangement, on the amount of dividends distributed by a PRC-resident enterprise to its immediate holding company outside the PRC that are related to earnings accumulated beginning on January 1, 2008. Dividends relating to undistributed earnings generated prior to January 1, 2008 are exempt from such withholding income tax. The CIT Law and its implementation rules impose a withholding income tax at 10 %, unless reduced by a tax treaty or arrangement, on the amount of dividends distributed by a PRC-resident enterprise to its immediate holding company outside the PRC that are related to earnings accumulated beginning on January 1, 2008. Dividends relating to undistributed earnings generated prior to January 1, 2008 are exempt from such withholding income tax. The Company’s provision for income taxes expenses consisted of: For the Three Months Ended March 31, PRC income tax 2026 2025 (Unaudited) Income tax provision $ 1,242, 185 $ 1,476,488 Deferred income tax expenses 1,000 ( 5,382 ) Total $ 1,243,185 $ 1,471,106 US - - BVI - - Hong Kong - - Income tax provision $ 1,243,185 $ 1,471,106 F- 14 The following table reconciles the PRC statutory rates to the Company’s effective tax rate for the three months March 31, 2026 and 2025: For the Three Months Ended March 31, 2026 2025 (Unaudited) (Unaudited) PRC statutory income tax rate 25.0 % 25.0 % Income tax computed at PRC statutory corporate income tax rate of 25 % 24.9 % 26.1 % Tax rate differential on entities not subject to PRC income 0.1 % ( 1.1 )% Temporary differences 0.0 % 0.1 % Non-deductible expenses ( 0.7 )% 11.4 % Effective tax rate 24.3 % 36.5 % The Company follows ASC 740, “Income Taxes”, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company’s deferred tax assets consisted of the following components: As of March 31, 2026 As of December 31, 2025 Deferred tax assets: Allowance for credit losses $ 3,753 $ 3,699 Provision of obsolete inventory 21,751 22,448 Impairment of construction in progress 45,697 45,076 Leasing liabilities 92,672 130,363 Total gross deferred tax assets 163,873 201,586 Less valuation allowance - - Deferred tax assets net of valuation allowance 163,873 201,586 Deferred tax liabilities: Right-of-use assets ( 92,672 ) ( 130,363 ) Deferred tax liabilities ( 92,672 ) ( 130,363 ) Deferred tax assets, net $ 71,201 $ 71,223 The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. As of March 31, 2026 and December 2025, taxes for Sichuan Vtouch remained open for statutory examination by PRC tax authorities. F- 15 NOTE 10 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consist of the following: March 31, 2026 December 31, 2025 Accrued payroll and employee benefits $ 106,169 $ 83,276 Accrued professional fees 137,173 298,802 Accrued director fees 97,345 96,698 Other payable to third parties 629,694 629,694 Other tax payables (i) 167,687 116,476 Others (ii) 147,102 147,101 Accrued expenses and other current liabilities $ 1,285,170 $ 1,372,047 (i) Other tax payable mainly represent value added tax payable. (ii) Others mainly represent accrued employee reimbursement payable and other accrued miscellaneous operating expenses. NOTE 11— STOCKHOLDERS’ EQUITY 1) Common Stock The Company’s authorized number of shares of common stock was 65,000,000 shares with par value of $ 0.001 . On December 22, 2020, the Company issued 5,181 shares of common stock to The Crone Law Group, P.C. or its designees for legal services (see Note 12). On January 1, 2021, the Company issued an aggregate of 15,541 shares to a third- party service provider for consulting services that had been rendered. On April 14, April 27 and September 1, 2022, the Company issued 5,777 , 5,599 and 2,857 shares of common stock upon cashless exercise of the Note Warrants to three lenders, respectively. (see Note 11 (b)). During the year ended December 31, 2022, the Company issued 6,211 shares of common stock to a third party upon exercise of warrants (see Note 12). During the year ended December 31, 2022, the Company issued 69,228 shares of common upon conversion of convertible promissory note payable (see Note 11 (a)). On January 19, 2023, the Company sold an aggregate of 8,000,000 shares of common stock to purchasers in a private placement for an aggregate purchase price of $ 40,000,000 , or $ 5.00 per share. On January 20, 2023, the Company received net proceeds of $ 40 million accordingly. During the year ended December 31, 2023, the Company issued 25,000 shares of common stock upon conversion of convertible promissory note payable (see Note 11(a)). During the year ended December 31, 2023, the Company issued 22,338 shares of common stock to two third parties upon exercise of warrants (see Note 11 (b)). On February 20, 2024, the Company issued 2,160,000 shares of common stock at a public offering price of $ 5.00 per share. The Company’s common stock began trading on the Nasdaq Capital Market under the ticker symbol “WETH” on February 21, 2024. On January 7, 2026, the company filed with the Secretary of State of the State of Nevada an amendment to the Company’s Articles of Incorporation, as amended (the “Amendment”), which became effective on that date. In connection with the Amendment, the Company also filed its Second Amended and Restated Articles of Incorporation (the “Restated AOI”). The Amendment was approved by the Company’s stockholders at the annual meeting held on December 26, 2025, and increased the number of authorized shares of the Company’s common stock from 15,000,000 to 65,000,000 . As of May 11, 2026, there were 11,931,534 shares of common stock issued and outstanding. F- 16 2) Reverse Stock Split On February 17, 2023, the Company’s board of directors authorized a reverse stock split of common stock 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 determined by the Chairman of the Board. Upon effectiveness of such reverse stock split, the number of authorized shares of the common stock of the Company will also be decreased in the same ratio. Pursuant to Section 78.209 of the Nevada Revised Statutes, the reverse stock split does not have to be approved by the stockholders of the Company. On July 16, 2023, the Company’s board of directors approved the 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 Section 78.209 of the Nevada Revised Statutes to effectuate a 1-for-20 reverse stock split of its common stock. On September 11, 2023, the reverse stock split was approved by the Financial Industry Regulatory Authority and took effect on September 12, 2023. All share information included in this Quarterly Report has been adjusted as if the reverse stock split occurred as of the earliest period presented. 3) Closing of the 2024 Public Offering On February 23, 2024, the Company closed its offering of 2,160,000 shares of common stock at a public offering price of $ 5.00 per share, for aggregate gross proceeds of $ 10.8 million before deducting underwriting discounts, and other offering expenses. The Company complies with the requirements of FASB ASC Topic 340-10-S99-1, “Other Assets and Deferred Costs – SEC Materials” (“ASC 340-10-S99”) and SEC Staff Accounting Bulletin Topic 5A, “Expenses of Offering”, and charged issuance costs of $ 1,810,246 to additional paid-in capital during the years ended December 31, 2024. 3) Statutory Reserve and Restricted Net Assets Under PRC rules and regulations, all companies in the PRC are required to appropriate 10 % of their net income to a statutory surplus reserve until the reserve balance reaches 50 % of their registered capital. The appropriation to this statutory surplus reserve must be made before distribution of dividends can be made. The statutory reserve is non-distributable, other than during liquidation, and can be used to fund previous years losses, if any, and may be converted into share capital by issuing new shares to existing shareholders in proportion to their shareholders or by increasing the par value of the shares currently outstanding, provided that the remaining balance of the statutory reserve after such issue is not less than 25 % of the registered capital. Appropriations to the discretionary surplus reserve are made at the discretion of the board of directors. The statutory reserve may be applied against prior year losses, if any, and may be used for general business expansion and production or increase in registered capital, but are not distributable as cash dividends. As of March 31, 2026 and December 31, 2025, the Company had reserve fund of US 8,073,968 and US $ 8,073,968 , respectively. NOTE 12 — WEIGHTED AVERAGE NUMBER OF SHARES In October 2020, the Company entered into a reverse merger transaction. The Company computes the weighted-average number of shares of common stock outstanding in accordance with ASC 260 states that in calculating the weighted average shares when a reverse merger takes place in the middle of the year, the number of common shares outstanding from the beginning of that period to the acquisition date shall be computed on the basis of the weighted-average number of shares of common stock of the legal acquiree (accounting acquirer) outstanding during the period multiplied by the exchange ratio established in the merger agreement. The number of shares of common stock outstanding from the acquisition date to the end of that period shall be the actual number of shares of common stock of the legal acquirer (the accounting acquiree) outstanding during that period. F- 17 NOTE 13 — 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 RMB 500,000 . Interest Rate Risk – The Company is exposed to the risk arising from changing interest rates, which may affect the ability of repayment of existing debts and viability of securing future debt instruments within the PRC. Currency Risk - A majority of the Company’s revenue and expense transactions are denominated in RMB and a significant portion of the Company’s assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances in currencies other than RMB by the Company in China must be processed through the PBOC or other China foreign exchange regulatory bodies which require certain supporting documentation in order to affect the remittance. Concentrations - The Company sells its products primarily to 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 period ended March 31, 2026 and 2025, five customers accounted for 22.8 %, 17.9 %, 15.3 %, 14.3 % and 11.9 %, respectively, and five customers accounted for 21.1 %, 16.9 %, 15.8 %, 15.1 % and 12.4 %, respectively, of the Company’s revenue. The Company’s top ten customers aggregately accounted for an aggregate of 100.0 % and 99.9 % of the total revenue for the three-month period ended March 31, 2026 and 2025, respectively. As of March 31, 2026, five customers accounted for 26.6 %, 18.6 %, 13.2 %, 12.2 %, and 10.9 % 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 an aggregate of approximately 10.1 % (one supplier) and 49.2 % (four suppliers) for the three-month period ended March 31, 2026 and 2025, respectively. NOTE 14 — COMMITMENTS AND CONTINGENCIES i) Legal Proceedings We may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of business. Litigation or any other legal or administrative proceeding, regardless of the outcome, can result in substantial cost and the diversion of our resources, including our management’s time and attention. As of the date of this Quarterly Report, we are not aware of any material, active, pending or threatened to which the Company or any of its subsidiaries is a party, or to which any of their property is subject. ii) Capital Expenditure Commitment As of March 31, 2026, the Company had commitment RMB 7.3 million (equivalent to $ 1.06 million) for construction in progress. F- 18 NOTE 15 — SEGMENT REPORTING The Company’s chief operating decision maker has been identified as the Chief Executive Officer (“CEO”), who reviews financial information of operating segments based on U.S. GAAP amounts when making decisions about allocating resources and assessing performance of the Company. The Company determined that it operated in one operating segment of touch screen business. The Company primarily operates in People’s Republic of China (“PRC”). and substantially all of the Company’s long-lived assets are located in the PRC. 1) The Company’s geographical revenue information is set forth below: Three-Month Period Ended March 31 2026 2025 (Unaudited) Sales in PRC $ 11,000,025 $ 10,301,069 Sales in Overseas -Republic of China (ROC, or Taiwan) 2,978,322 2,667,917 -South Korea 2,333,822 2,320,592 Sub-total 5,312,144 4,988,509 Total revenues $ 16,312,169 $ 15,289,578 2) Segment information is set forth below: Three-Month Period Ended March 31 2026 2025 (Unaudited) Revenues $ 16,312,169 $ 15,289,578 Less: Cost of revenues 10,488,869 9,647,947 Allowance for credit losses 12 45,739 Reversal of provision for obsolete inventory ( 4,012 ) ( 25,276 ) Staff cost 404,744 351,635 Depreciation and amortization expense 9,020 2,471 Lease expense 159,050 151,375 Income tax expense 1,243,185 1,471,106 Other segment items* 144,995 1,081,859 Segment net income 3,866,306 2,562,722 Consolidated net income $ 3,866,306 $ 2,562,722 Consolidated total assets $ 147,289,706 $ 133,677,892 * Other segment items include remaining selling expense, general and administration expenses and interest income. NOTE 16 — SUBSEQUENT EVENTS The Company has evaluated subsequent events and transactions that occurred after the balance sheet date through the date the consolidated financial statements were issued and no subsequent events occurred that require accrual or disclosure. F- 19