Wetouch Technology Inc. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2026 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to __________ Commission file number: 001-41957 WETOUCH TECHNOLOGY INC. (Exact name of registrant as specified in its charter) Nevada 20-4080330 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) No. 29, Third Main Avenue Shigao Town, Renshou County Meishan , Sichuan , China 620500 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (86) 28-37390666 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $0.001 par value per share WETH Nasdaq Stock Market LLC Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes ☐ No ☒ As of August 14, 2026, there were 13,381,534 shares of the registrant’s common stock, par value $0.001 per share, issued and outstanding. WETOUCH TECHNOLOGY INC. QUARTERLY REPORT ON FORM 10-Q TABLE OF CONTENTS Page Number Cautionary Note Regarding Forward Looking Statements ii PART I FINANCIAL INFORMATION Item 1. Financial Statements 1 Condensed Consolidated Balance Sheets as of June 30, 2026 and December 31, 2025 (Unaudited) F-1 Condensed Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended June 30, 2026 and 2025 (Unaudited) F-2 Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2026 and 2025 (Unaudited) F-3 Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2026 and 2025 (Unaudited) F-4 Notes to Condensed Consolidated Financial Statements F-5 - F-20 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 2 Item 3. Quantitative and Qualitative Disclosures About Market Risk 13 Item 4. Controls and Procedures 13 PART II OTHER INFORMATION 14 Item 1. Legal Proceedings 14 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 14 Item 3. Defaults Upon Senior Securities 14 Item 4. Mine Safety Disclosures 14 Item 5. Other Information 14 Item 6. Exhibits 15 Signatures 16 i CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be preceded by, or contain, words such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “predict,” “potential,” “might,” “could,” “would,” “should” or other words indicating future results, though not all forward-looking statements necessarily contain these identifying words. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, without limitation, statements about our future business operations and results, our strategy and competition. These statements represent our current expectations or beliefs concerning various future events and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations, including, without limitation, those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the Securities and Exchange Commission (the “SEC”) on April 13, 2026 (the “2025 Form 10-K”), and in our other filings with the SEC. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We undertake no obligation to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You should read this Quarterly Report with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in the foregoing documents by these cautionary statements. ii Item 1. Financial Statements WETOUCH TECHNOLOGY INC. AND ITS SUBSIDIARIES INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets at June 30, 2026 and December 31, 2025 (Unaudited) F-1 Condensed Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended June 30, 2026 and 2025 (Unaudited) F-2 Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2026 and 2025 (Unaudited) F-3 Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2026 and 2025 (Unaudited) F-4 Notes to Condensed Consolidated Financial Statements F-5 - F-20 1 WETOUCH TECHNOLOGY INC. AND ITS SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, 2026 December 31, 2025 (Unaudited) ASSETS CURRENT ASSETS Cash $ 127,516,514 $ 118,363,448 Accounts receivable, net 9,327,520 6,505,038 Inventories 9,185 45,202 Prepaid expenses and other current assets 1,098,247 1,189,616 TOTAL CURRENT ASSETS 137,951,466 126,103,304 Property, plant and equipment, net 9,157,685 8,885,976 Land use right, net 543,089 544,118 Operating right-of-use assets 215,718 521,454 Deferred tax assets, net 77,360 71,223 Long-term prepayment 4,649,259 4,510,973 TOTAL ASSETS $ 152,594,577 $ 140,637,048 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable $ 861,785 $ 1,063,759 Due to a related party 422,605 286,311 Income tax payable 929,716 - Accrued expenses and other current liabilities 1,403,167 1,372,047 Operating lease liabilities 215,718 521,454 TOTAL CURRENT LIABILITIES 3,832,991 3,243,571 TOTAL LIABILITIES $ 3,832,991 $ 3,243,571 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS’ EQUITY Common stock, $ 0.001 par value, 65,000,000 shares authorized, 12,531,534 and 11,931,534 issued and outstanding as of June 30, 2026 and December 31, 2025, respectively $ 12,532 $ 11,932 Additional paid in capital 53,533,080 52,501,680 Statutory reserve 8,073,968 8,073,968 Retained earnings 87,820,591 81,789,884 Accumulated other comprehensive loss ( 678,585 ) ( 4,983,987 ) TOTAL STOCKHOLDERS’ EQUITY 148,761,586 137,393,477 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 152,594,577 $ 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 INCOME (Unaudited) For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 REVENUES $ 14,001,291 $ 12,419,455 $ 30,313,460 $ 27,709,033 COST OF REVENUES ( 9,117,559 ) ( 8,307,944 ) ( 19,606,428 ) ( 17,955,891 ) GROSS PROFIT 4,883,732 4,111,511 10,707,032 9,753,142 OPERATING EXPENSES Selling expenses ( 153,448 ) ( 114,575 ) ( 311,401 ) ( 217,032 ) General and administrative expenses ( 533,293 ) ( 914,032 ) ( 1,112,296 ) ( 2,480,472 ) Share-based compensation expenses ( 1,032,000 ) - ( 1,032,000 ) - TOTAL OPERATING EXPENSES ( 1,718,741 ) ( 1,028,607 ) ( 2,455,697 ) ( 2,697,504 ) INCOME FROM OPERATIONS 3,164,991 3,082,904 8,251,335 7,055,638 Interest income 24,104 35,646 47,251 96,740 TOTAL OTHER INCOME 24,104 35,646 47,251 96,740 INCOME BEFORE INCOME TAX EXPENSE 3,189,095 3,118,550 8,298,586 7,152,378 INCOME TAX EXPENSE ( 1,024,694 ) ( 876,722 ) ( 2,267,879 ) ( 2,347,828 ) NET INCOME $ 2,164,401 $ 2,241,828 $ 6,030,707 $ 4,804,550 OTHER COMPREHENSIVE INCOME Foreign currency translation adjustment 2,392,247 1,682,589 4,305,402 2,414,969 COMPREHENSIVE INCOME $ 4,556,648 $ 3,924,417 $ 10,336,109 $ 7,219,519 EARNINGS PER COMMON SHARE* Basic $ 0.18 $ 0.19 $ 0.50 $ 0.40 Diluted $ 0.18 $ 0.19 $ 0.50 $ 0.40 WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING Basic 12,267,798 11,931,534 12,100,595 11,931,534 Diluted 12,267,798 11,931,534 12,100,595 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 Net income 2,241,828 2,241,828 Foreign currency translation adjustment - - - - - 1,682,589 1,682,589 Balance as of June 30, 2025 11,931,534 $ 11,932 $ 52,501,680 $ 8,073,968 $ 79,433,924 $ ( 8,216,320 ) $ 131,805,184 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 Share-based compensation expenses 600,000 600 1,031,400 - - - 1,032,000 Net income 2,164,401 2,164,401 Foreign currency translation adjustment - - - - 2,392,247 2,392,247 Balance as of June 30, 2026 12,531,534 $ 12,532 $ 53,533,080 $ 8,073,968 $ 87,820,591 $ ( 678,585 ) $ 148,761,586 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 Six Months Ended June 30, 2026 2025 (Unaudited) (Unaudited) Cash flows from operating activities Net income $ 6,030,707 $ 4,804,550 Adjustments to reconcile net income to cash provided by operating activities Allowance for credit loss ( 440 ) 45,889 (Reversal) of provision for obsolete inventory 16,083 ( 91,252 ) Depreciation and amortization 26,951 4,957 Share-based compensation expenses 1,032,000 - Amortization of operating Right-of-use assets 318,096 308,244 Changes in operating assets and liabilities: Accounts receivable ( 2,593,080 ) ( 3,052,186 ) Inventories 20,899 60,426 ) Prepaid expenses and other current assets 95,432 908,043 Deferred tax assets, net ( 3,910 ) 11,073 Accounts payable ( 231,942 ) 197,607 Amounts due to related parties 136,294 493,423 Income tax payable 919,244 856,161 Accrued expenses and other current liabilities 22,899 433,057 Operating lease liabilities ( 320,855 ) ( 303,592 ) Net cash provided by operating activities 5,468,378 4,676,400 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 3,684,688 2,015,746 Net increase in cash 9,153,066 6,692,146 Cash, beginning of period 118,363,448 103,760,324 Cash, end of period $ 127,516,514 $ 110,452,470 Supplemental disclosures of cash flow information Income tax paid $ 1,308,108 $ 1,291,550 Lease liabilities arising from obtaining right-of-use assets $ 2,758 $ 49,775 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. F- 5 As a result of the above restructuring, HK Wetouch became the sole stockholder of Sichuan Vtouch. 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 June 30, 2026, the results of operations and cash flows for the three-month and six-month periods ended June 30, 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 and six-month periods ended June 30, 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. (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 $ 578,508 ) for the Company’s new facility. The Company paid the consideration in full by November 18, 2021 and recorded in the prepayment. F- 7 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 $ 578,508 ) to land use right, started the amortization by a useful life of approximately 16 years. The amortization expense of land use rights was US$ 8,829 and nil for the three months ended June 30, 2026 and 2025, respectively, and $ 26,265 and nil for the six months ended June 30, 2026 and 2025, respectively, recorded in general and administrative expenses of Condensed Consolidated Statements of Income and Comprehensive Income. 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 six months ended June 30, 2026 and 2025, respectively. (g) Share-based compensation ASC 718-10 requires that share-based payment transactions with employees and nonemployees, such as option, restricted stock, restricted stock unit, dividend equivalent, or other awards that are approved by the Company’s board, be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period, with a corresponding addition to equity. Under this method, compensation cost related to employee share award or similar equity instruments is measured at the grant date based on the fair value of the award and is recognized over the period during which an employee is required to provide service in exchange for the award, which generally is the vesting period. F- 8 (h) Recent accounting pronouncements Recently issued accounting pronouncements not yet adopted In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03 “Income Statement: Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40)” to improve the disclosures about an entity’s expenses. Upon adoption, we will be required to disclose in the notes to the financial statements a disaggregation of certain expense categories included within the relevant expense captions on the consolidated statements of income. The standard is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The standard can be applied either prospectively or retrospectively. We are currently assessing adoption timing, the method of adoption, and the effect that the updated standard will have on our financial statement disclosures In September 2025, the FASB issued ASU 2025-06 “Intangibles: Goodwill and Other‒Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software” to modernize the accounting for software costs under Subtopic 350-40, Intangibles‒Goodwill and Other‒Internal-Use Software (referred to as “internal-use software”). Upon adoption, we will be required to account for internal-use software under the updated capitalization criteria. The standard is effective for our interim and annual 2028 periods, with early adoption permitted. The standard can be applied either prospectively, retrospectively, or under a modified transition approach. We are currently assessing adoption timing, the method of adoption, and the effect that the updated standard will have on our consolidated financial statements. In May 2026, the FASB issued ASU 2026-02 “Environmental Credits and Environmental Credit Obligations (Topic 818)” to provide recognition, measurement, presentation, and disclosure guidance for environmental credits and environmental credit obligations. Upon adoption, we will be required to account for environmental credits and environmental credit obligations under the new guidance. The standard is effective for our interim and annual 2028 periods, with early adoption permitted. The standard should be adopted on a retrospective basis. We are currently assessing adoption timing and the effect that the updated standard will have on our consolidated financial statements. 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. NOTE 3 — ACCOUNTS RECEIVABLE Accounts receivable consists of the following: June 30, 2026 December 31, 2025 (Unaudited) Accounts receivable $ 9,327,587 $ 6,505,535 Allowance for credit losses ( 67 ) ( 497 ) Accounts receivable, net $ 9,327,520 $ 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. F- 9 The following table provides an analysis of the aging of accounts receivable as of June 30, 2026 and December 31, 2025: June 30, 2026 December 31, 2025 (Unaudited) Current $ 5,579,374 $ 2,866,497 1-3 months past due 3,696,195 2,946,141 4-6 months past due 51,342 657,474 6-12 months past due 609 34,926 Total accounts receivable $ 9,327,520 $ 6,505,038 NOTE 4 — PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consist of the following: June 30, 2026 December 31, 2025 (Unaudited) Advance to suppliers $ - $ 3,638 Security deposit (i) 57,921 56,198 Prepaid market research fees (ii) 955,000 955,000 Interest receivable (ii) 76,908 60,570 Tax receivable (iii) - 105,370 Others receivable (iv) 8,418 8,840 Prepaid expenses and other current assets $ 1,098,247 $ 1,189,616 (i) On July 28, 2021, Sichuan Vtouch made a security deposit of RMB 393,000 (equivalent to $ 57,921 ) 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 June 30, 2026 December 31, 2025 Buildings $ 12,693 $ 12,315 Machinery and equipment 8,253 8,008 Vehicles 43,154 41,871 Construction in progress 9,135,102 8,863,391 Sub total 9,199,202 8,925,585 Less: accumulated depreciation ( 41,517 ) ( 39,609 ) Property, plant and equipment, net $ 9,157,685 8,885,976 Depreciation expense was $ 346 and $ 2,486 for the three-month period ended June 30, 2026 and 2025, respectively. Depreciation expense was $ 686 and $ 4,957 for the six-month period ended June 30, 2026 and 2025, respectively. As of June 30, 2026, the Company had commitment of RMB 7.3 million (equivalent to $ 1.08 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 $ 17.0 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 ($ 44,215 ), 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 ($ 58,953 ), 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 six months ended June 30, 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 and six months ended June 30, 2026 and 2025 were as follows: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (Unaudited) (Unaudited) Lease expense Operating lease expense $ 161,805 $ 156,869 $ 320,855 $ 308,244 F- 11 The balances for the operating leases where the Company is the lessee are presented as follows: June 30, 2026 December 31, 2025 (Unaudited) Operating lease right-of-use assets $ 215,718 $ 521,454 Lease liabilities – current $ 215,718 $ 521,454 The following is a schedule, by years, of maturities of lease liabilities as of June 30, 2026: Operating lease 2026 lease payment (July 1, 2026 to October 31, 2026 $ 216,340 Less: imputed interest ( 622 ) Present value of lease liabilities $ 215,718 Lease term and discount rate: For the Three Months Ended June 30, 2026 2025 Weighted-average remaining lease term (years) (Unaudited) Operating lease 0.33 1.40 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 six months ended June 30, 2026 and 2025 was as follows: For the Three Months Ended June 30, 2026 2025 (Unaudited) Cash payments for operating lease $ 320,855 $ 303,592 Lease liabilities arising from obtaining right-of-use assets 2,758 49,775 F- 12 NOTE 7 — LONG-TERM PREPAYMENT June 30, 2026 December 31, 2025 Prepaid equipment $ 33,161 $ 32,174 Prepaid construction in progress 4,616,098 4,478,799 Total long-term prepayment $ 4,649,259 $ 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 $ 33,161 ) to an external equipment provider, and prepaid construction in progress of RMB 20,319,674 (equivalent to $ 2,994,749 ) and RMB 11,001,014 (equivalent to $ 1,621,349 ) 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 June 30, 2026 December 31, 2025 Note (Unaudited) Chengdu Wetouch Intelligent Optoelectronics Co., Ltd. Affiliate of Ms. Jiaying Cai, director of the Company $ 422,605 $ 286,311 Payable to affiliate for expenses paid on behalf of the Company Total $ 422,605 $ 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 credit (expenses) consisted of Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (Unaudited) (Unaudited) PRC income tax Income tax provision $ 1,084,396 $ 860,267 $ 2,326,581 $ 2,336,755 Deferred income tax expenses ( 59,702 ) 16,455 ( 58,702 ) 11,073 Sub total $ 1,024,694 $ 876,722 $ 2,267,879 $ 2,347,828 US - - - - BVI - - - - Hong Kong - - - - Income tax provision $ 1,024,694 $ 876,722 $ 2,267,879 $ 2,347,828 F- 14 The following table reconciles the PRC statutory rates to the Company’s effective tax rate for the three and six months June 30, 2026 and 2025: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (Unaudited) (Unaudited) PRC statutory income tax rate 25.0 % 25.0 % 25.0 % 25.0 % Income tax computed at PRC statutory corporate income tax rate of 25 % 33.8 % 28.0 % 28.0 % 30.0 % Tax rate differential on entities not subject to PRC income ( 1.4 )% ( 0.5 )% ( 0.5 )% ( 0.8 )% Temporary differences 0.2 % 2.1 % 0.0 % 0.2 % Non-deductible expenses ( 0.5 )% ( 1.5 )% ( 0.2 )% 3.4 % Effective tax rate 32.1 % 28.1 % 27.3 % 32.8 % 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: June 30, 2026 December 31, 2025 Deferred tax assets: Allowance for credit losses $ 3,701 $ 3,699 Provision of obsolete inventory 27,202 22,448 Impairment of construction in progress 46,457 45,076 Leasing liabilities 53,930 130,363 Total gross deferred tax assets 131,290 201,586 Less valuation allowance - - Deferred tax assets net of valuation allowance 131,290 201,586 Deferred tax liabilities: Right-of-use assets ( 53,930 ) ( 130,363 ) Deferred tax liabilities ( 53,930 ) ( 130,363 ) Deferred tax assets, net $ 77,360 $ 71,223 The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. As of June 30, 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: June 30, 2026 December 31, 2025 Accrued payroll and employee benefits $ 107,936 $ 83,276 Accrued professional fees 122,172 298,802 Accrued director fees 112,083 96,698 Other payable to third parties 629,694 629,694 Other tax payables (i) 274,089 116,476 Others (ii) 157,193 147,101 Accrued expenses and other current liabilities $ 1,403,167 $ 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)). F- 16 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 May 11, 2026, the Compensation Committee of the Board approved the grant of 600,000 common stock to three independent consultants who contributed to the success of the Company’s operations in overseas market. The Award vested immediately upon grant, as a result, the Company recorded share-compensation expenses of $ 1,032,000 at the price of $ 1.72 at the grant date. As of June 30, 2026, there were 12,531,534 shares of common stock issued and outstanding. 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 June 30, 2026 and December 31, 2025, the Company had reserve fund of US8, 073,968 and US$ 8,073,968 , respectively. F- 17 NOTE 12 — SHARE BASED COMPENSATION The Company applied ASC 718 and related interpretations in accounting for measuring the cost of share-based compensation over the period during which the consultants are required to provide services in exchange for the issued shares. 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. The fair value of vested shares is 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. NOTE 13 — 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. NOTE 14 — 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 months ended June 30, 2025, five customers accounted for approximately 22.2 %, 16.3 %, 16.3 %, 14.4 % and 12.2 %, respectively, of the Company’s total revenue. For the three months ended June 30, 2025, five customers accounted for approximately 22.0 %, 16.2 %, 15.7 %, 14.5 %, and 12.0 %, respectively, of the Company’s revenue. F- 18 For the six months ended June 30, 2025, five customers accounted for 22.5 %, 17.2 %, 15.7 %, 14.4 % and 12.1 %, respectively, of the Company’s total revenue. For the six months ended June 30, 2025, five customers accounted for 21.5 %, 16.6 %, 15.8 %, 14.9 %, and 12.2 %, respectively, of the Company’s revenue. The Company’s top ten customers aggregately accounted for 99.9 % and 99.6 % of the total revenue for the three months ended June 30, 2026 and 2025, and approximately 99.9 % and 99.4 % for the six months ended June 30, 2026 and 2025. As of June 30, 2026, five customers accounted for 28.5 %, 19.9 %, 8.2 %, 8.2 % and 5.6 % 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 44.6 % (four suppliers) and 50.1 % (four suppliers) for the three months ended June 30, 2026 and 2025, respectively, and approximately 10.3 % (one supplier) and 49.6 % (four suppliers) for the six months ended June 30, 2026 and 2025, respectively. NOTE 15 — 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 June 30, 2026, the Company had commitment RMB 7.3 million (equivalent to $ 1.07 million) for construction in progress. NOTE 16 — 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 Months Ended Six Months Ended June 30, June 30, 2026 2025 2025 2026 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Sales in PRC $ 9,634,277 $ 8,414,927 $ 20,634,302 $ 18,715,995 Sales in Overseas -Republic of China (ROC, or Taiwan) 2,328,529 2,184,676 5,306,851 4,852,592 -South Korea 2,025,120 1,800,926 4,358,942 4,121,519 -Others 13,365 18,927 13,365 18,927 Sub-total 4,367,014 4,004,528 9,679,158 8,993,038 Total Revenue $ 14,001,291 $ 12,419,455 $ 30,313,460 $ 27,709,033 F- 19 2) Segment information is set forth below: Three Months Ended Six Months Ended June 30, June 30, 2026 2025 2026 2025 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues $ 14,001,291 $ 12,419,455 $ 30,313,460 $ 27,709,033 Less: Cost of revenues 9,117,559 8,307,944 19,606,428 17,955,891 Allowance for (provision of) credit losses ( 452 ) 150 ( 440 ) 45,889 Reversal of provision of obsolete inventory 20,095 ( 65,976 ) 16,083 ( 91,252 ) Staff cost 392,717 353,556 797,461 705,193 Share-based compensation 1,032,000 - 1,032,000 - Depreciation and amortization expense 17,931 2,486 26,951 4,957 Lease expense 161,805 156,869 320,855 308,244 Income tax expense 1,024,694 876,722 2,267,879 2,347,828 Other segment items* 70,541 545,876 215,536 1,627,733 Segment net income 2,164,401 2,241,828 6,030,707 4,804,550 Consolidated net income $ 2,164,401 $ 2,241,828 $ 6,030,707 $ 4,804,550 Consolidated total assets $ 152,594,577 $ 137,024,190 $ 152,594,577 $ 137,024,190 * Other segment items include remaining selling expense, general and administration expenses and interest income. NOTE 17 — 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. 1) On July 2, 2026, the compensation committee of the Company’s board of directors approved the grant of 850,000 restricted stocks to three external consultants who contributed to the success of the Company’s operations in the overseas market. The Award will be vested in six months. 2) On July 28, 2026, Wetouch Technology Inc. (the “Company”) announced that its Board of Directors had declared a special cash dividend of US$ 0.5 million (or approximately US$ 0.04 per share of common stock based on approximately 13.38 million outstanding shares) expected to be paid on or about September 30, 2026 with a record date of August 17, 2026. The special cash dividend plan reflects the Company’s continued focus on enhancing shareholder value while maintaining sufficient financial resources to support its business growth, technology innovation, strategic investments, and long-term development initiatives. 3) On August 11, 2026, the Company filed with Preliminary Proxy Statement (14A) with SEC on a special meeting of the stockholders (“Special Meeting”) of Wetouch Technology Inc, which will be held at the Company’s corporate headquarters, located at No. 29, Third Main Avenue, Shigao Town, Renshou County, Meishan Sichuan, China on September 4, 2026 at 10:00 A.M., local time. Matters to be voted upon at the Special Meeting are to i) approve the issuance of shares of common stock to Qixun Technology (Samoa) Limited and Qihong Technology (Samoa) Limited pursuant to certain share purchase agreements in accordance with Nasdaq Listing Rule 5635 (the “Issuance Proposal”); and), and ii) transact such other business as may properly come before the meeting or any adjournment thereof. F- 20 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The discussion should be read in conjunction with the Company’s consolidated financial statements and the notes presented herein. In addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Actual results could differ significantly from those expressed, implied or anticipated in these forward-looking statements as a result of certain factors discussed herein and any other periodic reports filed and to be filed with the Securities and Exchange Commission. For more information regarding the risks and uncertainties of our business, See “Risk Factors”, “Cautionary Note Regarding Forward Looking Statement.” Overview 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 June 30, 2026, the Company has contributed RMB 348.0 million (US$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. ” 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 owned subsidiaries, BVI Wetouch, HK Wetouch, and Sichuan Vtouch, we are engaged in the research, development, manufacturing, sales and servicing of medium- to large-sized projected capacitive touchscreens. We are specialized in large-format touchscreens, which are developed and designed for a wide variety of markets and used in the financial terminals, automotive, POS, gaming, lottery, medical, HMI, and other specialized industries. Our product portfolio comprises medium- to large-sized projected capacitive touchscreens ranging from 7.0 inch to 42 inch screens. We generate revenues through sales of our various touchscreen products. 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 June 30, 2026 and 2025, our domestic sales accounted for approximately 68.6% and 67.7%, respectively, of our revenues, and our international sales accounted for approximately 31.4% and 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.. 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 Quarterly Report has been retroactively adjusted to reflect these actions. For more details, see “ Item 1. Business - Corporate History and Structure - Reverse Stock Splits ” of the 2025 Form 10-K. 2 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 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 $14.8 million and $9.1 million have been recorded in the construction in progress as of June 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 June 30, 2026 include: ● Revenues were $14.0 million, an increase of 12.9% compared to $12.4 million in the second quarter of 2025 ● Gross profit was $4.9 million, an increase of 19.5% compared to $4.1 million in the second quarter of 2025 ● Gross profit margin was 34.9 %, compared to 33.1% in the second quarter of 2025 ● Net income stayed flat at $2.2 million in the second quarter of 2026 and 2025 ● Total volume shipped was 663,555 units, an increase of 7.8% compared to 615,742 units in the second quarter of 2025 Results of Operations The following table sets forth, for the periods indicated, statements of income data: For the Three Months Ended June 30, Change For the Six Months Ended June 30, Change (in US Dollar millions, except percentage) 2026 2025 % 2026 2025 % Revenues $ 14.0 $ 12.4 12.9 % $ 30.3 $ 27.7 9.4 % Cost of revenues (9.1 ) (8.3 ) 9.6 % (19.6 ) (18.0 ) 8.9 % Gross profit 4.9 4.1 19.5 % 10.7 9.7 10.3 % Total operating expenses (1.7 ) (1.0 ) 70.0 % (2.4 ) (2.7 ) (11.1 )% -Share-based compensation expenses (1.0 ) 0.0 N/A (1.0 ) 0.0 N/A Operating income 3.2 3.1 3.2 % 8.3 7.1 16.9 % Income before income taxes 3.2 3.1 3.2 % 8.3 7.1 16.9 % Income tax expense (1.0 ) (0.9 ) 11.1 % (2.3 ) (2.3 ) 0.0 % Net income $ 2.2 $ 2.2 0.0 % $ 6.0 $ 4.8 25.0 % 3 Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025 Revenues We generated revenue of $14.0 million for the three months ended June 30, 2026, an increase of $1.6 million, or 12.9%, compared to $12.4 million in the same period of last year. This was due to an increase of 7.8% in sales volume, and 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-Month Ended June 30, 2026 2025 Change Change Amount % Amount % Amount % (in US Dollar millions except percentage) Revenue from sales to customers in Mainland China $ 9.6 68.6 % $ 8.4 67.7 % $ 1.2 14.3 % Revenue from sales to customers overseas 4.4 31.4 % 4.0 32.3 % 0.4 10.0 % Total Revenue $ 14.0 100 % $ 12.4 100 % $ 1.6 12.9 % For the Three-Month Ended June 30, 2026 2025 Change Change Unit % Unit % Unit % (in UNIT, except percentage) Units sold to customers in Mainland China 441,200 66.5 % 411,353 66.8 % 29,847 7.3 % Units sold to customers overseas 222,355 33.5 % 204,389 33.2 % 17,966 8.8 % Total Units Sold 663,555 100.0 % 615,742 100 % 47,813 7.8 % (i) PRC Domestic Market 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. Due to our proactive efforts to market new models and efforts to obtain new customers and penetrate into new regions, our sales increased by 8.6% in East China, 7.1% in South China and 6.3% in Southwest China, during the three months ended June 30, 2026, as compared to the same period of last year. 4 (ii) Overseas Market For the three-month period ended June 30, 2026, revenues from the overseas market were $4.4 million as compared to $4.0 million of the same period of 2025, representing an increase by $0.4 million, or 10.0%, primarily due to (i) 8.8% increase in sales volume because of higher demand on automotive touchscreens and gaming touchscreens, and (ii) 6.0% positive impact from exchange rate due to appreciation of RMB against US dollars, partially offset by a decrease of 5.8% 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: For the Three-Month Ended June 30, 2026 2025 Change Change Amount % Amount % Amount Margin% (in US Dollars, except percentage) Product categories by end applications Automotive Touchscreens $ 3,535,561 25.2 % $ 3,122,908 25.1 % $ 412,653 13.2 % Industrial Control Computer Touchscreens 2,948,953 21.1 % 2,729,429 22.0 % 219,524 8.0 % POS Touchscreens 2,272,863 16.2 % 1,950,702 15.7 % 322,161 16.5 % Gaming Touchscreens 2,025,119 14.5 % 1,800,926 14.5 % 224,193 12.4 % Medical Touchscreens 1,914,237 13.7 % 1,665,087 13.4 % 249,150 15.0 % Multi-Functional Printer Touchscreens 1,304,558 9.3 % 1,150,403 9.3 % 154,155 13.4 % Total Revenue $ 14,001,291 100.0 % $ 12,419,455 100.0 % $ 1,581,836 12.7 % 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, 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 and Gross Profit Margin For the Three-Month Ended June 30, Change (in millions, except percentage) 2026 2025 Amount % Gross Profit $ 4.9 $ 4.1 $ 0.8 19.5 % Gross Profit Margin 34.9 % 33.1 % 1.8 % Gross profit was $4.9 million in the second quarter ended June 30, 2026, compared to $4.1 million in the same period of 2025. Our gross profit margin increased to 34.9% for the second quarter of 2026, as compared to 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 3.4% in labor costs due to additional hiring of technicians, and an increase of 2.2% in costs of materials (mainly in the price of chip costs) during the three months ended June 30, 2026. 5 Selling Expenses For the Three-Month Ended June 30, Change (in millions, except percentage) 2026 2025 Amount % Selling Expenses $ 0.2 $ 0.1 $ 0.1 100.0 % as a percentage of revenues 1.4 % 0.8 % 0.6 % Selling expenses were $0.2 million for the three-month period ended June 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 June 30, 2026. General and Administrative Expenses For the Three-Month Ended June 30, Change (in millions, except percentage) 2026 2025 Amount % General and Administrative Expenses $ 0.5 $ 0.9 $ (0.4 ) (44.4 )% as a percentage of revenues 3.6 % 7.3 % (3.7 )% General and administrative expenses were $0.5 million for the three-month period ended June 30, 2026, compared to $0.9 million in the same period in 2025, representing a decrease of $0.4 million, or 44.4%. The decrease was primarily due to the absence in the second quarter of 2026 of approximately $0.4 million of amortization expense related to prepaid three-year consulting service fees that was expired on May 31, 2025, partially offset by an increase of approximately $0.1 million in professional fees during the second quarter of 2026. Share-based Compensation Expenses For the Three-Month Ended June 30, Change (in millions, except percentage) 2026 2025 Amount % Share-based Compensation Expenses $ 1.0 $ 0.0 $ 1.0 N/A as a percentage of revenues 7.1 % 0.0 % 7.1 % 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). Operating Income Total operating income was $3.2 million for the three-month period ended June 30, 2026 as compared to $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 June 30, 2026. 6 Income Taxes For the Three-Month Ended June 30, Change (in millions, except percentage) 2026 2025 Amount % Income before Income Taxes $ 3.2 $ 3.1 $ 0.1 3.2 % Income Tax (Expense) (1.0 ) (0.9 ) (0.1 ) 11.1 % Effective income tax rate 32.1 % 28.1 % 4.0 % The effective income tax rates for the three-month period ended June 30, 2026 and 2025 were 32.1% and 28.1%, respectively. Net Income As a result of the above factors, our net income stayed flat at $2.2 million for the second quarter of 2026 and 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. For the Six Months Ended June 30, 2026 2025 Change Change Amount % Amount % Amount % (in US Dollar millions except percentage) Revenue from sales to customers in PRC $ 20.6 68.0 % $ 18.7 67.5 % $ 1.9 10.2 % Revenue from sales to customers overseas 9.7 32.0 % 9.0 32.5 % 0.7 7.8 % Total Revenues $ 30.3 100 % $ 27.7 100 % $ 2.6 9.4 % For the Six Months Ended June 30, 2025 Change Change Unit % Unit % Unit % (in UNIT, except percentage) Units sold to customers in PRC 944,500 66.2 % 920,003 66.7 % 24,497 2.7 % Units sold to customers overseas 482,380 33.8 % 458,284 33.3 % 24,096 5.3 % Total Units Sold 1,426,880 100 % 1,378,287 100 % 48,593 3.5 % 7 (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 : Revenues For the Six Months Ended June 30, 2026 2025 Change Change Amount % Amount % Amount Margin% (in US Dollars, except percentage) Product categories by end applications Automotive Touchscreens $ 7,865,662 25.9 % $ 7,083,405 25.6 % $ 782,257 11.0 % Industrial Control Computer Touchscreens 6,256,131 20.6 % 5,964,502 21.5 % 291,629 4.9 % POS Touchscreens 4,761,227 15.7 % 4,361,733 15.7 % 399,494 9.2 % Gaming Touchscreens 4,358,941 14.4 % 4,121,519 14.9 % 237,422 5.8 % Medical Touchscreens 4,308,003 14.2 % 3,614,745 13.0 % 693,258 19.2 % Multi-Functional Printer Touchscreens 2,763,496 9.1 % 2,563,129 9.3 % 200,367 7.8 % Total Revenues $ 30,313,460 100 % $ 27,709,033 100 % $ 2,604,427 9.4 % 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. 8 Gross Profit and Gross Profit Margin For the Six Months Ended June 30, Change (in millions, except percentage) 2026 2025 Amount % Gross Profit $ 10.7 $ 9.7 $ 1.0 10.3 % Gross Profit Margin 35.3 % 35.2 % 0.1 % 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 For the Six Months Ended June 30, Change (in millions, except percentage) 2026 2025 Amount % Selling Expenses $ 0.3 $ 0.2 $ 0.1 50.0 % as a percentage of revenues 1.0 % 0.7 % 0.3 % 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 For the Six Months Ended June 30, Change (in millions, except percentage) 2026 2025 Amount % General and Administrative Expenses $ 1.1 $ 2.5 $ (1.4 ) (56.0 )% as a percentage of revenues 3.6 % 9.0 % (5.4 )% 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 For the Six-Month Ended June 30, Change (in millions, except percentage) 2026 2025 Amount % Share-based Compensation Expenses $ 1.0 $ 0.0 $ 1.0 N/A as a percentage of revenues 3.3 % 0.0 % 3.3 % 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. 9 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 For the Six Months Ended June 30, Change (in millions, except percentage) 2026 2025 Amount % Income before Income Taxes $ 8.3 $ 7.1 $ 1.2 16.9 % Income Tax (Expense) (2.3 ) (2.3 ) 0.0 % Effective income tax rate 27.3 % 32.8 % (5.5 )% 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 Liquidity and Capital Resources Historically, our primary uses of cash have been to finance working capital needs. We expect to be able to meet our needs to fund operations, capital expenditures, and other commitments over the next 12 months primarily with our cash and cash equivalents, operating cash flows and bank borrowings. However, we may require additional cash resources due to changes in business conditions or other future developments. If these sources prove insufficient to meet our cash requirements, we may seek to raise additional funds through the sale of equity or debt securities or by obtaining a credit facility. Any issuance of additional equity or equity-linked securities could dilute the ownership interests of existing shareholders, while the incurrence of additional indebtedness would increase our debt service obligations and could subject us to operating and financial covenants that may restrict our business activities. There can be no assurance that financing will be available in the necessary amounts, on terms acceptable to us, or at all. As of June 30, 2026, we had current assets of $138.0 million, consisting of $127.5 million in cash and cash equivalent, $9.3 million in accounts receivable, $9,185 in inventories, and $1.1 million in prepaid expenses and other current assets. Our current liabilities as of June 30, 2026 were $3.8 million, which is comprised of $0.9 million in accounts payable, $0.4 million in amounts due to a related party, $0.9 million income tax payable, $1.4 million in accrued expenses and other current liabilities. and $0.2 million in operating lease liabilities, current portion. 10 The following is a summary of our cash flows provided by (used in) operating, investing, and financing activities for the three-month periods ended June 30, 2026 and 2025: For the Six-Month Ended June 30, (in US Dollar millions) 2026 2025 Net cash provided by provided by operating activities $ 5.5 $ 4.7 Net cash used in investing activities (0.0 ) (0.0 ) Net cash provided by financing activities 0.0 0.0 Effect of foreign currency exchange rate changes on cash and cash equivalents 3.6 2.0 Net increase in cash and cash equivalents 9.1 6.7 Cash and cash equivalents at the beginning of period 118.4 103.7 Cash and cash equivalents at the end of period $ 127.5 $ 110.5 Operating Activities Net cash provided by operating activities was $5.5 million for the six months ended June 30, 2026 as compared to net cash provided by operating activities of $4.7 million for the same period of the last year. The positive cash flow for the six months ended June 30, 2026 was primarily due to i) $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 $0.9 million in income tax payable and $0.1 million due to a related party, and partially o ffset by iii) the increase of $2.6 million in accounts receivable and iv) the decrease of $0.2 million in accounts payable. The positive cash flow for the six months ended June 30, 2025 was primarily due to i) $4.8 million net income, ii) $0.3 million of amortization of operating right-of-use assets, iii) the decrease of $0.9 million in prepaid expenses and current assets, iii) the increase of in $0.2 million accounts payable, $0.5 million due to related parties, $0.9 million in tax payable and $0.4 million in accrued expenses and current liabilities, partially offset by iv) the increase of $3.1 million in accounts receivable and v) the decrease of $0.3 million in operating lease liabilities. Investing Activities There were no cash flows from investing activities for the six-month period ended June 30, 2026 and 2025. Financing Activities There were no cash flows from financing activities for the six-month period ended June 30, 2026, and 2025. As of June 30, 2026, our cash and cash equivalents were $127.5 million, as compared to $118.4 million at December 31, 2025. Days Sales Outstanding (“DSO”) has decreased to 47 days for the six months ended June 30, 2026 from 56 days for the year ended December 31, 2025. 11 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. 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. Holding Company Structure There have been no changes to the Company’s holding company structure during the six months ended June 30, 2026. For more details, refer to the Company’s holding company 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. Cash and Other Assets Transfers between the Holding Company and Its Subsidiaries Please see “ITEM 7- Management’s Discussion and Analysis of Financial Condition and Results of Operations- Cash and Other Assets Transfers between the Holding Company and Its Subsidiaries” of the 2025 Form 10-K for more details. Capital Expenditure Commitment As of June 30, 2026, the Company had commitment of RMB7.3 million (equivalent to $1.08 million) for construction in progress. Off-Balance Sheet Arrangements We had no off-balance sheet arrangements as of June 30, 2026. Critical Accounting Policies The preparation of financial statements and related disclosures in conformity with GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Note 2, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report and in the Notes to Consolidated Financial Statements in Part II, Item 8 of the 2025 Form 10-K describe the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements. There have been no material changes to the Company’s critical accounting estimates since the 2025 Form 10-K. 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not applicable for smaller reporting companies. Item 4. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2026. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that during the period covered by this report, our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective at a reasonable assurance level, due to the material weaknesses in internal control over financial reporting previously disclosed in the 2025Form 10-K. During the six months of 2026, management continued to evaluate and implement remediation measures intended to address the previously identified material weaknesses. However, these material weaknesses had not been fully remediated as of June 30, 2026. The Company recognizes that the material weaknesses in its internal control over financial reporting will not be considered remediated until the remediated controls operate for a sufficient period of time and can be tested and concluded by management to be designed and operating effectively. Because the Company’s remediation efforts are ongoing, it cannot provide any assurance that these remediation efforts will be successful or that its internal control over financial reporting will be effective as a result of these efforts. The Company will continue to evaluate and work to improve its internal control over financial reporting related to the identified material weaknesses, and management may determine to take additional measures to address control deficiencies or determine to modify the remediation plan described above. The Company will report the progress and status of the above remediation efforts to the Audit Committee on a periodic basis. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting 13 PART II - Other Information Item 1. 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 to, that, if determined adversely to us, would have a material adverse effect on our business, financial condition, results of operations or cash flows. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Except as previously reported in our Current Reports on Form 8-K, we did not undertake any unregistered sales of our equity securities during the six months ended June 30, 2026. Item 3. Defaults Upon Senior Securities. None. Item 4. Mine Safety Disclosures. Not applicable. Item 5. Other Information. Not applicable. 14 Item 6. Exhibits Exhibit Number Description of Document 3.1 Certificate of Amendment and Second Amended and Restated Articles of Incorporation of the Company, dated January 7, 2026 (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Reports on Form 8-K filed with the Securities and Exchange Commission on January 12, 2026). 3.2 (1) Bylaws of the Company. 4.1 (1) Specimen Common Stock Certificate. 4.2 Description of Registrant’s Securities. (Incorporated herein by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the Securities and Exchange Commission on April 13, 2026). 4.3 Form of Underwriter’s Warrants. (Incorporated herein by reference to Exhibit 4.3 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the Securities and Exchange Commission on April 13, 2026). 31.1* Certification of The Principal Executive Officer Pursuant to Rule 13a-14(a) and Rule 15(d)-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of The Principal Financial Officer Pursuant to Rule 13a-14(a) and Rule 15(d)-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1** Certification of The Principal Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2** Certification of The Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS* Inline XBRL Instance Document. 101.SCH* Inline XBRL Taxonomy Extension Schema Document.* 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document.* 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document.* 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document.* 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document.* 104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).* * Filed herewith ** Furnished herewith (1) Filed as an exhibit to the Company’s registration statement on Form S-1, File No. 333-270726 and incorporated herein by reference. 15 SIGNATURES In accordance with the requirements of Securities Exchange Act of 1934, the registrant has caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: August 14, 2026 By: /s/ Zongyi Lian Zongyi Lian Chief Executive Officer and President (Principal Executive Officer) Date: August 14, 2026 By: /s/ Xing Tang Xing Tang Chief Financial Officer (Principal Financial and Accounting Officer) 16