Wetouch Technology Inc. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. For the Quarterly Period Ended September 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. Commission File Number: 000-56215 WETOUCH TECHNOLOGY INC. (Exact Name of Registrant as Specified in Its Charter) Nevada 20-4080330 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) No.29, Third Main Avenue , Shigao Town, Renshou County Meishan , Sichuan , China 620500 (Address of principal executive offices) (Zip Code) (86) 028-37390666 (Registrant’s telephone number, including area code ) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered None N/A N/A Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File to be submitted posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☒ (Do not check if a smaller reporting company) Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of November 14, 2022, the registrant had 33,345,541 shares of common stock issued and outstanding. WETOUCH TECHNOLOGY INC. QUARTERLY REPORT ON FORM 10-Q September 30, 2022 TABLE OF CONTENTS PAGE PART I - FINANCIAL INFORMATION 4 Item 1. Financial Statements 4 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 5 Item 3. Quantitative and Qualitative Disclosures About Market Risk 17 Item 4. Controls and Procedures 17 PART II - OTHER INFORMATION 17 Item 1. Legal Proceedings 17 Item 1A. Risk Factors 17 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 17 Item 3. Defaults Upon Senior Securities 18 Item 4. Mine Safety Disclosure 18 Item 5. Other Information 18 Item 6. Exhibits 18 SIGNATURES 19 2 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements include, among others, those statements including the words “believes”, “anticipates”, “expects”, “intends”, “estimates”, “plans” and words of similar import. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on our current expectations and assumptions regarding our business, potential target businesses, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include changes in local, regional, national or global political, economic, business, competitive, market (supply and demand) and regulatory conditions. A description of these and other risks and uncertainties that could affect our business appears in the section captioned “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 which we filed with the Securities and Exchange Commission (“SEC”) on April 15, 2022 (the “Annual Report”). The risks and uncertainties described under “Risk Factors” are not exhaustive. Given these uncertainties, readers of this Quarterly Report on Form 10-Q (“Quarterly Report”) are cautioned not to place undue reliance on such forward-looking statements. We disclaim any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments. 3 PART I – FINANCIAL INFORMATION Item 1. Financial Statements. The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States and the rules of the SEC, and should be read in conjunction with the audited financial statements and notes thereto contained in our Annual Report, as updated in subsequent filings we have made with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. WETOUCH TECHNOLOGY INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2022 (UNAUDITED) INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets at September 30, 2022 (Unaudited) and December 31, 2021 F-1 Condensed Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2022 and 2021 (Unaudited) F-2 Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended September 30, 2022 and 2021 (Unaudited) F-3 Condensed Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2022 and 2021 (Unaudited) F-4 Notes to Condensed Consolidated Financial Statements F-5 - F-15 4 WETOUCH TECHNOLOGY INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) As of September 30, As of December 31, 2022 2021 ASSETS CURRENT ASSETS Cash $ 45,549,273 $ 46,163,704 Accounts receivable, net 14,281,922 7,991,037 Inventories 405,183 244,381 Prepaid expenses and other current assets 1,173,249 2,445,894 TOTAL CURRENT ASSETS 61,409,627 56,845,016 Property, plant and equipment, net 10,593,796 11,833,302 TOTAL ASSETS $ 72,003,423 $ 68,678,318 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable $ 1,409,703 $ 800,586 Due to related parties 105,890 34,669 Income tax payable 1,183,001 65,463 Accrued expenses and other current liabilities 783,913 310,407 Convertible promissory notes payable 1,935,010 2,030,550 TOTAL CURRENT LIABILITIES 5,417,517 3,241,675 Common stock purchase warrants liability 1,093,093 1,128,635 TOTAL LIABILITIES $ 6,510,610 $ 4,370,310 COMMITMENTS AND CONTINGENCIES (Note 13) - - STOCKHOLDERS’ EQUITY Common stock, $ 0.001 par value, 300,000,000 shares authorized, 33,345,541 and 31,811,523 issued and outstanding as of September 30, 2022 and December 31, 2021, respectively $ 33,346 $ 31,812 Additional paid in capital 2,332,087 2,333,621 Statutory reserve 5,067,243 5,067,243 Retained earnings 63,392,906 54,610,164 Accumulated other comprehensive income (loss) ( 5,332,769 ) 2,265,168 TOTAL STOCKHOLDERS’ EQUITY 65,492,813 64,308,008 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 72,003,423 $ 68,678,318 The accompanying notes are an integral part of these condensed consolidated financial statements. F- 1 WETOUCH TECHNOLOGY INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) 2022 2021 2022 2021 Three-Month Period Ended Nine-Month Period Ended September 30, September 30, 2022 2021 2022 2021 REVENUES Revenue from customers $ 11,623,018 $ 11,165,980 $ 35,370,499 $ 37,016,616 Revenues from related parties - - - 97,554 Total Revenues 11,623,018 11,165,980 35,370,499 37,114,170 COST OF REVENUES Cost of revenues customers ( 6,561,166 ) ( 6,370,278 ) ( 20,946,893 ) ( 19,179,253 ) Cost of revenues related parties - ( 97,554 ) Total Cost of revenues ( 6,561,166 ) ( 6,370,278 ) ( 20,946,893 ) ( 19,276,807 ) GROSS PROFIT 5,061,852 4,795,702 14,423,606 17,837,363 OPERATING EXPENSES Selling expenses ( 214,719 ) ( 136,164 ) ( 1,231,967 ) ( 349,561 ) General and administrative expenses ( 88,063 ) ( 298,047 ) ( 903,547 ) ( 1,618,753 ) Research and development expenses ( 20,737 ) ( 22,267 ) ( 65,307 ) ( 67,035 ) Share-based compensation - - - ( 3,149,106 ) OPERATING EXPENSES ( 323,519 ) ( 456,478 ) ( 2,200,821 ) ( 5,184,455 ) INCOME FROM OPERATIONS 4,738,333 4,339,224 12,222,785 12,652,908 Interest income, net 29,621 28,798 89,257 64,184 Interest expense ( 58,692 ) - ( 172,255 ) - Government grant - - - 692,952 Gain on asset disposal 7,625,279 Gain on changes in fair value of common stock purchase warrants liability ( 187,109 ) - 35,542 TOTAL OTHER INCOME ( 216,180 ) 28,798 ( 47,456 ) 8,382,415 INCOME BEFORE INCOME TAX EXPENSE 4,522,153 4,368,022 12,175,329 21,035,323 INCOME TAX EXPENSE ( 1,232,629 ) ( 1,092,547 ) ( 3,392,587 ) ( 4,331,499 ) NET INCOME $ 3,289,524 $ 3,275,475 $ 8,782,742 $ 16,703,824 OTHER COMPREHENSIVE INCOME (LOSS) Foreign currency translation adjustment ( 4,195,353 ) 139,206 ( 7,597,937 ) 671,786 COMPREHENSIVE INCOME $ ( 905,829 ) $ 3,414,681 $ 1,184,805 $ 17,375,610 EARNINGS PER COMMON SHARE Basic $ 0.10 $ 0.1 $ 0.27 $ 0.53 Diluted $ 0.10 $ 0.1 $ 0.27 $ 0.53 WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING Basic 32,464,182 31,811,523 31,727,262 31,811,523 Diluted 34,384,816 32,653,163 33,647,896 32,653,163 The accompanying notes are an integral part of these condensed consolidated financial statements. F- 2 WETOUCH TECHNOLODY INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited) Shares Amount capital reserve Earnings Income (loss) equity Common stock at Par value $0.001 Additional paid-in Statutory Retained Accumulated other comprehensive Total stockholders’ Shares Amount capital reserve Earnings Income (loss) equity Balance at July 1, 2022 32,039,035 $ 32,040 $ 2,333,393 $ 5,067,243 $ 60,103,382 $ ( 1,137,416 ) $ 66,398,642 Shares issued cashless for warrants 1,306,506 1,306 ( 1,306 ) - - - Net income 3,289,524 3,289,524 Foreign currency translation adjustment - - - - - ( 4,195,353 ) ( 4,195,353 ) Balance at September 30, 2022 33.345,541 $ 33,346 $ 2,332,087 $ 5,067,243 $ 63,392,906 $ ( 5,332,769 ) $ 65,492,813 Common stock at Par value $0.001 Additional paid-in Statutory Retained Accumulated other comprehensive Total stockholders’ Shares Amount capital reserve Earnings loss equity Balance at July 1, 2021 31,811,523 $ 31,812 $ 4,221,727 $ 3,062,159 $ 52,657,631 $ 1,490,488 $ 61,463,817 Net income 3,275,475 3,275,475 Foreign currency translation adjustment - - - - - 139,206 139,206 Balance at September 30, 2021 31,811,523 $ 31,812 $ 4,221,727 $ 3,062,159 $ 55,933,106 $ 1,629,694 $ 64,878,498 Common stock at Par value $0.001 Additional paid-in Statutory Retained Accumulated other comprehensive Total stockholders’ Shares Amount capital reserve Earnings income equity Balance at January 1, 2022 31,811,523 $ 31,812 $ 2,333,621 $ 5,067,243 $ 54,610,164 $ 2,265,168 $ 64,308,008 Shares issued cashless for warrants 1,534,018 1,534 ( 1,534 ) - - - Net income 8,782,742 8,782,742 Foreign currency translation adjustment - - - - - ( 7,597,937 ) ( 7,597,937 ) Balance at September 30, 2022 33.345,541 $ 33,346 $ 2,332,087 $ 5,067,243 $ 63,392,906 $ ( 5,332,769 ) $ 65,492,813 Common stock at Par value $0.001 Additional paid-in Statutory Retained Accumulated other comprehensive Total stockholders’ Shares Amount capital reserve Earnings (income) loss equity Balance at January 1, 2021 31,500,693 $ 31,501 $ 1,072,932 $ 3,062,159 $ 39,229,282 $ 957,908 $ 44,353,782 Beginning balance, value 31,500,693 $ 31,501 $ 1,072,932 $ 3,062,159 $ 39,229,282 $ 957,908 $ 44,353,782 Share-based compensation 310,830 311 3,148,795 - - 3,149,106 Net income 16,703,824 16,703,824 Foreign currency translation adjustment - - - - - 671,786 671,786 Balance at September 30, 2021 31,811,523 $ 31,812 $ 4,221,727 $ 3,062,159 $ 55,933,106 $ 1,629,694 $ 64,878,498 Ending balance, value 31,811,523 $ 31,812 $ 4,221,727 $ 3,062,159 $ 55,933,106 $ 1,629,694 $ 64,878,498 The accompanying notes are an integral part of these condensed consolidated financial statements. F- 3 WETOUCH TECHNOLODY INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) 2022 2021 For the nine-months ended September 30, 2022 2021 Cash flows from operating activities Net income $ 8,782,742 $ 16,703,824 Adjustments to reconcile net income to cash provided by operating activities Bad debts reversal - ( 76,260 ) Depreciation and amortization 12,494 377,435 Share-based compensation 3,149,106 Loss of input VAT credits - 354,991 Gain on asset disposal - ( 7,625,165 ) Amortization of discounts and issuance cost of the notes 39,774 - Gain on changes in fair value of common stock purchase warrants liability ( 35,542 ) - Changes in operating assets and liabilities: Accounts receivable ( 7,451,004 ) 1,556,300 Amounts due from related parties - 83,535 Inventories ( 194,529 ) ( 93,265 ) Prepaid expenses and other current assets 1,168,383 ( 757,832 Accounts payable 723,723 ( 124,858 ) Amounts due to related parties 7,366 ( 566,737 ) Income tax payable 1,208,810 977,435 Accrued expenses and other current liabilities 506,706 ( 216,336 ) Deferred grants - ( 726,730 ) Net cash provided by (used in) operating activities 4,768,923 13,015,443 Cash flows from investing activities Purchase of property, plant and equipment ( 191,882 ) Proceeds from assets disposal - 17,804,769 Net cash provided by investing activities - 17,612,887 Cash flows from financing activities Net cash used in financing activities - - Effect of changes of foreign exchange rates on cash ( 5,383,354 ) ( 524,833 ) Net increase (decrease) in cash ( 614,431 ) 30,103,497 Cash, beginning of period 46,163,704 23,963,861 Cash, end of period $ 45,549,273 $ 54,067,358 Supplemental disclosures of cash flow information Interest paid $ - $ - Income tax paid $ 2,181,273 $ 3,339,767 The accompanying notes are an integral part of these condensed consolidated financial statements. F- 4 WETOUCH TECHNOLOGY INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 1 — BUSINESS DESCRIPTION Business Wetouch Technology Inc. (“Wetouch”, or the “Company”), formerly known as Gulf West Investment Properties, Inc., was originally incorporated in August 1992, under the laws of the state of Nevada. On October 9, 2020, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) with Wetouch Holding Group Limited (“BVI Wetouch”) and all the shareholders of BVI Wetouch (each, a “BVI Shareholder” and collectively the “BVI Shareholders”), to acquire all the issued and outstanding capital stock of BVI Wetouch in exchange for the issuance to the BVI Shareholders an aggregate of 28,000,000 shares of our common stock (the “Reverse Merger”). In the Reverse Merger, each ordinary share of BVI Wetouch was exchanged for 2,800 shares of common stock of Wetouch. Immediately after the closing of the Reverse Merger on October 9, 2020, we had a total of 31,396,394 issued and outstanding shares of common stock. As a result of the Reverse Merger, BVI Wetouch is now our wholly-owned subsidiary. Wetouch Holding Group Limited (“BVI Wetouch”), is a holding company whose only asset, held through a subsidiary, is 100% of the registered capital of Sichuan Wetouch Technology Co. Ltd. (“Sichuan Wetouch”), a limited liability company organized under the laws of the People’s Republic of China (“China” or “PRC”). Sichuan Wetouch is primarily engaged in the business of research development, manufacture, and distribution of touchscreen displays to customers both in PRC and overseas. The touchscreen products, which are manufactured by the Company, are primarily for use in computer components. The Reverse Merger was accounted for as a recapitalization effected by a share exchange, wherein BVI Wetouch is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of BVI Wetouch have been brought forward at their book value and no goodwill has been recognized. The number of shares, par value amount, and additional paid-in capital in the prior years are retrospectively adjusted according. Corporate History of BVI Wetouch Wetouch Holding Group Limited (“BVI Wetouch”) was incorporated under the laws of British Virgin Islands on August 14, 2020. It became the holding company of Hong Kong Wetouch Electronics Technology Limited (“Hong Kong Wetouch”) on September 11, 2020. Hong Kong Wetouch Technology Limited (“HK Wetouch”), was incorporated as a holding company under the laws of Hong Kong Special Administrative Region (“SAR”) on December 3, 2020. On March 2, 2021, HK Wetouch acquired all shares of Hong Kong Vtouch. Due to the fact that Hong Kong Wetouch and HK Wetouch are both under the same sole stockholder, the acquisition is accounted for under common control. In June, 2021, Hong Kong Wetouch completed its dissolution process pursuant to the minutes of its special shareholder meeting. Sichuan Wetouch Technology Co. Ltd. (“Sichuan Wetouch”) was formed on May 6, 2011 in the People’s Republic of China (“PRC”) and became Wholly Foreign-Owned Enterprise in PRC on February 23, 2017. On July 19, 2016, Sichuan Wetouch was 100 % held by HK Wetouch. On December 30, 2020, Sichuan Vtouch Technology Co., Ltd. (“Sichuan Vtouch”) was incorporated in Chengdu, Sichuan, under the laws of the People’s Republic of China. In March 2021, pursuant to local PRC government guidelines on local environmental issues and the national overall plan, Sichuan Wetouch was under the government directed relocation order, and started its dissolution process which is estimated to be completed by the end of 2022. Sichuan Vtouch took over the operating business of Sichuan Wetouch. As a result of the above restructuring, HK Wetouch became the sole shareholder of Sichuan Vtouch. F- 5 Note 2 — BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted as permitted by rules and regulations of the United States Securities and Exchange Commission (“SEC”). The condensed consolidated balance sheet as of December 31, 2021 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, 2021, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended. In the opinion of the management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the financial position as of September 30, 2022, the results of operations and cash flows for the three-month and nine-month periods ended September 30, 2022 and 2021 have been made. However, the results of operations included in such financial statements may not necessary be indicative of annual results. Use of Estimates The preparation of condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the related disclosure of contingent assets and liabilities. Actual results could differ from those estimates. On an ongoing basis, management evaluates the Company’s estimates, including those related to the bad debt allowance, fair values of financial instruments, intangible assets and property and equipment, income taxes, and contingent liabilities, among others. The Company bases its estimates on assumptions, both historical and forward looking, that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Significant Accounting Policies For a detailed discussion about Wetouch’s significant accounting policies, refer to Note 2 — “Summary of Significant Accounting Policies,” in Wetouch’s consolidated financial statements included in Company’s 2021 audited consolidated financial statements. During the three-month and nine-month periods ended September 30, 2022, there were no significant changes made to Wetouch significant accounting policies. F- 6 NOTE-3- ACCOUNTS RECEIVABLE Accounts receivable consists of the following: SCHEDULE OF ACCOUNTS RECEIVABLE September 30, 2022 December 31 2021 Accounts receivable $ 14,281,922 $ 7,991,037 Allowance for doubtful accounts - - Accounts receivable, net $ 14,281,922 $ 7,991,037 The Company’s accounts receivable primarily includes balance due from customers when the Company’s products are sold and delivered to customers. NOTE-4 — PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consists of the following: SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS September 30, 2022 December 31, 2021 Advance to suppliers $ 297,260 $ 244,758 VAT input credits - 307,575 Issue cost related to convertible promissory notes 138,687 159,000 Deferred marketing expenses - 1,000,000 Prepayment for land use right/ (i) (i) 551,800 615,955 Security deposit (ii) (ii) 55,247 61,670 Others receivable (iii) (iii) 130,255 56,936 Prepaid expenses and other current assets $ 1,173,249 $ 2,445,894 (i) On July 23, 2021, Sichuan Vtouch entered into a contract with Chengdu Wenjiang District Planning and Natural Resources Bureau for purchasing a land use right of 131,010 square feet with a consideration of RMB 3,925,233 (equivalent to $ 551,800 ) for the new facility. The Company made a full prepayment by November 18, 2021. Upon a certificate of land use right issued by the local government, which is estimated to be obtained by the fourth quarter of 2022, the Company will reclassify this prepayment to intangible assets accordingly. (ii) On July 28, 2021, Sichuan Vtouch made a security deposit of RMB 393,000 (equivalent to $ 55,247 ) to Chengdu Cross-Strait Science and Technology Industry Development Park Management Committee to obtain a construction license for new facility. This deposit will be refunded upon the issuance of the construction license by end of 2022. (iii) Other receivables are mainly employee advances, and prepaid expenses. NOTE 5— PROPERTY, PLANT AND EQUIPMENT, NET SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT September 30, 2022 December 31, 2021 Buildings $ 12,107 $ 13,514 Vehicles 41,162 45,948 Construction in progress 10,552,131 11,778,957 Subtotal 10,605,400 11,838,419 Less: accumulated depreciation ( 11,604 ) ( 5,117 )) Property, plant and equipment, net $ 10,593,796 $ 11,833,302 Depreciation expense was $ 2,340 and $ 2,477 for the three-month period ended September 30, 2022 and 2021, respectively, and $ 12,494 and $ 263,873 for the nine-month period ended September 30, 2022 and 2021, respectively Pursuant to local PRC government guidelines on local environment issues and the national overall plan, Sichuan Wetouch is under the government directed relocation order to relocate no later than December 31, 2021 and received compensation accordingly. On March 18, 2021, pursuant to the agreement with the local government and an appraisal report issued by a mutual agreed appraiser, Sichuan Wetouch received a compensation of RMB 115.2 million ($ 16.2 million) (“Compensation Funds”) for the withdrawal of the right to use of state-owned land and the demolition of all buildings, facilities, equipment and all other appurtenances on the land. During the year ended December 31, 2021, the Company recorded a gain of $ 7,611,646 for the asset disposal. On March 16, 2021, in order to minimize interruption of our business, Sichuan Vtouch entered into a leasing agreement with Sichuan Renshou Shigao Tianfu Investment Co., Ltd., a limited company owned by the local government, to lease the property, and all buildings, facilities and equipment thereon (“Demised Properties) of Sichuan Wetouch, commencing from April 1, 2021 until December 31, 2021 at a monthly rent of RMB 300,000 ($ 42,173 ) , and renewed on December 31, 2022 at a monthly rent of RMB 400,000 ($56,231) from January 1, 2022 till October 31, 2022 for the use of the Demised Properties . F- 7 NOTE 6 – RELATED PARTY TRANSACTIONS The related party transactions are summarized as follows: SCHEDULE OF REVENUES FROM RELATED PARTY TRANSACTIONS 2022 2021 2022 2021 Three-Month Period Ended September 30, Nine-Month Period Ended September 30, 2022 2021 2022 2021 US$ US$ US$ US$ Revenues resulting from related parties: Sales to Chengdu Wetouch Technology Co., Ltd (“Chengdu Wetouch”) $ - $ - $ - $ 10,451 Sales to Meishan Vtouch Electronics Technology Co., Ltd. (Meishan Wetouch) - - - 87,103 Total Revenue $ - $ - $ - $ 97,554 During the six-month period ended June 30, 2021, the Company sold capacitive touchscreens to Chengdu Wetouch and Meishan Wetouch from time to time. There were no written agreements between the Company and Meishan Wetouch. Mr. Guangde Cai, Chairman and director of the Company and our indirect majority shareholder, owns 94 % and 95 % of Chengdu Wetouch and Meishan Wetouch, respectively. Amounts due to related parties are as follows: SCHEDULE OF RELATED PARTY TRANSACTIONS Relationship September 30, 2022 December 31, 2021 Note Mr. Zongyi Lian President and CEO of the Company $ 1,614 $ 1,802 Payable to employee Mr. Guangde Cai Chairman of the Company 104,276 32,867 Payable to employee Total $ 105,890 $ 34,669 F- 8 NOTE 7 — INCOME TAXES Wetouch Wetouch Technology Inc. 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, subsidiaries of Wetouch, is not subject to tax on its income or capital gains. In addition, no British Virgin Islands withholding tax will be imposed upon the payment of dividends by the Company to its shareholders. Hong Kong HK Wetouch is incorporated in Hong Kong and is subject to profit taxes in Hong Kong at a progressive rate of 16.5 %. PRC Sichuan Wetouch and Sichuan Vtouch files income tax returns in the PRC. Effective from January 1, 2008, the PRC statutory income tax rate is 25% according to the Corporate Income Tax (“CIT”) Law which was passed by the National People’s Congress on March 16, 2007. Under PRC CIT Law, domestic enterprises and Foreign Investment Enterprises (“FIEs”) are usually subject to a unified 25% enterprise income tax rate while preferential tax rates, tax holidays and even tax exemption may be granted on a case-by-case basis by local government as preferential tax treatment to High and New Technology Enterprises (“HNTEs”). Under this preferential tax treatment, HNTEs are entitled to an income tax rate of 15 %, subject to a requirement that they re-apply for their HNTE status every three years. Pursuant to an approval from the local tax authority in October 2017, Sichuan Wetouch became a qualified enterprise located in the western region of the PRC, entitled it to a preferential income tax rate of 15 % from October 11, 2017 to October 11, 2020. On October 21, 2020, Sichuan Wetouch was granted on a case-by-case basis by Sichuan Provincial government as preferential tax treatment High and New Technology Enterprises (“HNTEs”), entitled to a reduced income tax rate of 15% beginning October 21, 2020 until October 20, 2023 . Sichuan Vtouch is entitled to 25 % of income tax rate. The effective income tax rates for the nine-month periods ended September 30, 2022 and 2021 were 27.9 % and 20.6 %, respectively. The effective income tax rate for the nine-month period ended September 30, 2022 and 2021 differs from the PRC statutory income tax rate of 25 % primarily due to non deductible expenses of $ 35,542 resulting from gain of changes in fair value of Common Stock Purchase Warrants for the nine-month periods ended September 30, 2022, and Sichuan Wetouch’s preferential income tax rate for the same period of the last year, respectively. The estimated effective income tax rate for the year ended December 31, 2022 would be similar to actual effective tax rate of the nine-month periods ended September 30, 2022. F- 9 NOTE 8— ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consist of the following: SCHEDULE OF ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES September 30, 2022 December 31, 2021 Advance from customers $ 199,491 $ 59,111 Accrued payroll and employee benefits 86,686 99,342 Accrued interest expenses 153,275 20,795 Other tax payables (i) (i) 253 - Others (ii) (ii) 344,208 131,159 Accrued expenses and other current liabilities $ 783,913 $ 310,407 (i) Other tax payables are mainly value added tax payable. (ii) Others mainly represent accrued employee reimbursement payable and other accrued miscellaneous operating expenses. NOTE 9 – CONVERTIBLE PROMISSORY NOTES PAYABLE a) Convertible promissory notes In October, November, and December 2021, the Company, issued seven (7) convertible promissory notes of US$ 2,250,000 aggregate principal amount, due in one year (the ‘Notes’) with issuance price discounted 90.0 %. The Notes bear interest at a rate of 8.0 % per annum, payable in one year and will mature on October 27, November 5, November 16, November 29 and December 2 of 2022. Net proceeds after debt issuance costs and debt discount were approximately US$ 1,793,000 . Debt issuance costs in the amount of US$ 162,000 are recorded as deferred charges and included in the other current assets on the consolidated balance sheet. The debt discount and debt issuance costs are amortized into interest expense using the effective interest method over the terms of the Notes. The details of convertible notes are as follows: Unless the Notes are converted, the principal amounts of the Notes, and accrued interest at the rate of 8 % per annum, are payable on the one-year anniversary of the issuance of the Notes (the “Maturity Date”). If the Company fails to satisfy its loan obligation by the Maturity Date, the default interest rate will be 16 %. The Lenders have the right to convert any or all of the principal and accrued interest on the Notes into shares of common stock of the Company on the earlier of (i) 180 calendar days after the issuance date of the Notes or (ii) the closing of a listing for trading of the common stock of the Company on a national securities exchange offering resulting in gross proceeds to the Company of $ 15,000,000 or more (an “ Uplist Offering ”). If the Company closes an Uplist Offering on or before the 180 th calendar date after the issuance date of the Notes, the conversion price shall be 70 % of the per share offering price in the Uplist Offering; otherwise, the conversion price is $ 0.75 per share. Subject to customary exceptions, if the Company issues shares or any securities convertible into shares of common stock at an effective price per share lower than the conversion price of the Notes, the conversion rate of the Notes shall be reduced to such lower price. Until the Notes are either paid or converted in their entirety, the Company agreed with the Lenders not to sell any securities convertible into shares of common stock of the Company (i) at a conversion price that is based on the trading price of the stock or (ii) with a conversion price that is subject to being reset at a future date or upon an event directly or indirectly related to the business of the Company or the market for the common stock. The Company also agreed to not issue securities at a future determined price. F- 10 The Lenders have the right to require the Company to repay the Notes if the Company receives cash proceeds, including proceeds from customers and the issuance of equity (including in the Uplist Offering). If the Company prepays the Notes prior to the Maturity Date, the Company shall pay a 10 % prepayment penalty. On April 27, 2022, the Company entered into an amendment to the Note (“Amendment to Promissory Note”) issued to a Lender and, on May 3, 2022, an amendment to the Registration Rights Agreement by and between the Company and the Lender dated as of October 27, 2021 (“Amendment to Registration Rights Agreement”), extending the number of days the Company shall have in order to cause the registration statement covering the resale of the Common Stock to become effective. For each 30-day extension, the Company agreed to repay the Lender $25,000 of the principal amount of the Note, without prepayment penalty. The Company has repaid $ 25,000 to the Lender on May 3, 2022. On August 9 and September 20, 2022, the Company repaid $ 50,000 to six (6) Lenders and $ 65,000 to five (5) Lenders, respectively. For the nine-month period ended September 30, 2022, the Company recognized interest expenses of the Notes in the amount of US$ 172,255 . The following is the summary of outstanding promissory notes as of September 30, 2022: SUMMARY OF OUTSTANDING PROMISSORY NOTES Interest rate Principal Amount Net Proceeds Warrants Shares Maturity Date Convertible Note- Talos Victory (Note 9 (b)) 8 % $ 250,000 $ 197,000 200,000 October 27, 2022 Convertible Note-Mast Hill (Note 9 (b)) 8 % 750,000 601,000 600,000 November 5, 2022 Convertible Note-First Fire (Note 9 (b)) 8 % 250,000 197,000 200,000 November 16, 2022 Convertible Note-LGH Note 9 (b)) 8 % 250,000 207,000 200,000 November 24, 2022 Convertible Note -Fourth Man (Note 9 (b)) 8 % 250,000 197,000 200,000 November 29, 2022 Convertible Note-Jeffery Street Note 9 (b)) 8 % 250,000 197,000 200,000 December 2, 2022 Convertible Note -Blue Lake Note 9 (b)) 8 % 250,000 197,000 200,000 December 2, 2022 Total 2,250,000 1,793,000 1,800,000 Debt Discounts ( 225,000 ) Amortization of discounts for the year ended December 31, 2021 5,550 Convertible promissory notes payable as of December 31, 2021 2,030,550 Repayment of principals for the nine-month period ended September 30, 2022 ( 115,000 ) Amortization of discounts for the nine-month period ended September 30, 202 19,461 Convertible promissory notes payable as of September 30,2022 $ 1,935,010 *The Company prepaid $ 10,000 legal deposit for each note until the repayment of the notes. F- 11 b) Warrants Accounting for Warrants In connection with the issuance of a convertible promissory notes (see Note 11 (a) in October, November and December, 2021, the Company also issued seven (7) three-year warrants (the “ Warrants”) to purchase an aggregate of 1,800,000 shares of the Company’s common stock (the “ Warrant Shares”). The Warrants issued to the Lenders granted each of the Lenders the right to purchase up to 200,000 shares of common stock of the Company at an exercise price of $ 1.25 per share. However, if the Company closes an Uplist Offering on or before the 180 th calendar date after the issuance date of the Warrants, then the exercise price shall be 125 % of the offering price of a share in the Uplist Offering. If the adjusted exercise price as a result of the Uplist Offering is less than $ 1.25 per share, then the number of shares for which the Warrants are exercisable shall be increased such that the total exercise price, after taking into account the decrease in the per share exercise price, shall be equal to the total exercise price prior to such adjustment. The Lenders have the right to exercise the Warrants on a cashless basis if the highest traded price of a share of common stock of the Company during the 150 trading days prior to exercise of the Warrants exceeds the exercise price, unless there is an effective registration statement of the Company which covers the resale of the Lenders. If the Company issues shares or any securities convertible into shares at an effective price per share lower than the exercise price of the Warrants, the exercise price of the Warrants shall be reduced to such lower price, subject to customary exceptions. The Lenders may not convert the Notes or exercise the Warrants if such conversion or exercise will result in each of the Lenders, together with any affiliates, beneficially owning in excess of 4.9 % of the Company’s outstanding common stock immediately after giving effect to such exercise unless the Lenders notify the Company at least 61 days prior to such exercise. On April 14 and April 27, 2022, two Lenders exercised cashless for 115,540 and 111,972 warrant shares, respectively. From August 24 to September 27, 2022, seven Lenders exercised cashless for 1,306,506 warrant shares. The fair values of these warrants as of September 30, 2022 were calculated using the Black-Scholes option-pricing model with the following assumptions: SCHEDULE OF FAIR VALUE OF WARRANTS September 30, 2022 Volatility (%) Expected dividends yield (%) Weighted average expected life (year) Risk-free interest rate (%) (per annum) Common stock purchase warrants liability as of December 31, 2021(US$) Changes of fair value of common stock purchase warrants liability (+ (gains)/- losses(US$) Common stock purchase warrants liability as of September 30, 2022 (US$) Convertible Note- Talos Victory (Note 9 (a)) 256.7 % $ 0.0 % $ 2.1 4.22 % 124,756 ( 3,895 ) 120,861 Convertible Note-Mast Hill (Note 9 (a)) 256.7 % 0.0 % 2.1 4.22 % 375,156 ( 11,749 ) 363,407 Convertible Note-First Fire (Note 9 (a)) 256.7 % 0.0 % 2.1 4.22 % 125,408 ( 3,946 ) 121,462 Convertible Note-LGH Note 9 (a)) 256.7 % 0.0 % 2.1 4.22 % 125,664 ( 3,971 ) 121,693 Convertible Note -Fourth Man (Note 9 (ab)) 256.7 % 0.0 % 2.2 4.22 % 125,821 ( 3,987 ) 121,834 Convertible Note-Jeffery Street Note 9 (a))3,054 256.7 % 0.0 % 2.2 4.22 % 125,915 ( 3,997 ) 121,918 Convertible Note -Blue Lake Note 9 (a)) 256.7 % 0.0 % 2.2 4.22 % 125,915 ( 3,997 ) 121,918 Total Total 1,128,635 ( 35,542 ) 1,093,093 (c) Registration Rights Agreements Pursuant to the terms of the Registration Rights Agreement dated as of each contract date of each convertible promissory note, executed between the Company and each Lender, the Company agreed to file a registration statement with the Securities and Exchange Commission to register the shares of common stock underlying the Notes and the shares issuable upon exercise of the Warrants within sixty days from the date of each Registration Rights Agreement. The Company also granted the Lenders piggyback registration rights on such shares pursuant to the Purchase Agreements. F- 12 NOTE 10— SHAREHOLDERS’ EQUITY Ordinary Shares The Company’s authorized number of ordinary shares was 300,000,000 shares with par value of $ 0.001 . On December 22, 2020, the Company issued 103,610 shares of common stock to The Crone Law Group, P.C. or its designees for legal services (see Note 11). On January 1, 2021, the Company issued an aggregate of 310,830 shares to a third party service provider for consulting services that had been rendered. On April 14 and April 27, 2022, the Company issued cashless warrant shares of 115,540 and 111,972 to two Lenders, respectively. (see Note 9 (b)). From August 24 and September 27, 2022, the Company issued cashless warrants shares of 1,306,506 to seven Lenders, respectively. (see Note 9 (b)). As of September 30, 2022, the Company had 33,345,541 issued and outstanding shares. NOTE 11- SHARE BASED COMPENSATION The Company applied ASC 718 and related interpretations in accounting for measuring the cost of share-based compensation over the period during which the consultants are required to provide services in exchange for the issued shares. The fair value of above award was estimated at the grant date using Black-Scholes model for pricing the share compensation expenses. On December 22, 2020, the Board of Directors of the Company authorized the issuance of an aggregate of 103,610 shares and 210,360 warrants to The Crone Law Group, P.C. or its designees for legal services that had been rendered. The five-year warrants are exercisable at one cent per share. The shares of 103,610 were vested on December 22, 2020 and no warrants were exercised. The fair value of above award was estimated at the grant date using Black-Scholes model for pricing the share compensation expenses. The fair value of the Black-Scholes model includes the following assumptions: expected life of 2.5 years, expected dividend rate of 0 %, volatility of 43.5 % and an average interest rate of 0.11 %. On January 1, 2021, the Board of Directors of the Company authorized the issuance of an aggregate of 310,830 shares and 631,080 warrants to a third party service provider for consulting services that had been rendered. The five-year warrants are exercisable at one cent per share. The 310,830 shares of common stock and 631,080 warrants were vested on January 1, 2021 and no warrants were exercised. The fair value of above award was estimated at the grant date using Black-Scholes model for pricing the share compensation expenses. The fair value of the Black-Scholes model includes the following assumptions: expected life of 1.5 years, expected dividend rate of 0 %, volatility of 215.4 % and an average interest rate of 2.96 %. As of September 30, 2022, the Company had 841,440 warrants outstanding related to above mentioned services with i) weighted average exercise price of $ 0.01 ; ii) weighted average remaining contractual life of 1.00 years; and iii) aggregate intrinsic value of $ 0.5 million. For the three-month periods and nine-month periods ended September 30, 2022 and 2021, the Company recognized relevant share-based compensation expense of nil and $ 1,041,281 for the vested shares, and nil and $ 2,107,825 for the warrants, respectively F- 13 NOTE 12- RISKS AND UNCERTAINTIES Credit Risk – The carrying amount of accounts receivable included in the balance sheet represents the Company’s exposure to credit risk in relation to its financial assets. No other financial asset carries a significant exposure to credit risk. The Company performs ongoing credit evaluations of each customer’s financial condition. The Company maintains allowances for doubtful accounts and such allowances in the aggregate have not exceeded management’s estimates. The Company has its cash in bank deposits primarily at state owned banks located in the PRC. Historically, deposits in PRC banks have been secured due to the state policy of protecting depositors’ interests. The PRC promulgated a Bankruptcy Law in August 2006, effective June 1, 2007, which contains provisions for the implementation of measures for the bankruptcy of PRC banks. The bank deposits with financial institutions in the PRC are insured by the government authority for up to 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 through direct customers in the PRC and to some extent, the overseas customers in European countries and East Asia such as South Korea and Taiwan. For the three-month periods ended September 30, 2022 and 2021, five customers accounted for 21.9 %, 16.3 %, 15.0 %, 13.4 % and 12.95 , and five customers accounted for 21.3 %, 15.5 %, 15.4 %, 14.0 % and 11.4 %, respectively, of the Company’s revenue. For the nine-month periods ended September 30, 2022 and 2021, six customers accounted for 20.5 %, 15.9 %, 15.6 %, 14.5 %, 12.3 % and 10.2 %, and five customers accounted for 18.9 %, 17.5 %, 14.6 %, 14.1 % and 11.4 %, respectively, of the Company’s revenue. And the Company’s top ten customers aggregately accounted for 99.1 % and 98.1 % of the total revenue for the three-month periods ended September 30, 2022 and 2021, and 99.2 % and 96.7 % for the nine-month periods ended September 30, 2022 and 2021. As of September 30, 2022, five customers accounted for 26.2 %, 24.3 %, 14.5 % and 11.5 % of the total accounts receivable balance, respectively. The Company purchases its raw materials through various suppliers. Raw material purchases from these suppliers which individually exceeded 10% of the Company’s total raw material purchases, accounted for approximately 47.7 % (four suppliers) and 46.3 % (four suppliers) for the three-month periods, respectively, 47.2 % (four suppliers) and 25.1 % (two suppliers) for the nine-month periods ended September 30, 2022 and 2021, respectively. F- 14 NOTE 13 — COMMITMENTS AND CONTINGENCIES Legal Proceedings From time to time, the Company is a party to various legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. As of September 30, 2022, there were no legal proceedings. Capital expenditure commitment On December 20, 2021, the Company entered into a contract with Shenzhen Municipal Haoyutuo Decoration & Cleaning Engineering Company Limited to purchase a facility decoration contract of RMB 20.0 million (equivalent to US$ 3.1 million ). As of September 30, 2022, the Company has prepaid RMB 15.0 million (equivalent to US$ 2.1 million) and recorded as construction in progress (see Note 5) and had a remaining balance of RMB 5.0 million (equivalent to US$ 0.7 million) to be paid by the end of 2022. NOTE 14 — REVENUES The Company’s geographical revenue information is set forth below: SCHEDULE OF GEOGRAPHICAL REVENUE INFORMATION 2022 2021 2022 2021 Three-Month Period Ended September 30, Nine-Month Period Ended September 30, 2022 2021 2022 2021 US$ US$ US$ US$ Sales in PRC $ 8,159,260 $ 7,696,992 $ 24,421,569 $ 24,652,526 Sales in Overseas —Republic of China (ROC, or Taiwan) 1,851,599 1,785,128 5,708,133 6,663,678 -South Korea 1,578,002 1,618,284 5,144,829 5,519,484 -Others 34,156 65,576 95,968 278,482 Sub-total 3,463,757 3,468,988 10,948,930 12,461,644 Total Revenue $ 11,623,018 $ 11,165,980 $ 35,370,499 $ 37,114,170 F- 15 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Forward-Looking Statements The following management’s discussion and analysis should be read in conjunction with our historical financial statements and the related notes thereto. The management’s discussion and analysis contain forward-looking statements, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those under “Risk Factors” in our Annual Report filed with the SEC on April 15, 2022, as updated in subsequent filings we have made with the SEC that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report. Basis of Presentation The following discussion highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on our unaudited financial statements contained in this Quarterly Report, which we have prepared in accordance with United States generally accepted accounting principles. You should read the discussion and analysis together with such financial statements and the related notes thereto. Overview We were originally incorporated under the laws of the state of Nevada in August 1992. On October 9, 2020, we entered into a share exchange agreement (the “Share Exchange Agreement”) with BVI Wetouch and all the shareholders of BVI Wetouch, to acquire all the issued and outstanding capital stock of BVI Wetouch in exchange for the issuance to such shareholders an aggregate of 28 million shares of our common stock (the “Reverse Merger”). The Reverse Merger closed on October 9, 2020. Immediately after the closing of the Reverse Merger, we had a total of 31,396,394 issued and outstanding shares of common stock. As a result of the Reverse Merger, BVI Wetouch is now our wholly-owned subsidiary. We are engaged in the research, development, manufacturing, sales and servicing of medium to large sized projected capacitive touchscreens, which constitutes our source of revenues through BVI Wetouch, which owns Hong Kong Wetouch, HK Wetouch, Sichuan Wetouch and Sichuan Vtouch. We are specialized in large-format touchscreens, which are developed and designed for a wide variety of markets and used in by the financial terminals, automotive, point of sale (POS), gaming, lottery, medical, human machine interface (HMI), and other specialized industries. Our product portfolio comprises medium to large sized projected capacitive touchscreens ranging from 7.0 inch to 42 inch screens. In terms of the structures of touch panels, we offer (i) Glass-Glass (“GG”), primarily used in GPS/car entertainment panels in mid-size and luxury cars, industrial HMI, financial and banking terminals, POS and lottery machines; (ii) Glass-Film-Film (“GFF”), mostly used in high-end GPS and entertainment panels, industrial HMI, financial and banking terminals, lottery and gaming industry; (iii) Plastic-Glass (“PG”), typically adopted by touchscreens in GPS/entertainment panels motor vehicle GPS, smart home, robots and charging stations; and (iv) Glass-Film (“GF”), mostly used in industrial HMI. The following discussion and analysis pertain financial condition and results of operations of our subsidiaries Hong Kong Wetouch, HK Wetouch, Sichuan Wetouch and Sichuan Vtouch for the quarter ended September 30, 2022. 5 Effects of COVID-19 The COVID-19 pandemic and resulting global disruptions have affected our businesses, as well as those of our customers and suppliers. To serve our customers while also providing for the safety of our employees and service providers, we have modified numerous aspects of our logistics, transportation, supply chain, purchasing, and after-sale processes. The Company has taken proactive measures to promote products to new customers and entering more regions during the three-month period ended September 30, 2022. The extent of the impact of COVID-19 on the Company’s results of operations and financial condition will depend on the virus’ future developments, including the duration and spread of the outbreak and the impact on the Company’s customers, which are still uncertain and cannot be reasonably estimated at this point of time. Highlights for the three-month period ended September 30, 2022 include: ● Revenues were $11.6 million, an increase of 3.6% from $11.2 million in the third quarter of 2021 ● Gross profit was $5.1 million, an increase of 6.3% from $4.8 million in the third quarter of 2021 ● Gross profit margin was 43.6%, compared to 42.9% in the third quarter of 2021 ● Net income was $3.3 million, compared to $3.3 million in the third quarter of 2021 ● Total volume shipped was 572,241 units, an increase of 7.7% from 531,210 units in the third quarter of 2021 Results of Operations The following table sets forth, for the periods indicated, statements of income data: (in US Dollar millions, except percentage) Three-Month Period Ended September 30, Change Nine-Month Period Ended September 30, Change 2022 2021 % 2022 2021 % Revenues $ 11.6 $ 11.2 3.6 % $ 35.4 $ 37.1 (4.6 )% Cost of revenues (6.6 ) (6.4 ) 3.1 % (20.9 ) (19.3 ) 8.3 % Gross profit 5.1 4.8 6.3 % 14.4 17.8 (19.1 )% Total operating expenses (0.3 ) (0.5 ) (0.4 )% (2.2 ) (5.2 ) (57.7 )% Operating income 4.7 4.3 9.3 % 12.2 12.6 (3.2 )% Gain on asset disposal - - 0.0 % - 7.6 0.0 % Gain (loss) on changes of fair values of Common Stock Purchase Warrant (0.2 ) - N/A 0.0 - N/A Income before income taxes 4.5 4.4 2.3 % 12.2 21.0 (41.9 )% Income tax expense (1.2 ) (1.1 ) 9.1 % (3.4 ) (4.3 ) (20.9 )% Net income $ 3.3 $ 3.3 0.0 % $ 8.8 $ 16.7 (47.3 )% 6 Results of Operations - Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021 Revenues We generated revenue of $11.6 million for the three months ended September 30, 2022, an increase of $0.4 million, or 3.6%, compared to $11.2 million in the same period of last year. This was due to an increase of 7.7% in sales volume, an increase of 2.2% in the average RMB selling price of our products, offset by 5.9% negative impact from exchange rate due to depreciation of RMB against US dollars, compared with those of the same period of last year. For the Three-Month Period Ended September 30, 2022 2021 Change Change Amount % Amount % Amount % (in US Dollar millions except percentage) Revenue from sales to customers in PRC $ 8.1 69.8 % $ 7.7 68.8 % $ 0.4 5.2 % Revenue from sales to customers overseas 3.5 30.2 % 3.5 31.2 % 0.0 0.0 % Total Revenues $ 11.6 100 % $ 11.2 100 % $ 0.4 3.6 % For the Three-Month Period Ended September 30, 2022 2021 Change Change Unit % Unit % Unit % (in UNIT, except percentage) Units sold to customers in PRC 390,542 68.2 % 356,600 67.1 % 33,942 9.5 % Units sold to customers overseas 181,699 31.8 % 174,610 32.1 % 7,089 4.1 % Total Units Sold 572,241 100 % 531,210 100 % 41,031 7.7 % (i) Domestic market For the three months ended September 30, 2022, revenue from domestic market increased by $0.4 million or 5.2% as a combined result of: 1) an increase of 9.5% in sales volume, an increase of 2.1% in the average RMB selling price of our products, offset by 5.9% negative impact from exchange rate due to depreciation of RMB against US dollars, compared with those of the same period of last year. As for the RMB selling price, the increase of 2.1% was mainly due to the increased sales of new models of higher-end products such as touch screens used in gaming machine with higher selling price in the domestic market during the three-month period ended September 30, 2022. The weakening in macroeconomic conditions since the outbreak of COVID-19 pandemic continued to exacerbate the touch screen business environment. Since April 2022, the Chinese government has imposed strict zero tolerance virus policies and the Company’s business has been negatively impacted and has continued to generate lower revenues. Due to our proactive efforts to market new models such as POS and medical touchscreens coupled with penetration into new regions and new customer acquisitions, our sales increased by 14.8% in Eastern China, 12.3% in Southwest China, and 0.5% in Southern China during the three-month period ended September 30, 2022. (ii) Overseas market For the three-month period ended September 30, 2022, revenues from the overseas market remained stable at $3.5 million as compared to the same period of 2021, with an increase of 4.1% in sales volume and an increase of 1.9% in average selling price, compared with those of the same period of last year. 7 The following table summarizes the breakdown of revenues by categories in US dollars : Revenues For the Three –Month Period Ended September 30, 2022 2021 Change Change Amount % Amount % Amount Margin% (in US Dollars, except percentage) Product categories by end applications Automotive Touchscreens $ 2,841,960 24.5 % $ 2,819,828 25.3 % $ 22,131 0.8 % Industrial Control Computer Touchscreens 2,609,467 22.5 % 2,237,229 20.0 % 372,238 16.6 % POS Touchscreens 1,989,250 17.1 % 1,576,455 17.3 % 412,795 26.2 % Gaming Touchscreens 1,578,004 13.5 % 1,935,984 14.1 % (357,980 ) (18.5 )% Medical Touchscreens 1,579,007 13.6 % 1,556,448 13.9 % 22,560 1.4 % Multi-Functional Printer Touchscreens 1,024,278 8.8 % 1,023,167 9.2 % 1,111 0.1 % Others* 1,052 0.0 % 16,869 0.2 % (15,817 ) (93.8 )% Total Revenues $ 11,623,018 100.0 % $ 11,165,980 100.0 % $ 457,038 3.6 % *Others include applications in self-service kiosks, ticket vending machine and financial terminals. The Company continued to shift production mix from traditional lower-end products to high-end touchscreens used in control computer industries, POS touchscreens, automotive and medical touchscreens, primarily due to (i) greater growth potential of computer screen models in China, and (ii) the stronger demand and better quality demand from consumers’ recognition of higher-end touch screens made with better raw materials. Gross Profit and Gross Profit Margin Three-Month Period Ended September 30, Change (in millions, except percentage) 2022 2021 Amount % Gross Profit $ 5.1 $ 4.8 $ 0.3 6.3 % Gross Profit Margin 43.6 % 42.9 % 0.7 % Gross profit was $5.1 million in the third quarter ended September 30, 2022, compared to $4.8 million in the same period of 2021. Our gross profit margin increased to 43.6% for the third quarter ended September 30, 2022 as compared to 42.9% for the same period of 2021, primarily due to the increase of 7.7% in sales volume and of 2.2% in the average RMB selling price of our products, due to our product shift to higher gross profit margin products such as POS touchscreens, industrial control computer touchscreens and medical touchscreens, partially offset by the increased raw materials and higher cost of goods sold. Selling Expenses Three-Month Period Ended September 30, Change (in millions,, except percentage) 2022 2021 Amount % Selling Expenses $ 0.2 $ 0.1 $ 0.1 100.0 % as a percentage of revenues 1.7 % 0.9 % 0.8 % Selling expenses were $0.2 million for the three-month period ended September 30, 2022 compared to $0.1 million in the same period in 2021, primarily due to the increase of marketing expenses as the Company took promotional efforts to market new models such as POS touchscreens and obtain new customers and penetrate into new regions in order to reduce the negative impact of COVID 19. 8 General and Administrative Expenses Three-Month Period Ended September 30, Change (in millions, except percentage) 2022 2021 Amount % General and Administrative Expenses $ 0.1 $ 0.3 $ (0.2 ) (66.7 )% as a percentage of revenues 0.8 % 2.7 % (1.9 )% General and administrative (G&A) expenses were $0.1 million for the quarter ended September 30, 2022, compared to $0.3 million in the same period in 2021, representing a decrease of 66.7%, or $0.2 million. The decrease was primarily due to the decrease of $0.4 million loss of input VAT credits during the third quarter of 2021, due to Sichuan Wetouch ceasing operation and relocation to comply with local PRC government guidelines on local environment issues and the national overall plan (see Note 5 to our Condensed Consolidated Financial Statements (unaudited)), and offset by an increase of $0.2 million of professional fees during the third quarter ended September 30, 2022. Research and Development Expenses Three-Month Period Ended September 30, Change (in US dollars, except percentage) 2022 2021 Amount % Research and Development Expenses $ 20,737 $ 22,267 $ (1,530 ) (6.8 )% as a percentage of revenues 0.0 % 0.0 % 0.0 % Research and development (R&D) expenses were $20,737 for the quarter ended September 30, 2022 compared to $22,267 in the same period in 2021, representing an increase of $735 of material consumption. Operating Income Total operating income was $4.7 million for the third quarter ended September 30, 2022 as compared to $4.3 million for the same period of last year, due to higher gross profit and lower operating expenses. Loss on changes in fair value of Common Stock Purchase Warrants Three-Month Period Ended September 30, Change (in US$ millions, except percentage) 2022 2021 Amount % Loss on changes in fair value of Common Stock Purchase Warrants $ (0.2 ) $ 0.0 $ (0.2 ) N/A as a percentage of revenues 1.7 % 0.0 % 1.7 % Loss on changes in fair value of common stock purchase warrants was $0.2 million for the three-month period ended September 30, 2022, as compared to nil in the same period of 2021 (See Note 9 (b)). 9 Income Taxes Three-Month Period Ended September 30, Change (in millions, except percentage) 2022 2021 Amount % Income before Income Taxes $ 4.5 $ 4.4 $ 0.1 2.3 % Income Tax (Expense) (1.2 ) (1.1 ) (0.1 ) 9.1 % Effective income tax rate 27.3 % 25.0 % 2.3 % The effective income tax rates for the three-month periods ended September 30, 2022 and 2021 were 27.3% and 25.0%, respectively. The increase of the effective income tax rate was partially due to the increase of taxable income for the third quarter of 2022, as compared to that of the same period of the prior year. Net Income Our net income remained at $3.3 million in the third quarter of 2022 and 2021. Results of Operations - Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021 Revenues We generated revenue of $35.4 million for the nine-month period ended September 30, 2022, a decrease of $1.7 million, or 4.6%, compared to $37.1 million in the same period of last year. This was primarily due to a decrease of 2.5% in sales volume, and a decrease of 0.6% in the average RMB selling price of our products and 2.1% negative impact from exchange rate due to depreciation of RMB against US dollars, compared with those of the same period of last year. For the Nine –Month Period Ended September 30, 2022 2021 Change Change Amount % Amount % Amount % (in US Dollar millions except percentage) Revenue from sales to customers in PRC $ 24.5 69.2 % $ 24.6 66.3 % $ (0.1 ) (0.4 )% Revenue from sales to customers overseas 10.9 30.8 % 12.5 33.7 % (1.6 ) (12.8 )% Total Revenues $ 35.4 100 % $ 37.1 100 % $ (1.7 ) (4.6 )% 10 For the Nine-Month Period Ended September 30, 2022 2021 Change Change Unit % Unit % Unit % (in UNIT, except percentage) Units sold to customers in PRC 1,129,764 66.5 % 1,109,985 66.1 % 19,779 1.8 % Units sold to customers overseas 569,144 33.5 % 632,569 33.9 % (63,425 ) (10.0 )% Total Units Sold 1,698,908 100 % 1,742,554 100 % (43,646 ) (2.5 )% (i) Domestic market For the nine-month period ended September 30, 2022, revenue from the domestic market decreased by $0.1 million or 0.4% as a combined result of: (i) an increase of 1.8% in sales volume, partially offset by (ii) a decrease of 0.6% in the average RMB selling price of our products, and 2.1% negative impact from exchange rate due to depreciation of RMB against US dollars, compared with those of the same period of last year. As for the RMB selling price, the decrease of 0.6% was mainly due to the Company’s marketing strategy to offer price discount to penetrate into new markets during the nine-month period ended September 30, 2022. The weakening in macroeconomic conditions since the outbreak of COVID-19 pandemic continued to exacerbate the touch screen business environment. Since April 2022, the Chinese government has imposed strict zero tolerance virus policies and the Company’s business has been negatively impacted and has continued to generate lower revenues during the nine months ended September 30, 2022. Although the Company has taken proactive efforts to market new models such as POS touchscreens and obtain new customers and penetrate into new regions with a sales increase of 5.3% in Eastern China and 3.7% in Southwest China, the Company suffered a decrease of 19.4% in Southern China due to the government lockdown in this region during the nine-month period ended September 30, 2022. (ii) Overseas market For the nine-month period ended September 30, 2022, revenues from the overseas market were $10.9 million as compared to $12.5 million of the same period of 2021, decreasing by $1.6 million or 12.8%, mainly due to a decrease of 10.0% in sales volume and a decrease of 2.3% in average selling price of our products, compared with those of the same period of last year. 11 The following table summarizes the breakdown of revenues by categories in US dollars : Revenues For the Nine-Month Period Ended September 30, 2022 2021 Change Change Amount % Amount % Amount Margin% (in US Dollars, except percentage) Product categories by end applications Automotive Touchscreens $ 8,759,635 24.8 % $ 10,574,802 28.5 % $ (1,815,167 ) (17.2 )% Industrial Control Computer Touchscreens 7,251,728 20.5 % 7,060,893 19.0 % 190,835 2.7 % POS Touchscreens 5,963,500 16.9 % 5,580,657 14.8 % 382,843 7.0 % Gaming Touchscreens 5,144,703 14.5 % 5,469,102 15.0 % (324,399 ) (5.9 )% Medical Touchscreens 4,627,854 13.1 % 4,960,325 13.4 % (332,471 ) (6.7 )% Multi-Functional Printer Touchscreens 3,618,124 10.2 % 3,356,615 9.0 % 261,509 7.8 % Others* 4,955 0.0 % 111,776 0.3 % (106,821 ) (95.6 )% Total Revenues $ 35,370,499 100.0 % $ 37,114,170 100.0 % $ (1,743,671 ) (4.6 )% *Others include applications in self-service kiosks, ticket vending machine and financial terminals. The Company continued to shift production mix from traditional lower-end products such as touchscreens used in automotive to high-end products such as touchscreens used in POS touchscreens and multi-functional printer touchscreens, primarily due to (i) greater growth potential of computer screen models in China, and (ii) the stronger demand and better quality demand from consumers’ recognition of higher-end touchscreens made with better raw materials. Gross Profit and Gross Profit Margin Nine-Month Period Ended September 30, Change (in millions, except percentage) 2022 2021 Amount % Gross Profit $ 14.4 $ 17.8 $ (3.4 ) (19.1 )% Gross Profit Margin 40.8 % 48.2 % (7.4 )% Gross profit was $14.4 million during the nine-month period ended September 30, 2022, compared to $17.8 million in the same period of 2021. Our gross profit margin decreased to 40.8% for the nine-month period ended September 30, 2022 as compared to 48.2% for the same period of 2021, primarily due to the decrease of sales by 4.6%, and the increase of 11.8% in cost of materials such as the chip cost, and 14.8% of overhead cost such as facility rent and electricity, partially offset by the decrease of labor cost by 19.1% due to the reduced production volume for the nine-month period ended September 30, 2022. Selling Expenses Nine-Month Period Ended September 30, Change (in millions, except percentage) 2022 2021 Amount % Selling Expenses $ 1.2 $ 0.3 $ 0.9 300.0 % as a percentage of revenues 3.4 % 0.8 % 2.6 % Selling expenses were $1.2 million for the nine-month period ended September 30, 2022 compared to $0.3 million in the same period in 2021, primarily due to the increase of marketing expenses of $1.0 million as the Company took promotional efforts to market new models such as POS touchscreens and obtain new customers and penetrate into new regions in order to reduce the negative impact of COVID 19. 12 General and Administrative Expenses Nine-Month Period Ended September 30, Change (in millions, except percentage) 2022 2021 Amount % General and Administrative Expenses $ 0.9 $ 1.6 $ (0.7 ) (43.7 )% as a percentage of revenues 2.5 % 4.3 % (1.8 )% General and administrative (G&A) expenses were $0.9 million for the nine-month period ended September 30, 2022, compared to $1.6 million in the same period in 2021, representing a decrease of 43.7%, or $0.7 million. The decrease was primarily due to i) $0.4 million loss of VAT input credits due to Sichuan Wetouch ceasing operation and relocation to comply with local PRC government guidelines on local environmental issues and the national overall plan, ii) $0.1 million accelerated amortization expense due to Sichuan Wetouch ceasing operation and relocation to comply with local PRC government guidelines on local environmental issues and the national overall plan during the nine-month period ended September 30, 2021 (See Note 5), partially offset by iii) the increase of $0.3 million in miscellaneous expenses. Research and Development Expenses Nine-Month Period Ended September 30, Change (in US dollars, except percentage) 2022 2021 Amount % Research and Development Expenses $ 65,307 $ 67,035 $ (1,728 ) (2.6 )% as a percentage of revenues 0.0 % 0.0 % 0.0 % Research and development (R&D) expenses were $65,307 for the nine-month period ended September 30, 2022 compared to $67,035 in the same period in 2021. Share-based Compensation Nine-Month Period Ended September 30, Change (in millions, except percentage) 2022 2021 Amount % Share-based compensation $ 0.0 $ 3.1 $ (3.1 ) (0.0 )% as a percentage of revenues 0.0 % 8.4 % (8.4 )% Share-based compensation were nil and $3.1 million for the nine-month period ended September 30, 2022 and 2021, respectively. On January 1, 2021, the Board of Directors of the Company authorized the issuance of an aggregate of 310,830 shares and 631,080 warrants to a consultant for advisory services that had been rendered. The Company recognized relevant share-based compensation expense of $1,041,281 for the vested shares and $2,107,825 for the warrants during the nine-month period ended September 30, 2021. Operating Income Total operating income was $12.2 million for the nine-month period ended September 30, 2022 as compared to $12.6 million of the same period of last year due to lower gross profit offset by the lower G&A expenses and share-based compensation expenses. 13 Gain on Asset Disposal Nine-Month Period Ended September 30, Change (in millions, except percentage) 2022 2021 Amount % Gain on asset disposal $ 0.0 $ 7.6 $ (7.6 ) (0.0 )% as a percentage of revenues 0.0 % 20.5 % (20.5 )% Gain on asset disposal was nil for the nine-month period ended September 30, 2022 compared to $7.6 million in the same period in 2021. Pursuant to local PRC government guidelines on local environmental issues and the national overall plan, Sichuan Wetouch was under the government directed relocation order to relocate no later than December 31, 2021 and received compensation accordingly. On March 18, 2021, pursuant to the agreement with the local government and an appraisal report issued by a mutual agreed appraiser, Sichuan Wetouch received a compensation of RMB115.2 million ($17.9 million) (“Compensation Funds”) for the withdrawal of the right to use of state-owned land and the demolition of all buildings, facilities, equipment and all other appurtenances on the land. During the nine-month period ended September 30, 2021, the Company recorded a gain of $7,625,279 for the asset disposal. Gain on changes in fair value of Common Stock Purchase Warrants Nine-Month Period Ended September 30, Change (in US dollars, except percentage) 2022 2021 Amount % Gain on changes in fair value of Common Stock Purchase Warrants $ 35,542 $ 0.0 $ 35,542 N/A as a percentage of revenues 0.0 % 0.0 % 0.8 % Gain on changes in fair value of common stock purchase warrants was $35,542 for the nine-month period ended September 30, 2022, as compared to nil in the same period of 2021 (See Note 9 (b)). 14 Income Taxes Nine-Month Period Ended September 30, Change (in millions, except percentage) 2022 2021 Amount % Income before Income Taxes $ 12.2 $ 21.0 $ (8.8 ) (41.9 )% Income Tax (Expense) (3.4 ) (4.3 ) (0.9 ) (20.9 )% Effective income tax rate 27.9 % 20.6 % 7.3 % The effective income tax rates for the nine-month periods ended September 30, 2022 and 2021 were 27.9% and 20.6%, respectively. The effective income tax rate increased during the nine-month period ended September 30, 2022, primarily due to Sichuan Wetouch’s preferential income tax rate for the same period of the last year. Our PRC subsidiary Sichuan Vtouch had $45.5 million of cash and cash equivalents of September 30, 2022, which are planned to be indefinitely reinvested in PRC. The distributions from our PRC subsidiary are subject to the U.S. federal income tax at 21%, less any applicable foreign tax credits. Due to our policy of indefinitely reinvesting our earnings in our PRC business, we have not provided for deferred income tax liabilities related to PRC withholding income tax on undistributed earnings of our PRC subsidiaries. Net Income As a result of the above factors, we had a net income of $8.8 million in the nine-month period ended September 30, 2022 compared to a net income of $16.7 million in the same period of 2021. Liquidity and Capital Resources Historically, our primary uses of cash have been to finance working capital needs. We expect that we will be able to meet our needs to fund operations, capital expenditures and other commitments in the next 12 months primarily with our cash and cash equivalents, operating cash flows and bank borrowings. We may, however, require additional cash resources due to changes in business conditions or other future developments. If these sources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or equity-linked securities could result in additional dilution to stockholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financial covenants that would restrict operations. Financing may not be available in amounts or on terms acceptable to us, or at all. As of September 30, 2022, we had current assets of $61.4 million, consisting of $45.5 million in cash, $14.3 million in accounts receivable, $0.4 million in inventories, and $1.2 million in prepaid expenses other current assets. Our current liabilities as of September 30, 2022, were $5.4 million, which is comprised of $1.2 million in income tax payable, $1.4 million in accounts payable, $0.8million in accrued expenses and other current liabilities and $1.9 million convertible promissory notes payable. 15 The following is a summary of our cash flows provided by (used in) operating, investing, and financing activities for the nine- month period ended September 30, 2022 and 2021: Nine-Month Period Ended September 30, (in US Dollar millions) 2022 2021 Net cash provided by operating activities $ 4.8 $ 13.0 Net cash provided by investing activities - 17.6 Net cash used in financing activities - - Effect of foreign currency exchange rate changes on cash and cash equivalents (5.4 ) (0.5 ) Net increase (decrease) in cash and cash equivalents (0.6 ) 30.1 Cash and cash equivalents at the beginning of period 46.1 24.0 Cash and cash equivalents at the end of period $ 45.5 $ 54.1 Operating Activities Net cash provided by operating activities was $4.8 million for the nine months ended September 30, 2022, as compared to $13.0 million provided by operating activities for the same period of the last year, primarily due to (i) the decrease of $7.9 million net income for the nine months ended September 30, 2022 as compared to the same period of 2021, (ii) the decrease of $3.1 million of share-based compensation during the nine-month period ended September 30, 2021, (iii) the increase of $9.0 million account receivable due to slower collection from the impact of the COVID-19 pandemic and Sichuan Wetouch settling customer receivables for the nine-month period ended September 30, 2021, iv) the decrease of 0.7 million of deferred income due to Sichuan Wetouch’s write-off of the government grant in the operating ceasing process for the nine-month period ended September 30, 2021, offset by (v) the increase of $1.9 million prepaid expenses, (vi) the decrease of $7.6 million gain on asset disposal for the nine-month period ended September 30, 2021, and (vii) the increase of $0.8 million accounts payable due to the longer payment period. Investing Activities There were $17.8 million in proceeds from asset disposal for Sichuan Wetouch, and $0.2 million in purchase of property, plant and equipment for the nine month period ended September 30, 2021. See Note 5 in the interim financial information. Financing Activities There were nil financing activities for the nine-month period ended September 30, 2022 and 2021. As of September 30, 2022, our cash and cash equivalents were $45.5 million, as compared to $46.2 million at December 31, 2021. Days Sales Outstanding (“DSO”) was at 85 days for the nine-month period ended September 30, 2022 compared to 88 days for the year ended December 31, 2021. The following table provides an analysis of the aging of accounts receivable as of September 30, 2022 and December 31, 2021: September 30, 2022 December 31, 2021 -Current $ 5,290,212 $ 1,403,187 -1-3 months past due 7,589,897 2,827,048 -4-6 months past due 1,398,333 3,742,732 7-12 months past due 3,480 18,070 -greater than 1 year past due - - Total accounts receivable $ 14,281,922 $ 7,991,037 The majority of the Company’s revenues and expenses were denominated primarily in Renminbi (“RMB”), the currency of the People’s Republic of China. There is no assurance that exchange rates between the RMB and the U.S. Dollar will remain stable. Inflation has not had a material impact on the Company’s business. Based on past performance and current expectations, we believe our cash and cash equivalents provided by operating activities and financing activities will satisfy our working capital needs, capital expenditures and other liquidity requirements associated with our operations for at least the next 12 months. Off Balance Sheet Arrangements We have no off balance sheet arrangements. 16 Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not applicable because we are a smaller reporting company. Item 4. Controls and Procedures. Disclosure Controls and Procedures We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation and subject to the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of September 30, 2022 due to the material weaknesses in internal control over financial reporting described below. Because of our limited operations, we have a limited number of employees which prohibits a segregation of duties. In addition, we lack a formal audit committee with a financial expert. As we grow and expand our operations we will engage additional employees and experts as needed. However, there can be no assurance that our operations will expand. Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. PART II – OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. We know of no material, active, pending or threatened proceeding against us or our subsidiaries, nor are we, or any subsidiary, involved as a plaintiff or defendant in any material proceeding or pending litigation. ITEM 1A. RISK FACTORS. Not required for smaller reporting companies. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. None. 17 ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS. Exhibit No. Description 31.1 Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certifications of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certifications of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WETOUCH TECHNOLOGY INC. Date: November 14, 2022 By: /s/ Zongyi Lian Name: Zongyi Lian Title: President and Chief Executive Officer (Principal Executive Officer) Date: November 14, 2022 By: /s/ Yuhua Huang Name: Yuhua Huang Title: Chief Financial Officer (Principal Financial and Accounting Officer) 19