What changed in this filing

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Item 1A. Risk Factors

2023-04-17 compared with 2022-04-15 · 155 added, 103 removed, 1082 unchanged (19% of the section changed)

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of operations.

the year ended December 31, 2021, our revenues were approximately $40.8 million, an increase of 30.0% from $31.3

the year ended December 31, 2022, our revenues were approximately $37.9 million, a decrease of $2.9 million, or 7.1%, compared with

$40.8 million for year ended December 31, 2021.

The current COVID-19 pandemic adversely affected many aspects of our business, including production,

supply chain, and sales and delivery.

Our manufacturing facility underwent temporary yet prolonged closure in February 2020 as part of

China’s nationwide efforts to contain the spread of the novel coronavirus.

Even though our business is currently operational, our

production capacity, delivery, warranty services including after-sale services and technical support, and operational efficiency are

still adversely affected by the COVID-19 pandemic due to insufficient workforce in production, sales, and delivery as a result of temporary

travel restrictions in China and the necessity to comply with disease control protocols in our business establishments and manufacturing

Our suppliers’ abilities to timely deliver raw materials, parts and components, or other services were also adversely

affected for similar reasons.

The global spread of COVID-19 may also affect our overseas sales.

As a result of varying levels of travel

and other restrictions for public health concerns in various regions of China, we also temporarily postponed the delivery of our products

to our customers.

While the duration of the impact of the pandemic on our business and related financial impacts cannot be reasonably

estimated at this time, our results of operations for the first half of 2020 were adversely affected with potential continuing impacts

on subsequent periods.

In addition, we expect that the COVID-19 pandemic may adversely affect our manufacturing ability, our delivery

and after-sale services in China, which may adversely affect our sales and delivery growth in 2020.

COVID-19 has had a global economic

impact on the financial markets.

The global spread of COVID-19 pandemic may result in global economic distress, and the extent to which

it may affect our results of operations will depend on future developments, which are highly uncertain and cannot be predicted.

assure you that the COVID-19 pandemic can be eliminated or contained in the near future, or at all, or a similar outbreak will not occur

If the COVID-19 pandemic and the resulting disruption to our business were to extend over a prolonged period, it could materially

and adversely affect our business, financial condition, and results of operations.

The current COVID-19 pandemic adversely affected many aspects of our business,

including production, supply chain, and sales and delivery.

Our manufacturing facility underwent temporary yet prolonged closure in

February 2020 as part of China’s nationwide efforts to contain the spread of the novel coronavirus.

Even though our business

is currently operational, our production capacity, delivery, warranty services including after-sale services and technical support,

and operational efficiency are still adversely affected by the COVID-19 pandemic due to insufficient workforce in production, sales,

and delivery as a result of temporary travel restrictions in China and the necessity to comply with disease control protocols in our

business establishments and manufacturing facility.

Our suppliers’ abilities to timely deliver raw materials, parts and

components, or other services were also adversely affected for similar reasons.

The global spread of COVID-19 may also affect our

overseas sales.

As a result of varying levels of travel and other restrictions for public health concerns in various regions of

China, we also temporarily postponed the delivery of our products to our customers.

While the duration of the impact of the pandemic

on our business and related financial impacts cannot be reasonably estimated at this time, our results of operations for the first

half of 2020 were adversely affected with potential continuing impacts on subsequent periods.

In addition, further outbreaks of the

COVID-19 pandemic may adversely affect our PRC subsidiary’s manufacturing ability, our PRC subsidiary’s delivery and

after-sale services in China.

COVID-19 has had a global economic impact on the financial markets.

The global spread of COVID-19 pandemic may result in global

economic distress, and the extent to which it may affect our results of operations will depend on future developments, which are

highly uncertain and cannot be predicted.

We cannot assure you that the COVID-19 pandemic can be eliminated or contained in the near

future, or at all, or a similar outbreak will not occur again.

If the COVID-19 pandemic and the resulting disruption to our business

were to extend over a prolonged period, it could materially and adversely affect our business, financial condition, and results of

pandemics, epidemics in China or elsewhere in the world, or fear of spread of contagious diseases, such as Ebola virus disease (EVD),

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For the year ended December 31, 2022,

and 2020, our top five customers accounted for an aggregate of approximately 79.6% and 73.31%, respectively, of our revenues.

three customers accounted for 32.2%, 22.8%, and 14.0% of the total accounts receivable balance, respectively.

For the year ended December

31, 2021, six customers accounted for 25.7%, 18.6%, 12.5%, 11.5%, 11.3% and 10.2% of the total accounts receivable balance, respectively.

ability to cost-effectively attract new customers and retain existing customers, especially our top customers, is crucial to driving

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due from customers when our products are sold and delivered to customers.

Our customers are required to make full payment within three

to five months from delivery date, although our industry typical payment term is 180 days from delivery.

As a result of the COVID-19

outbreak in January 2020, collection activities from some of our customers affected by the pandemic resulted in longer payment terms.

Our customers are required to make full payment within

three to five months from delivery date, although our industry typical payment term is 180 days from delivery.

As a result of the

COVID-19 outbreak in January 2020, collection activities from some of our customers affected by the pandemic resulted in longer

payment terms.

We impliedly granted extended payment terms until December 31, 2020 to some of our customers.

As of December 31, 2020, we collected all

overdue accounts receivable and resumed our typical payment term.

Deteriorating conditions in, bankruptcies, or financial difficulties

of a customer or within their industries generally may impair the financial condition of our customers and hinder their ability to pay

us on a timely basis or at all, and accounts receivable are written off against allowances only after exhaustive collection efforts.

The failure or delay in payment by one or more of our customers could reduce our cash flows and adversely affect our liquidity and results

of operations.

As of December 31,

2020, we collected all overdue accounts receivable and resumed our typical payment term.

For the years ended December 31, 2022 and

2021, we did not provide any extended payment terms to any of our customers.

Deteriorating conditions in, bankruptcies, or financial

difficulties of a customer or within their industries generally may impair the financial condition of our customers and hinder their

ability to pay us on a timely basis or at all, and accounts receivable are written off against allowances only after exhaustive

collection efforts.

The failure or delay in payment by one or more of our customers could reduce our cash flows and adversely affect

our liquidity and results of operations.

to maintain the quality and safety of our products could have a material and adverse effect on our reputation, financial condition and

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the Property by the local government pursuant to the Guidelines and the Compensation Agreement, we are actively searching for an appropriate

parcel in Chengdu Medicine City (Technology Park), Wenjiang District, Chengdu for the construction of our new production facilities and

office buildings.

As of the year ended December 31, 2021, our management estimates that our capital needs for this acquisition and construction

will be approximately RMB170.0 million ($26.2 million), but there is no assurance that the estimated amount is sufficient to achieve

parcel in Chengdu Medicine City (Technology Park), Wenjiang District, Chengdu for the construction of our PRC subsidiary’s new

production facilities and office buildings.

As of the date of Annual Report, our management estimates that our capital needs for this

acquisition and construction will be approximately RMB170.0 million ($26.2 million), but there is no assurance that the estimated amount

is sufficient to achieve our goals.

We may need additional financing for our business development.

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The Leaseback Agreement entitles us to lease back the Properties commencing from April 1, 2021 until December 31, 2021, at a monthly

rent of RMB300,000 (approximately $46,154), which period has been extended to October 31, 2022.

are actively searching for an appropriate parcel in Chengdu Medicine City (Technology Park), Wenjiang District, Chengdu for the construction

of our new production facilities and office buildings.

We estimate the acquisition of the new parcel and new production lines and construction

of the new facilities and office buildings on the new parcel will be completed prior to December 31, 2021, but there is no assurance

and we may need extended time to achieve our business plan.

If we fail to secure such acquisition and construction prior to December

31, 2021 and the extended period, if any, our business, financial condition and results of operations may be materially and adversely

Guangde Cai, our Chairman, beneficially owns 7.7% of our outstanding shares and his interests may differ from the interests of other

shareholders, which could cause a material decline in the value of our shares.

Guangde Cai, our Chairman, beneficially owns 7.7% of our outstanding shares, he could have significant influence on determining the

outcome of any matters submitted to the shareholders for approval, including mergers, consolidations, the election of directors and other

significant corporate actions.

Without his consent, we may be prevented from entering into transactions that could be beneficial to us

or our minority shareholders.

His interest may differ from the interests of our other shareholders.

The concentration in the ownership

of our shares may cause a material decline in the value of our shares.

cannot assure you that Mr.

Cai will act in our best interests given Mr.

Cai’s ability to control related parties, such as Chengdu

Wetouch, Meishan Wetouch and Xinjiang Wetouch Electronic Technology Co., Ltd.

rent of RMB300,000 (approximately $46,154), which period was extended to October 31, 2022.

On October 16, 2022, Sichuan Vtouch entered

an extension to the Leaseback Agreement with Sichuan Renshou to extend the period it granted Sichuan Vtouch to lease back the Properties

until October 31, 2023, at a monthly rent of RMB400,000 (approximately $59,941).

of the date of this Annual Report, we are actively searching for an appropriate parcel in Chengdu Medicine City (Technology Park), Wenjiang

District, Chengdu for the construction of our new production facilities and office buildings.

We estimate the new production lines and

construction of the new facilities and office buildings on the new parcel will be completed prior to October 31, 2023, but there is no

assurance and we may need extended time to achieve our business plan.

If we fail to secure such construction prior to October 31, 2023

and the extended period, if any, our business, financial condition and results of operations may be materially and adversely affected.

adjustment of related party transaction pricing could lead to additional taxes, and therefore substantially reduce our consolidated net

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do not have long-term contracts with our suppliers and they can reduce order quantities or terminate their sales to us at any time.

do not have long term contracts with our suppliers.

At any time, our suppliers can reduce the quantities of products they sell to us,

or cease selling products to us altogether.

Such reductions or terminations could have a material adverse impact on our revenues, profits

and financial condition.

PRC subsidiary does not have long term contracts with our suppliers.

At any time, our suppliers can reduce the quantities of products

they sell to us, or cease selling products to us altogether.

Such reductions or terminations could have a material adverse impact on

our revenues, profits and financial condition.

we fail to adopt new technologies to evolving customer needs or emerging industry standards, our business may be materially and adversely

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after the overseas listing application is submitted.

The Draft Rules, if enacted, may subject us to additional compliance requirement

in the future, and we cannot assure you that we will be able to obtain clearance of filing procedures under the Draft Rules on a timely

basis, or at all.

on existing PRC laws and regulations, as advised by our PRC legal advisor, we are not required to obtain any pre-approval from the CSRC

to conduct this Underwritten Offering, subject to interpretation of the existing PRC laws and regulations by the PRC government authorities.

As of the date of this prospectus, we have not received any inquiry, notice, warning, sanctions or any regulatory objections to this

Underwritten Offering from the CSRC.

On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of

Overseas Securities Offering and Listing by Domestic Companies (the “Trial Administrative Measures”), which took effect

on March 31, 2023.

The Trial Administrative Measures further stipulate the rules and requirements for overseas offering and listing conducted

by PRC domestic companies.

Upon the effectiveness of the Trial Administrative Measures, we could be required to go through the filing

If required, we cannot assure you that we will be able to complete such process on time or at all.

July 10, 2021, the Cyberspace Administration of China issued the Measures for Cybersecurity Review (Revision Draft for Comments), or

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for companies with China-based operations.

the effectiveness of the Trial Administrative Measures, we could be subject to the Trial Administrative Measures, as the Company has:

(i) 50% or more of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated

financial statements for the most recent accounting year is accounted for by PRC domestic companies;

and (ii) the main parts of the issuer’s

business activities are conducted in mainland China, or its main places of business are located in mainland China, or the senior managers

in charge of its business operation and management are mostly Chinese citizens or domiciled in mainland China;

and, if required, we cannot

assure you that we will be able to complete such process on time or at all.

February 17, 2023, the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic

Companies (the “Trial Administrative Measures”), which took effect on March 31, 2023.

Compared to the Draft Rules, the

Trial Administrative Measures further clarified and emphasized several aspects, including:

(i) comprehensive determination of the

“indirect overseas offering and listing by PRC domestic companies” in compliance with the principle of “substance

over form” and particularly, an issuer will be required to go through the filing procedures under the Trial Administrative

Measures if the following criteria are met at the same time:

a) 50% or more of the issuer’s operating revenue, total profit,

total assets or net assets as documented in its audited consolidated financial statements for the most recent accounting year is

accounted for by PRC domestic companies, and b) the main parts of the issuer’s business activities are conducted in mainland

China, or its main places of business are located in mainland China, or the senior managers in charge of its business operation and

management are mostly Chinese citizens or domiciled in mainland China;

(ii) exemptions from immediate filing requirements for

issuers that a) have already been listed or registered but not yet listed in foreign securities markets, including U.S.

prior to the effective date of the Trial Administrative Measures, and b) are not required to re-perform the regulatory procedures

with the relevant overseas regulatory authority or the overseas stock exchange, c) whose such overseas securities offering or

listing shall be completed before September 30, 2023.

However, such issuers shall carry out filing procedures as required if they

conduct refinancing or are involved in other circumstances that require filing with the CSRC;

(iii) a negative list of types of

issuers banned from listing overseas, such as issuers under investigation for bribery and corruption;

(iv) regulation of issuers in

specific industries;

(v) issuers’ compliance with national security measures and the personal data protection laws;

certain other matters such as:

an issuer must file with the CSRC within three business days after it submits an application for

initial public offering to competent overseas regulators;

and subsequent reports shall be filed with the CSRC on material events,

including change of control or voluntary or forced delisting of the issuer(s) who have completed overseas offerings and listings.

According to the Relevant Officials of the CSRC Answered Reporter Questions (“CSRC Answers”) and Trial Administrative

Measures, upon effectiveness, as a company applying for listing on Nasdaq, we could be subject to the filing process since we have not

obtained the clearance from SEC or Nasdaq before the effective date of the Trial Administrative Measures.

As the Trial Administrative Measures are newly issued, there remains uncertainty as to how it will be

interpreted or implemented.

Therefore, we cannot assure you that we will

be able to obtain clearance from the CSRC in a timely fashion or at all.

joint statement by the SEC and the Public Company Accounting Oversight Board (United States), or the PCAOB, proposed rule changes submitted

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jurisdiction.

enactment of the Act and any additional actions, proceedings, or new rules resulting from these efforts to increase U.S.

regulatory access

to audit information could cause investors uncertainty for affected issuers and the price of our shares could be adversely affected,

and we could face regulatory sanctions if we and our auditor are unable to meet the PCAOB inspection requirement.

lack of access to the PCAOB inspection in China prevents the PCAOB from fully evaluating audits and quality control procedures of the

auditors based in China.

As a result, investors may be deprived of the benefits of such PCAOB inspections.

The inability of the PCAOB

to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of these accounting firm’s audit

procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections.

June 22, 2021, the U.S.

Senate passed the Accelerating Holding Foreign Companies Accountable Act and on December 29, 2022 the Accelerating

Holding Foreign Companies Accountable Act was enacted, which amended the HFCA Act by requiring the SEC to prohibit an issuer’s

securities from trading on any U.S.

stock exchanges if its auditor is not subject to PCAOB inspections for to two consecutive years instead

of three, thus reducing the time before our securities may be prohibited from trading or delisted.

December 2, 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act.

The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public

accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate completely because of

a position taken by an authority in a foreign jurisdiction.

December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered

public accounting firms headquartered in China and in Hong Kong because of positions taken by PRC and Hong Kong authorities in those

jurisdictions.

The PCAOB has made such designations as mandated under the HFCA Act.

Pursuant to each annual determination by the PCAOB,

the SEC will, on an annual basis, identify issuers that have used non-inspected audit firms and thus are at risk of such suspensions

in the future.

August 26, 2022, the SEC issued a statement announcing that the PCAOB signed a Statement of Protocol (“SOP”) with the China

Securities Regulatory Commission, or CSRC, and the Ministry of Finance of the People’s Republic of China governing inspections

and investigations of audit firms based in China and Hong Kong, jointly agreeing on the need for a framework.

December 15, 2022, the PCAOB announced that it has secured complete access to inspect and investigate registered public accounting firms

headquartered in Mainland China and Hong Kong and voted to vacate the previous Determination Report to the contrary.

auditor, the independent registered public accounting firm that issues the audit report, as an auditor of companies that are traded publicly

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Our auditor is headquartered in Lakewood, Colorado

and has been inspected by the PCAOB on a regular basis with the last inspection in 2021 with inspection report available in November

However, if our application to list our common stock on Nasdaq is approved, the recent developments would add uncertainties to

the trading of our shares on U.S.

stock exchanges, and we cannot assure you whether Nasdaq or regulatory authorities would apply additional

and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures,

adequacy of personnel and training, or sufficiency of resources, geographic reach, or experience as it relates to our audit.

and has been inspected by the PCAOB on a regular basis.

regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion

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common stock currently trades on the OTCQB under the symbol “WETH” and currently there is minimal trading in our common stock.

If we are successful at uplisting our common stock on Nasdaq, we can offer no assurances that trading in our stock will improve over

Such thin trading may make it more difficult for you to liquidate your holdings in our common stock or negatively affect the price

per share that you are able to realize from such sales, and we cannot assure you that a liquid public market for our common stock will

Even assuming the uplisting of our common stock on Nasdaq, we can offer no assurances that trading in our stock will improve over time.

Such thin trading may make it more difficult for you to liquidate your holdings in our common stock or negatively affect the price per

share that you are able to realize from such sales, and we cannot assure you that a liquid public market for our common stock will develop.

An active trading market for our shares may never develop or be sustained following this offering.

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SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management

report on such company’s internal controls over financial reporting in its prospectus, which contains management’s assessment

report on such company’s internal controls over financial reporting, which contains management’s assessment

of the effectiveness of internal controls over financial reporting.

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sale or availability for sale of substantial amounts of our common stock could adversely affect their market price.

of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could adversely affect

the market price of our common stock and could materially impair our ability to raise capital through equity offerings in the future.

Shares held by our existing shareholders may be sold in the public market in the future subject to the restrictions in Rule 144 and Rule

701 under the Securities.

We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any

other shareholder or the availability of these securities for future sale will have on the market price of our common stock.

of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could adversely

affect the market price of our common stock and could materially impair our ability to raise capital through equity offerings in the

Shares held by our existing shareholders may be sold in the public market in the future subject to the restrictions in Rule

144 and Rule 701 under the Securities Act.

We cannot predict what effect, if any, market sales of securities held by our significant

shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of our

common stock.

we do not expect to pay dividends in the foreseeable future, you must rely on a price appreciation of our common stock for return on

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors