Wetouch Technology Inc. 10-K

ITEM 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures 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 defined by Exchange Act Rules 13a-15(e) or 15d-15(e)) as of December 31, 2022, pursuant to Exchange Act Rule 13a-15(b). We concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that our disclosure controls are not effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed under the supervision of our principal executive and principal financial officers and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of its consolidated financial statements for external reporting purposes in accordance with GAAP. Material Weaknesses in Internal Control over Financial Reporting Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022 based on the framework established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2022 was not effective. A material weakness, as defined in the standards established by the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. The ineffectiveness of the Company’s internal control over financial reporting was due to the following material weaknesses: ● Inadequate segregation of duties consistent with control objectives; ● Lack of formal policies and procedures; ● Lack of risk assessment procedures on internal controls to detect financial reporting risks on a timely manner. Management believes that the material weaknesses that were identified did not have an effect on our financial results. However, management believes that these weaknesses, if not properly remediated, could result in a material misstatement in our financial statements in future periods. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. 65 Management’s Plan to Remediate the Material Weakness Management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions planned include: ● Identify gaps in our skills base and the expertise of our staff required to meet the financial reporting requirements of a public company; and ● Continue to develop policies and procedures on internal control over financial reporting and monitor the effectiveness of operations on existing controls and procedures. We have engaged with a third-party financial consulting firm during the year to assist with the preparation of SEC reporting. We are committed to maintaining a strong internal control environment, and believe that these remediation efforts will deliver improvements in our control environment. Our management will continue to monitor and evaluate the relevance of our risk-based approach and the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. This Annual Report does not include an attestation report of our registered public accounting firm regarding our internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that exempt smaller reporting companies from this requirement. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting that occurred during our fourth quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. OTHER INFORMATION. We have adopted an insider trading policy and a clawback policy. Our insider trading policy clawback policy are available on our website and are filed as exhibits to this Annual Report. Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable. PART III ITEM 10. Directors, Executive Officers and Corporate Governance Listed below are the names of the directors and executive officers of the Company, their ages as of the date of this Annual Report, and their positions with the Company. Name Age Position(s) Held Fei Bai 47 Chairman, Director Zongyi Lian 58 President and Chief Executive Officer Yuhua Huang 48 Chief Financial Officer Jiaying Cai 27 Secretary, Director Jin Chen 57 Director Xiaojin Tang 48 Director Congjin Wang 32 Director 66 Fei Bai - Chairman and Director Mr. Bai has been our company’s Chairman and Director since August 31, 2022. Additionally, he serves as an independent director on the board of directors of Xinxu Copper Industry Technology Limited (Nasdaq: XXC), a metal material manufacturer, since March 2024. From July 2019 to December 2021, Mr. Bai served as the general manager of the Nanjing Branch of Qianhai Century Fund Management Co., Ltd., a private fund management company, where he was primarily responsible for private fundraising and sales funding of trust products. Mr. Bai also served as the general manager of the business division of Heyi Asset, an asset management company, from September 2015 to June 2019, where he was responsible for marketing. He received his bachelor’s degree in law from Nanjing Normal University in June 2006 and holds a securities/fund qualification issued by the Securities Association of China since August 2015. Zongyi Lian - Chief Executive Officer and President Mr. Lian was appointed Chief Executive Officer and President on October 12, 2020. He has served as Chief Executive Officer of Sichuan Wetouch since November 21, 2017. In 2006, he co-founded Chongqing Damai Touchscreen Computer Co., Ltd (“Damai”) (later renamed Chengdu Wetouch) and served as Vice Technique General Manager, where he was responsible for overseeing the product technology department. In 2011, he co-founded Sichuan Wetouch and served as Vice Technique General Manager. Mr. Lian holds a Master’s degree in Automatic Control from National Chiao Tung University. Yuhua Huang - Chief Financial Officer Mr. Huang was appointed our Chief Financial Officer on October 12, 2020. He concurrently serves as Chief Financial Officer of Sichuan Wetouch, a position he has held since March 2018. From 2010 to 2013, he worked as an accountant at Liugong Group, where he was responsible for overseeing the finance department. From 2014 to 2017, he served as Financial Manager at Shanghai Oriental Pearl Group Co., Ltd., an import and export company, where he was responsible for the financing activities. Mr. Huang holds a Bachelor’s degree in accounting from Sichuan Institute of Industrial Technology. He was qualified as a CPA in China in 2004 and as an auditor in 2014, respectively. Jiaying Cai - Secretary and Director Ms. Cai has been our Company’s Secretary and Director since June 2020. She concurrently serves as the Chief Executive Officer and director of BVI Wetouch, our wholly-owned subsidiary, since its inception on August 14, 2020. From February 2017 to May 2019, Ms. Cai worked at Chengdu Wetouch Technology Co., Ltd, an affiliate of Guangde Cai, which specializes in the research, development, manufacturing and sales of capacitive touchscreens widely used in HMI and military industries, where she served as staff within the financial department, human resources department and purchasing department. In April 2020, she joined Chengdu Haobot Technology Co., Ltd, a software and hardware development company, where she has been serving as its Legal Representative and General Manager until present. Ms. Cai holds a Bachelor’s degree in Music from The Sichuan Conservatory of Music and an EMBA degree from Sichuan University. Jing Chen - Director Ms. Chen was appointed to our company’s Board of Directors, effective November 12, 2021. Additionally, she serves as an independent director and the chairman of the audit committee on the board of directors of Erayak Power Solution Group Inc. (Nasdaq: RAYA) since November 2021, of Jin Medical International Limited. (Nasdaq: ZJYL) from August 2021 to December 2023, of Bon Natural Lift Limited. (Nasdaq: BON) since October 2023, and of Xinxu Copper Industry Technology Limited. (Nasdaq: XXC) since March 2024.She has served as the Group Vice President of Future Fintech Group Inc. (Nasdaq: FTFT), a FinTech company, where she was responsible for the company’s internal control and merger and acquisition. From May 2019 to November 2020, Ms. Chen served as the CFO of Future Fintech Group Inc. She served as the CFO of AnZhiXinCheng (Beijing) Technology Co., Ltd. from August 2018 to May 2019. Ms. Chen is an Independent Director of Hello iPayNow (Beijing) Company Ltd. since April 2019. From August 2017 to July 2018, she served as CFO of Beijing Logis Technology Development Co., Ltd., a company listed on The National Equities Exchange and Quotations Co., Ltd. of China, which is a Chinese over-the-counter stock trading system. From June 2016 to July 2017, Ms. Chen served as Group Chief Financial Officer of Beijing AnWuYou Food Co., Ltd. Ms. Chen served as Chief Financial Officer of Beijing DKI Investment Management Co., Ltd. from August 2012 to May 2016. Ms. Chen received a Doctorate of Business Administration from Victoria University, Neuchatel, Switzerland and an MBA degree from City University of Seattle in Washington, U.S. Ms. Chen holds Fellow Membership of CPA Australia (FCPA) and is a Member of the Chartered Institute of Management Accountants (CIMA). She is also a Senior Member of the International Financial Management (SIFM) accredited by the Ministry of Human Resources and Social Security of the PRC. 67 Xiaojin Tang - Director Mr. Tang was elected to our Company’s Board of Directors, effective August 31, 2022. Additionally, he serves as an independent director on the board of directors of Xinxu Copper Industry Technology Limited (Nasdaq: XXC), a metal material manufacturer, since March 2024. He has served as an attorney at Gaopeng & Partners since 2019. From April 2017 to December 2017, he served as the deputy director of Nanjing Immigration Inspection. Mr. Tang received his bachelor’s degree in corporate law from Hohai University. He received his master’s degree in sociology from Jiangsu Provincial Party School. Congjin Wang - Director Mr. Wang was elected to our Company’s Board of Directors, effective February 17, 2023. Mr. Wang has served as an attorney at Gaopeng (Nanjing) Law Firm since June 2022. From June 2021 through May 2022, Mr. Wang worked for Guohao Law Firm. He worked at Beijing Gaopeng (Nanjing) Law Firm from December 2014 through May 2021. He is currently a member of Nanjing Securities and Futures Fund Professional Committee, a public interest lawyer of China Securities Small and Medium Investors Service Center, a member of Jiangsu foreign lawyers Talent Pool, and a member of the Nanjing Foreign Lawyers Talent Pool. Mr. Wang received a bachelor’s degree from Anqing Normal University in July 2014, and he is currently studying at University of Chinese Academy of Social Sciences for his master’s degree. Family Relationships There are no other family relationships between any of our directors or executive officers. There are no arrangements or understandings between our directors and directors and any other person pursuant to which they were appointed as an officer and director of the Company. Board Committees We have established three committees under the board of directors: an audit committee, a compensation committee and a nominating and corporate governance committee. We have adopted a charter for each of the three committees. Each committee’s members and functions are described below. Audit Committee. Our audit committee consists of Jing Chen, Xiaojin Tang and Congjin Wang. Ms. Chen is the chairperson of the audit committee. We have determined that Ms. Chen, Mr. Tang and Mr. Wang each satisfy the “independence” requirements of Nasdaq Listing Rule 5605(a)(2) and meets the independence standards under Rule 10A-3 under the Exchange Act. We have determined that Ms. Chen qualifies as an “audit committee financial expert.” We have adopted an audit committee charter, which details the principal responsibilities of the audit committee, including: ● To assist board oversight of (i) the integrity of our financial statements, (ii) our compliance with legal and regulatory requirements, (iii) our independent auditor’s qualifications and independence, and (iv) the performance of our internal audit function and independent auditors; the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by us; ● To (i) approve all audit engagement fees and terms and (ii) pre-approve all audit and permitted non-audit and tax services that may be provided by the Company’s independent auditors or other registered public accounting firms. ● At least annually, to evaluate the qualifications, performance and independence of the Company’s independent auditors, including an evaluation of the lead audit partner; and to assure the regular rotation of the lead audit partner at the Company’s independent auditors and consider regular rotation of the accounting firm serving as the Company’s independent auditors. ● To review and discuss with the Company’s independent auditors and management the Company’s quarterly financial statements and the disclosure under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to be included in the Company’s Quarterly Report on Form 10-Q before such Form 10-Q is filed; and to review and discuss the Form 10-Q for filing with the SEC. ● To review, approve and oversee any transaction between the Company and any related person (as defined in Item 404 of Regulation S-K promulgated by the SEC) and any other potential conflict of interest situations on an ongoing basis, in accordance with Company policies and procedures, and to develop policies and procedures for the Committee’s approval of related party transactions. ● To review with management and the Company’s independent auditors: (i) any major issues regarding accounting principles and financial statement presentation, including any significant changes in the Company’s selection or application of accounting principles; (ii) any significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements, including the effects of alternative GAAP methods; and (iii) the effect of regulatory and accounting initiatives and off-balance sheet structures on the Company’s financial statements. ● To assist and advise the Board and the Compensation Committee thereof in enforcing the Company’s executive compensation clawback policy and related laws, rules and regulations. The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee is responsible for, among other things: (a) representing and assisting the Board in its oversight responsibilities regarding the Company’s accounting and financial reporting processes, the audits of the Company’s financial statements, including the integrity of the financial statements, and the independent auditors’ qualifications and independence; (b) overseeing the preparation of the report required by SEC rules for inclusion in the Company’s annual proxy statement; (c) retaining and terminating the Company’s independent auditors; (d) approving in advance all audit and permissible non-audit services to be performed by the independent auditors; and (e) approving related person transactions. 68 Compensation Committee. Our compensation committee consists of Jing Chen, Xiaojin Tang and Congjin Wang. Mr. Tang is the chairperson of our compensation committee. We have determined that Ms. Chen, Mr. Tang and Mr. Wang each are “independent,” as such term is defined for directors and compensation committee members in the listing standards of the NASDAQ Stock Market LLC. Additionally, each qualify as “non-employee directors” for purposes of Rule 16b-3 under the Securities Exchange Act of 1934 and as “outside directors” for purposes of Section 162(m) of the Internal Revenue Code. We have adopted a compensation committee charter, which details the principal responsibilities of the compensation committee, including: ● To review and approve the Company’s compensation programs and arrangements applicable to its executive officers, including without limitation salary, incentive compensation, equity compensation and perquisite programs, and amounts to be awarded or paid to individual officers under those programs and arrangements, or make recommendations to the Board regarding approval of the same. ● To determine the objectives of the Company’s executive officer compensation programs, identify what the programs are designed to reward, and modify (or recommend that the Board modify) the programs as necessary and consistent with such objectives and intended rewards. ● To ensure appropriate corporate performance measures and goals regarding executive officer compensation are set and determine the extent to which they are achieved and any related compensation earned. ● To at least annually review and approve the Company’s goals and objectives relevant to CEO compensation, evaluate the CEO’s performance in light of such goals and objectives, and determine and approve the CEO’s compensation level based on this evaluation. ● To review and approve any new equity compensation plan or any material change to an existing plan where stockholder approval has not been obtained. ● To assist management in complying with our proxy statement and annual report disclosure requirements; ● To implement and enforce the Company’s executive compensation clawback policy and related laws, rules and regulations, including determining what constitutes “incentive-based compensation” and, if a clawback is triggered due to a financial statement restatement, the amount of any clawback. The charter also provides that the compensation committee may select, retain and terminate independent legal counsel and other experts or consultants, as it deems appropriate, without seeking approval of the Board or management, including the authority to approve the fees payable to such counsel, experts or consultants and any other term of retention. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC. Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of Jing Chen, Xiaojin Tang and Congjin Wang. Mr. Wang is the chairperson of our nominating and corporate governance committee. We have determined that each of Ms. Chen, Mr. Tang and Mr. Wang qualify as “independent” as that term is defined by Nasdaq Listing Rule 5605(a)(2). We have adopted a nominating and corporate governance committee charter, which details the principal responsibilities of the nominating and corporate governance committee, including: ● The identification, evaluation and recommendation of qualified candidates to become Board members. ● The oversight of the implementation of and monitoring compliance with the Company’s Code of Ethics (other than with respect to complaints regarding accounting or auditing issues). ● Coordinating and overseeing Board, committee, and director evaluations. ● Periodic review of the Company’s governance documents as appropriate. The charter also provides that the nominating and corporate governance committee may, in its sole discretion, retain or obtain the advice of, and terminate, any search firm to be used to identify director candidates, and will be directly responsible for approving the search firm’s fees and other retention terms. Code of Ethics We have adopted a written code of ethics and business conduct that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the code of ethics and business conduct will be provided to any person, without charge, upon written request sent to Wetouch Technology Inc., No. 29, Third Main Avenue, Shigao Town, Renshou County, Meishan, Sichuan, China; Attention: Corporate Secretary. Any amendments to or waivers of the code of ethics and business conduct will be promptly reported in a Current Report on Form 8-K, as required by applicable laws. Trading Policies On April 16, 2024, we adopted insider trading policies and procedures governing the purchase, sale, and/or other dispositions of our securities by directors, officers and employees, which are reasonably designed to promote compliance with insider trading laws, rules and regulations, and applicable Nasdaq listing standards (the “Insider Trading Policy”). The foregoing description of the Insider Trading Policy does not purport to be complete and is qualified in its entirety by the terms and conditions of the Insider Trading Policy, a copy of which is attached hereto as Exhibit 19 and is incorporated herein by reference. 69 Involvement in Certain Legal Proceedings To our knowledge, during the last ten years, none of our directors and executive officers (including those of our subsidiaries) has: ● Had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time. ● Been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses. ● Been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities. ● Been found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated. ● Been the subject to, or a party to, any sanction or order, not subsequently reverse, suspended or vacated, of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. Delinquent Section 16(a) Reports Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who beneficially own more than 10% percent of our equity securities (“Reporting Persons”) to file reports of ownership and changes in ownership with the SEC. Based solely on our review of copies of such reports and representations from the Reporting Persons, we believe that during the fiscal year ended December 31, 2023, the Reporting Persons timely filed all such reports, except that Fei Bai, Xiaojin Tang, and Congjin Wang, directors of the Company, failed to timely file Forms 3 as directors of the Company. No securities of the Company are beneficially owned by Mr. Bai, Mr. Tang, or Mr. Wang. ITEM 11. Executive Compensation The following table sets forth total compensation paid to our named executive officers for the years ended December 31, 2023 and 2022. Name and principal position Year Salary ($) Bonus ($) Stock awards ($) Option awards ($) All other compensation ($) Total ($) Zongyi Lian, President, Chief Executive Officer 2023 $ 20,336 - - - - $ 20,336 2022 $ 21,393 - - - - $ 21,393 Yuhua Huang, Chief Financial Officer 2023 $ 18,642 - - - - $ 18,642 2022 $ 19,610 - - - - $ 19,610 Employment Agreements Zongyi Lian On November 21, 2017, Sichuan Wetouch entered into an employment agreement with its Chief Executive Officer, Zongyi Lian, pursuant to which he receives an annual base salary of approximately $23,890 (equivalent to RMB168,000) plus other annual remuneration, including but not limited to position salary of approximately $17,070 (equivalent to RMB120,000), confidentiality fee of approximately $6,828 (equivalent to RMB48,000) and subsidies of approximately $9,104 (equivalent to RMB64,000). Mr. Lian’s employment is for an initial term of three (3) years and may be renewed by the parties within 30 days prior to the expiration of the employment agreement. On November 13, 2020, the employment agreement with Mr. Lian was renewed for another three (3) years until November 20, 2023, with the similar terms and conditions. Amount reflects salary paid to Mr. Lian for services rendered to our former operating subsidiary, Sichuan Wetouch. Such employment agreement has been assigned to our PRC subsidiary, Sichuan Vtouch. On April 16, 2024, our board of directors ratified and approved the extension of the term of employment of Mr. Lian as our CEO for another three years from November 21, 2023 under same terms and conditions. We expect to enter into a new agreement with Mr. Lian to memorize the terms and conditions and expect to file with the SEC upon execution of such agreement. 70 Yuhua Huang On November 1, 2017, Sichuan Wetouch entered into an employment agreement with its Chief Financial Officer, Yuhua Huang, pursuant to which he receives an annual base salary of approximately $11,945 (equivalent to RMB84,000) plus other annual remuneration, including but not limited to position salary of approximately $8,535 (equivalent to RMB60,000), confidentiality fee of approximately $3,414 (equivalent to RMB24,000) and subsidies of approximately $4,552 (equivalent to RMB32,000). Mr. Huang’s employment is for an initial term of three (3) years and may be renewed by the parties within 30 days prior to the expiration of the employment agreement. On November 11, 2020, the employment agreement with Mr. Huang was renewed for another three (3) years until October 31, 2023, with the similar terms and conditions. Amount reflects salary paid to Mr. Huang for services rendered to our former operating subsidiary, Sichuan Wetouch. Such employment agreement has been assigned to our PRC subsidiary, Sichuan Vtouch. On April 16, 2024, our board of directors ratified and approved the extension of the term of employment of Mr. Huang as our CFO for another three years from November 1, 2023 under same terms and conditions. We expect to enter into a new agreement with Mr. Huang to memorize the terms and conditions and expect to file with the SEC upon execution of such agreement. Under these agreements, each of the individuals is employed for a specified time period and is entitled to receive annual salary plus other remuneration, pension insurance, medical insurance, maternity insurance, unemployment insurance, work-related injury insurance, housing provident funds and other benefits pursuant to PRC law. We and the individuals may terminate the employment upon mutual agreement. Provided that the individuals propose earlier termination and the agreement is terminated upon mutual agreement. The persons are not entitled to compensation. The persons may terminate the employment by giving thirty days advance written notice. We may terminate their employment for cause, at any time, without notice or remuneration, for certain acts of the person, such as serious violation of Sichuan Vtouch’s rules and regulations, and gross neglect of duty and misconduct resulting in large economic losses to Sichuan Vtouch. We may also terminate the employment for cause, with thirty days advance written notice and one month’s salary, for certain acts of the executive officer, such as illness or non-work related injury resulting in inability to work in the previous position or newly assigned position after recovery, inability to perform the assigned work and after training or adjustment of position, still failure to perform the assigned work. The employment agreements will be terminated upon (1) expiry of the employment, (2) the entitlement of the named executive officers to the pension insurance, (3) the death of the named executive officers, (4) the bankruptcy of Sichuan Vtouch, and (5) other circumstances regulated by laws and regulations. Each individual is not permitted to (1) hold any side job during the employment, and (2) operate on their own or on behalf of other individuals or enterprises any business providing same or similar competitive products or services. Confidentiality and Non-Competition We have entered into confidentiality and non-competition agreements with each of Mr. Lian and Mr. Huang in November 2017, which were renewed in November 2020. Such agreements have been assigned to our PRC subsidiary, Sichuan Vtouch. Each individual has agreed (1) to keep all confidential information confidential and return them together with any copy to Sichuan Vtouch upon termination of employment; (2) not to disclose the confidential information of Sichuan Vtouch to any third party; (3) not to allow any third party to use or acquire the confidential information of Sichuan Vtouch, except as required in the performance of his or her duties in connection with the employment or pursuant to the instruction of the Company; (4) not to use the confidential information of Sichuan Vtouch for its own benefits; and (4) to keep other confidential obligations. As compensation, each individual is entitled to receive a monthly confidentiality fee at a different rate. Each individual has also agreed to hold, after the termination or expiry of his employment agreement, in strict confidence, any of our confidential information without any extra compensation. 71 Each officer has agreed to be bound by non-competition restrictions during the term of his employment and for two years following termination of the employment. The executive officers are not allowed to (1) directly or indirectly invest, establish, or be hired by, any individual or enterprises engaging in the same or similar business, or competitive business, (2) directly or indirectly persuade, induce, encourage, or cause any employee of the Company to terminate the employment with Sichuan Vtouch or its subsidiaries; and (3) directly or indirectly persuade, induce, encourage, or cause any customers of Sichuan Vtouch to terminate the business relationship with Sichuan Vtouch or its subsidiaries. Each officer is obligated to pay $7,110 to $14,220 (equivalent to RMB50,000 to RMB100,000) as a penalty, together with any earnings generated from the use or disclose of the confidential information, to Sichuan Vtouch for violation of the confidentiality and non-competition agreements. Clawback Policy Our board of directors adopted a clawback policy covering our executive officers. An executive officer is our chief executive officer, president, principal financial officer, principal accounting officer (or if there is no such accounting officer, the controller), any vice-president in charge of a significant principal business unit, division, or function (such as sales, administration, or finance), any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for us. As of the date of this Annual Report, our only executive officers are our chief executive officer and our chief financial officer. The clawback policy relates to incentive-based compensation, which is any compensation that is granted, earned or vested based wholly or in part upon the attainment of a financial reporting measure. The clawback policy covers the recovery of incentive-based compensation from an executive officer only in the event that we are required to prepare an accounting restatement due to the material noncompliance of our financial reporting requirement under the United States securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. Questions as to “materiality” will be made by the Compensation Committee in coordination with the Audit Committee. The incentive-based compensation subject to recovery is the incentive-based compensation received during the three completed fiscal years immediately preceding the date that we are required to prepare an accounting restatement as described above, provided that the person served as an executive officer at any time during the performance period applicable to the incentive-based compensation in question provided that the clawback policy shall only apply if the incentive-based compensation is received while we have a class of securities listed on Nasdaq and on or after October 2, 2023. None of our officers’ employment agreements provide incentive-based compensation during the year ended December 31. 2023. Outstanding Equity Awards at Fiscal Year-End There are no current outstanding equity awards to our executive officers as of December 31, 2023. Long-Term Incentive Plans There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. 72 Director Compensation The table below shows the compensation paid to our non-employee directors during 2023. Name Year Fees Earned or Paid in Cash Stock Awards Option Awards Non-Equity Incentive Plan Compensation Nonqualified Deferred Compensation Earnings All other Compensation Total Fei Bai 2023 - - - - - 33,894 * $ 33,894 * Xiaojin Tang 2023 - - - - - 16,947 * $ 16,947 * Congjin Wang 2023 - - - - - 16,947 * $ 16,947 * Jiaying Cai 2023 - - - - - 16,947 * $ 16,947 * Jing Chen 2023 - - - - - 20,000 * $ 20,000 * Jeffrey Kone(1) 2023 $ 2,575 * - - - - - 2,575 *Accrued and not paid. Mr. Jeffrey Kone resigned as a director on February 16, 2023. ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table lists, as of April 15, 2024, the number of shares of common stock beneficially owned by (i) each person, entity or group (as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934) known to the Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each of our directors (iii) each of our Named Executive Officers and (iv) all executive officers and directors as a group. All information with respect to beneficial ownership has been furnished by the respective 5% or more stockholders, directors or executive officers, as the case may be. Unless otherwise noted, the mailing address of each listed beneficial owner is No. 29, Third Main Avenue, Shigao Town, Renshou County, Meishan, Sichuan, China. 73 The percentages below are calculated based on 11,931,534 shares of common stock issued and outstanding as of April 15, 2024. Shares Beneficially Owned Name of Beneficial Owner Shares Percentage Executive Officers and Directors: Fei Bai 0 0 % Jiaying Cai 41,961 * Zongyi Lian 0 0 Yuhua Huang 0 0 Jing Chen 0 0 Xiaojin Tang 0 0 Congjin Wang 0 0 All officers and directors as a group (7 persons) 41,961 * 5% or Greater Holders: N/A * Less than 1% Changes in Control Agreements As of the date of this Annual Report, we are not aware of any arrangements that may result in “changes in control,” as that term is defined by the provisions of Item 403(c) of Regulation S-K. ITEM 13. Certain Relationships and Related Transactions, and Director Independence The following is a description of transactions since January 1, 2022 to which we were a party in which (i) the amount involved exceeded or will exceed the lesser of (A) $120,000 or (B) one percent of our average total assets at year end for the last two completed fiscal years and (ii) any of our directors, executive officers or holders of more than 5% of our capital stock, or any member of the immediate family of, or person sharing the household with, any of the foregoing persons, who had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other similar arrangements, which are described under “Executive Compensation.” Amounts due to Related Parties For the years ended December 31, 2023 and 2022, the total amounts due to related parties were nil and $1,665, respectively. These advances are non-interest bearing and due on demand. 74 Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. Audit Fees For each fiscal year of 2023 and 2022, we incurred aggregate fees and expenses of $275,000 and $164,000, respectively, from B F Borgers CPA PC for works completed for our annual audits and quarterly reviews. Audit-Related Expenses Audit-related expenses for 2023 and 2022 were $0 and $0, respectively. Tax Fees We incurred aggregate fees and expenses of $0 and $0 for each fiscal year of 2023 and 2022, respectively. All Other Fees We incurred other fees of $0 and $0 for each fiscal year of 2022 and 2021. ITEM 15. Exhibits and Financial Statements Schedules 1. Consolidated Financial Statements Our financial statements and the notes thereto, together with the report of our independent registered public accounting firm on those financial statements, are hereby filed as part of this Annual Report beginning on page F-1. 2. Financial Statement Schedules All financial statement schedules have been omitted since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto. 3. Exhibits The following is a complete list of exhibits filed as part of this Form 10-K. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K. Exhibit Number Description of Document 2.1 (1) Share Exchange Agreement dated October 9, 2020 among Wetouch Technology Inc. f/k/a Gulf West Investment Properties, Inc., Wetouch Holding Group Limited, the shareholders of Wetouch Holding Group Limited, Hong Kong Wetouch Electronics Technology Limited and Fengfei Zhang, as administrative agent for the sellers. 3.1 (1) Amended and Restated Articles of Incorporation of the Company, dated September 30, 2020. 3.2 (1) Bylaws of the Company. 3.3 (1) Certificate of Incorporation of Wetouch Holding Group Limited, dated August 14, 2020. 3.4 (1) Memorandum of Association and Articles of Association of Wetouch Holding Group Limited, dated August 14, 2020. 3.5.1 (1) Certificate of Incorporation of Hong Kong Vtouch Electronics Technology Limited, dated May 5, 2016. 3.5.2 (1) Certificate of Change of Name of Hong Kong Wetouch Electronics Technology Limited, dated August 13, 2020. 3.5.3 (1) Certificate of Change of Name of Hong Kong Wetouch Electronics Technology Limited, dated September 8, 2020. 3.6.1 (1) Articles of Association of Hong Kong Vtouch Electronics Technology Limited, dated May 5, 2016. 75 3.6.2 (1) Amended Articles of Association of Hong Kong Wetouch Electronics Technology Limited. 3.7 (1) English Translation of Business License of Sichuan Wetouch Technology Co., Ltd, dated January 23, 2017. 3.8 (1) English Translation of Articles of Association of Sichuan Wetouch Technology Co., Ltd, dated July 19, 2016. 3.9 (1) English Translation of Business License of Sichuan Vtouch Technology Co., Ltd., dated December 30, 2020. 3.10 (1) English Translation of Articles of Association of Sichuan Vtouch Technology Co., Ltd, dated December 29, 2020. 3.11 (1) Certificate of Incorporation of Hong Kong Wetouch Holding Group Limited, dated December 3, 2020. 3.12 (1) Certificate of Change of Name of Hong Kong Wetouch Technology Limited, dated December 9, 2020. 3.13 (1) Articles of Association of Hong Kong Wetouch Holding Group Limited, dated December 3, 2020. 3.14 (1) Articles of Association of Hong Kong Wetouch Technology Limited, dated March 12, 2021. 4.1 (1) Specimen Common Stock Certificate. 4.2* Description of Registrant’s Securities. 4.3 (1) Form of Underwriter’s Warrants. 4.4 (1) Common Stock Purchase Warrant dated October 27, 2021 issued by Wetouch Technology Inc. 4.6 (1) Common Stock Purchase Warrant dated November 5, 2021 issued by Wetouch Technology Inc. 4.8 (1) Common Stock Purchase Warrant dated November 16, 2021 issued by Wetouch Technology Inc. 4.10 (1) Common Stock Purchase Warrant dated November 24, 2021 issued by Wetouch Technology Inc. 4.12 (1) Common Stock Purchase Warrant dated November 29, 2021 issued by Wetouch Technology Inc. 4.14 (1) Common Stock Purchase Warrant dated December 2, 2021 issued by Wetouch Technology Inc. 76 4.16 (1) Common Stock Purchase Warrant dated December 2, 2021 issued by Wetouch Technology Inc. 10.1.1 (1) English Translation of Employment Agreement between Sichuan Wetouch Technology Co., Ltd and Zongyi Lian. 10.1.2 (1) English Translation of Confidentiality and Non-Competition Agreement between Sichuan Wetouch Technology Co., Ltd and Zongyi Lian. 10.2.1 (1) English Translation of Employment Agreement between Sichuan Wetouch Technology Co., Ltd and Yuhua Huang. 10.2.2 (1) English Translation of Confidentiality and Non-Competition Agreement between Sichuan Wetouch Technology Co., Ltd and Yuhua Huang. 10.3.1 (1) English Translation of Form of Sichuan Vtouch Technology Co., Ltd. Sales Framework Agreement. 10.4 (1) English Translation of Form of Sichuan Vtouch Technology Co., Ltd. Purchase Order with Suppliers. 10.5 (1) English Translation of Form of Loan Agreement between Sichuan Wetouch Technology Co., Ltd and Shareholder of Australia Vtouch Technology Co., Ltd. 10.6 (1) English Translation of Form of Supplemental Agreement to Loan Agreement between Sichuan Wetouch Technology Co., Ltd and Shareholder of Australia Vtouch Technology Co., Ltd. 10.7 (1) English Translation of Renewed Employment Agreement between Sichuan Wetouch Technology Co., Ltd and Zongyi Lian dated November 13, 2020. 10.8 (1) English Translation of Renewed Confidentiality and Non-Competition Agreement between Sichuan Wetouch Technology Co., Ltd and Zongyi Lian dated November 13, 2020. 10.9 (1) English Translation of Renewed Employment Agreement between Sichuan Wetouch Technology Co., Ltd and Yuhua Huang dated November 11, 2020. 10.10 (1) English Translation of Renewed Confidentiality and Non-Competition Agreement between Sichuan Wetouch Technology Co., Ltd and Yuhua Huang dated November 11, 2020. 10.11 (1) English Translation of Form of Sichuan Wetouch Technology Co., Ltd. Supplemental Agreement to Sales Framework Agreement. 10.12 (1) English Translation of Agreement of Compensation on Demolition between Sichuan Wetouch Technology Co., Ltd and Sichuan Renshou Shigao Tianfu Investment Co., Ltd dated March 16, 2021. 10.13.1 (1) English Translation of Leaseback Agreement between Sichuan Vtouch Technology Co., Ltd and Sichuan Renshou Shigao Tianfu Investment Co., Ltd dated March 16, 2021. 10.13.2 * English Translation of Leaseback Agreement between Sichuan Vtouch Technology Co., Ltd and Meishan Huantian Industrial Co., Ltd. (formerly known as Sichuan Renshou Shigao Tianfu Investment Co., Ltd) dated October 30, 2023. 10.14 (1) Securities Purchase Agreement, dated as of October 27, 2021, between Wetouch Technology Inc. and Talos Victory Fund, LLC 10.15 (1) Registration Rights Agreement dated as of October 27, 2021, between Wetouch Technology Inc. and Talos Victory Fund, LLC 10.16 (1) Securities Purchase Agreement, dated as of November 5, 2021, between Wetouch Technology Inc. and Mast Hill Fund, L.P. 10.17 (1) Registration Rights Agreement dated as of November 5, 2021, between Wetouch Technology Inc. and Mast Hill Fund, L.P. 10.18 (1) Securities Purchase Agreement, dated as of November 16, 2021, between Wetouch Technology Inc. and FirstFire Global Opportunities Fund, LLC. 10.19 (1) Registration Rights Agreement dated as of November 16, 2021, between Wetouch Technology Inc. and FirstFire Global Opportunities Fund, LLC. 10.20 (1) Securities Purchase Agreement, dated as of November 24, 2021, between Wetouch Technology Inc. and LGH Investments, LLC. 77 10.21 (1) Registration Rights Agreement dated as of November 24, 2021, between Wetouch Technology Inc. and LGH Investments, LLC. 10.22 (1) Securities Purchase Agreement, dated as of November 29, 2021, between Wetouch Technology Inc. and Fourth Man, LLC. 10.23 (1) Registration Rights Agreement dated as of November 29, 2021, between Wetouch Technology Inc. and Fourth Man, LLC. 10.24 (1) Securities Purchase Agreement, dated as of December 2, 2021, between Wetouch Technology Inc. and Jefferson Street Capital LLC. 10.25 (1) Registration Rights Agreement dated as of December 2, 2021, between Wetouch Technology Inc. and Jefferson Street Capital LLC. 10.26 (1) Securities Purchase Agreement, dated as of December 2, 2021, between Wetouch Technology Inc. and Blue Lake Partners, LLC. 10.27 (1) Registration Rights Agreement dated as of December 2, 2021, between Wetouch Technology Inc. and Blue Lake Partners LLC. 10.28 (1) Form of Securities Purchase Agreement. 10.29* English Translation of State-owned Construction Land Use Rights Transfer Contract, dated as of August 6, 2021, between Sichuan Vtouch Technology Co., Ltd and Wenjiang District, Chengdu City Co., Ltd. 10.30* English Translation of Construction Contract, dated as of July 27, 2021, between Sichuan Vtouch Technology Co., Ltd and Sichuan Chunqiu Development and Construction Group Co. Ltd. 19* Insider Trading Policy. 21.1 (1) List of subsidiaries of the Company. 31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act. 31.2* Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Sarbanes-Oxley Act. 32.1** Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act 32.2** Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act 97* Executive Compensation Recovery Policy 99.1* Audit Committee Charter 99.2* Compensation Committee Charter 99.3* Nominating and Corporate Governance Committee Charter 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) *filed herewith ** Furnished herewith (1) Filed as an exhibit to the Company’s registration statement on Form S-1, File No. 333-270726 and incorporated herein by reference. ITEM 16. FORM 10–K SUMMARY None. 78 Signatures Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: April 16, 2024 WETOUCH TECHNOLOGY INC. By: /s/ Zongyi Lian Zongyi Lian President and Chief Executive Officer (Principal Executive Officer) By: /s/ Yuhua Huang Yuhua Huang Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Zongyi Lian President April 16, 2024 Zongyi Lian Chief Executive Officer and Chairman(Principal Executive Officer) /s/ Yuhua Huang Chief Financial Officer April 16, 2024 Yuhua Huang (Principal Financial and Accounting Officer) /s/ Fei Bai Chairman and Director April 16, 2024 Fei Bai /s/ Jiaying Cai Director April 16, 2024 Jiaying Cai /s/ Jing Chen Director April 16, 2024 Jing Chen /s/ Xiaojin Tang Director April 16, 2024 Xiaojin Tang /s/ Congjin Wang Director April 16, 2024 Congjin Wang 79 WETOUCH TECHNOLOGY INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets as of December 31, 2023 and 2022 F-3 Consolidated Statements of Income and Comprehensive Income for the Years Ended December 31, 2023 and 2022 F-4 Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2023 and 2022 F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022 F-6 Notes to Consolidated Financial Statements as of December 31, 2023 and 2022 F-7 - F-30 F- 1 Report of Independent Registered Public Accounting Firm To the shareholders and the board of directors of Wetouch Technology Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Wetouch Technology Inc. as of December 31, 2023 and 2022, the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /S/ BF Borgers CPA PC (PCAOB ID 5041 ) We have served as the Company’s auditor since 2019 Lakewood, CO April 16, 2024 F- 2 WETOUCH TECHNOLOGY INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS 2023 2022 As of December 31, 2023 2022 ASSETS CURRENT ASSETS Cash $ 98,040,554 $ 51,250,505 Accounts receivable, net 7,455,252 9,057,741 Inventories 222,102 423,276 Prepaid expenses and other current assets 1,063,627 1,450,620 TOTAL CURRENT ASSETS 106,781,535 62,182,142 Property, plant and equipment, net 12,859,863 10,923,610 TOTAL ASSETS $ 119,641,398 $ 73,105,752 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable $ 640,795 $ 1,383,094 Loan from a third party 469,591 385,791 Due to a related party - 1,665 Income tax payable - 22,152 Accrued expenses and other current liabilities 3,992,905 944,624 Convertible promissory notes payable 1,239,126 1,277,282 TOTAL CURRENT LIABILITIES 6,342,417 4,014,608 Common stock purchase warrants liability 378,371 256,957 TOTAL LIABILITIES $ 6,720,788 $ 4,271,565 COMMITMENTS AND CONTINGENCIES (Note 13) - - STOCKHOLDERS’ EQUITY Common stock, $ 0.001 par value, 15,000,000 shares authorized, 9,732,948 and 1,680,248 issued and outstanding as of December 31, 2023 and 2022, respectively * $ 9,733 $ 1,680 Additional paid in capital * 43,514,125 3,402,178 Statutory reserve 7,195,092 6,040,961 Retained earnings 69,477,092 62,366,892 Accumulated other comprehensive loss ( 7,275,432 ) ( 2,977,524 ) TOTAL STOCKHOLDERS’ EQUITY 112,920,610 68,834,187 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 119,641,398 $ 73,105,752 * Retrospectively restated for effect of reverse stock split (1-for-20) , see Note 10 (2) The accompanying notes are an integral part of these consolidated financial statements. F- 3 WETOUCH TECHNOLOGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME 2023 2022 The Years Ended December 31, 2023 2022 REVENUES $ 39,705,939 $ 37,923,112 COST OF REVENUES ( 22,515,219 ) ( 23,872,632 ) GROSS PROFIT 17,190,720 14,050,480 OPERATING EXPENSES Selling expenses ( 608,524 ) ( 1,288,467 ) General and administrative expenses ( 3,847,361 ) ( 1,262,093 ) Research and development expenses ( 84,551 ) ( 85,251 ) OPERATING EXPENSES ( 4,540,436 ) ( 2,635,811 ) INCOME FROM OPERATIONS 12,650,284 11,414,669 Interest income 117,719 118,714 Interest expense ( 252,325 ) ( 224,885 ) Other expense ( 47,328 ) - Loss on conversion of convertible promissory notes payable - ( 96,927 Gain (loss)on changes in fair value of common stock purchase warrants liability ( 121,413 ) 871,677 TOTAL OTHER INCOME (EXPENSE), NET ( 303,347 ) 668,579 INCOME BEFORE INCOME TAX EXPENSE 12,346,937 12,083,248 INCOME TAX EXPENSE ( 4,082,606 ) ( 3,352,802 ) NET INCOME $ 8,264,331 $ 8,730,446 OTHER COMPREHENSIVE INCOME (LOSS) Foreign currency translation adjustment ( 4,297,908 ) ( 5,242,692 ) COMPREHENSIVE INCOME (LOSS) $ 3,966,423 $ 3,487,754 EARNINGS PER COMMON SHARE * Basic * $ 0.89 $ 5.38 Diluted * $ 0.89 $ 4.73 WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING * Basic * 9,285,815 1,620,511 Diluted * 9,375,105 1,843,767 * Retrospectively restated for effect of reverse stock split (1-for-20) , see Note 10 (2) The accompanying notes are an integral part of these consolidated financial statements. F- 4 WETOUCH TECHNOLOGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 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 December 31, 2021 * 1,590,576 $ 1,591 $ 2,363,842 $ 5,067,243 $ 54,610,164 $ 2,265,168 $ 64,308,008 Appropriation to statutory reserve - - 973,718 ( 973,718 ) - - Exercise of warrants issued in conjunction with legal services in 2020 6,211 6 ( 6 ) - - - - Exercise of warrants issued to third parties in conjunction with debt issuance in 2021 14,233 14 ( 14 ) - - - - Stock issuance for convertible promissory notes payable 69,228 69 1,038,356 - - - 1,038,425 Net income 8,730,446 - 8,730,446 Foreign currency translation adjustment - - - - - ( 5,242,692 ) ( 5,242,692 ) Balance at December 31 2022 * 1,680,248 $ 1,680 $ 3,402,178 $ 6,040,961 $ 62,366,892 $ ( 2,977,524 ) $ 68,834,187 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 December 31 2022 * 1,680,248 $ 1,680 $ 3,402,178 $ 6,040,961 $ 62,366,892 $ ( 2,977,524 ) $ 68,834,187 Balance 1,680,248 $ 1,680 $ 3,402,178 $ 6,040,961 $ 62,366,892 $ ( 2,977,524 ) $ 68,834,187 Appropriation to statutory reserve - - - 1,154,131 ( 1,154,131 ) - - Shares issued to private placement 8,000,000 8,000 39,992,000 - - - 40,000,000 Fraction shares issued due to reverse stock split 5,362 6 ( 6 ) - - - - Exercise of warrants issued to third parties in conjunction with debt issuance in 2021 22,338 22 ( 22 ) - - - - Stock issuance for convertible promissory notes payable 25,000 25 119,975 - - - 120,000 Net income - - - - 8,264,331 - 8,264,331 Foreign currency translation adjustment - - - - - ( 4,297,908 ) ( 4,297,908 ) Balance at September 30, 2023 9,732,948 $ 9,733 $ 43,514,125 $ 7,195,092 $ 69,477,092 $ ( 7,275,432 ) $ 112,920,610 Balance 9,732,948 $ 9,733 $ 43,514,125 $ 7,195,092 $ 69,477,092 $ ( 7,275,432 ) $ 112,920,610 * Retrospectively restated for effect of reverse stock split (1-for-20) , see Note 10 (2) The accompanying notes are an integral part of these consolidated financial statements. F- 5 WETOUCH TECHNOLOGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2023 2022 Cash flows from operating activities Net income $ 8,264,331 $ 8,730,446 Adjustments to reconcile net income to cash provided by operating activities Inventory write-off - 74,100 Depreciation and amortization 9,403 9,891 Loss on convertible promissory notes payable - 96,927 Amortization of discounts and issuance cost of the notes 33,655 148,368 Loss (Gain) on changes in fair value of common stock purchase warrants liability 121,413 ( 871,677 ) Changes in operating assets and liabilities: Accounts receivable 1,347,497 ( 1,497,237 ) Inventories 187,532 ( 197,453 ) Due from a related party ( 51 ) - Prepaid expenses and other current assets 333,415 853,426 Accounts payable ( 704,696 ) 637,372 Loans from a third party 84,025 - Amounts due to related parties ( 1,665 ) ( 18,055 ) Income tax payable ( 21,578 ) ( 41,068 ) Accrued expenses and other current liabilities 3,071,108 661,203 Net cash provided by operating activities 12,724,389 8,586,243 Cash flows from investing activities Purchase of property, plant and equipment ( 2,263,549 ) - Net cash used in investing activities ( 2,263,549 ) - Cash flows from financing activities Proceeds from stock issuance of private placement 40,000,000 - Repayments of convertible promissory notes payable ( 55,000 ) ( 1,038,426 ) Proceeds from interest-free advances from a third party - 385,791 Net cash provided by (used in) financing activities 39,945,000 ( 652,635 ) Effect of changes of foreign exchange rates on cash ( 3,615,791 ) ( 2,846,807 ) Net increase in cash 46,790,049 5,086,801 Cash, beginning of year 51,250,505 46,163,704 Cash, end of year $ 98,040,554 $ 51,250,505 Supplemental disclosures of cash flow information Interest paid $ - $ 10,000 Income taxes paid $ 4,104,184 $ 3,391,137 Non-cash financing activities Cashless stock issuance for convertible promissory notes payable $ 22,338 $ 284,654 The accompanying notes are an integral part of these consolidated financial statements. F- 6 WETOUCH TECHNOLOGY INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 — BUSINESS DESCRIPTION Wetouch Technology Inc. (“Wetouch”, or the “Company”), formerly known as Gulf West Investment Properties, Inc., was originally incorporated in August 1992, under the laws of the state of Nevada. On October 9, 2020, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) with Wetouch Holding Group Limited (“BVI Wetouch”) and all the shareholders of BVI Wetouch (each, a “BVI Shareholder” and collectively, the “BVI Shareholders”), to acquire all the issued and outstanding capital stock of BVI Wetouch in exchange for the issuance to the BVI Shareholders an aggregate of 28,000,000 shares ( 1,400,000 shares post-Reverse Stock Split) of the Company’s common stock (the “Reverse Merger”). In the Reverse Merger, each ordinary share of BVI Wetouch was exchanged for 2,800 shares ( 140 shares post-Reverse Stock Split) of common stock of Wetouch. Immediately after the closing of the Reverse Merger on October 9, 2020, the Company had a total of 31,396,394 ( 1,569,820 shares post-Reverse Stock Split) issued and outstanding shares of common stock. As a result of the Reverse Merger, BVI Wetouch became a wholly-owned subsidiary of the Company. BVI Wetouch is a holding company whose only asset, held through a subsidiary, is 100 % of the registered capital of Sichuan Wetouch Technology Co., Ltd. (“Sichuan Wetouch”), a limited liability company organized under the laws of the People’s Republic of China (“China” or the “PRC”). Sichuan Wetouch is primarily engaged in the business of research and development, manufacture, and distribution of touchscreen displays to customers both in the PRC and overseas. The touchscreen products, which are manufactured by the Company, are primarily for use financial terminals, automotive, Point of Sales, gaming, lottery, medical, Human-Machine Interface (HMI) , and other specialized industries The Reverse Merger was accounted for as a recapitalization effected by a share exchange, wherein BVI Wetouch is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of BVI Wetouch have been brought forward at their book value and no goodwill has been recognized. The number of shares, par value amount, and additional paid-in capital in the prior years are retrospectively adjusted accordingly. Corporate History of BVI Wetouch BVI Wetouch was incorporated under the laws of British Virgin Islands on August 14, 2020. It became the holding company of Hong Kong Wetouch Electronics Technology Limited (“Hong Kong Wetouch”) on September 11, 2020. Hong Kong Wetouch Technology Limited (“HK Wetouch”), was incorporated as a holding company under the laws of Hong Kong Special Administrative Region (the “SAR”) on December 3, 2020. On March 2, 2021, HK Wetouch acquired all shares of Hong Kong Wetouch. Due to the fact that Hong Kong Wetouch and HK Wetouch are both under the same sole stockholder, the acquisition is accounted for under common control. In June 2021, Hong Kong Wetouch completed its dissolution process pursuant to the minutes of its special shareholder meeting. Sichuan Wetouch was formed on May 6, 2011 in the PRC and became a Wholly Foreign-Owned Enterprise (WFOE”) in PRC on February 23, 2017. On July 19, 2016, Sichuan Wetouch was 100 % held by HK Wetouch. On December 30, 2020, Sichuan Vtouch was incorporated in Chengdu, Sichuan, under the PRC laws. F- 7 In March 2021, pursuant to local PRC government guidelines on local environmental issues and the national plan, Sichuan Wetouch was under the government directed relocation order. Sichuan Vtouch took over the operating business of Sichuan Wetouch. On March 30, 2023, an independent third party acquired all shares of Sichuan Wetouch for a nominal amount. As a result of the above restructuring, HK Wetouch became the sole shareholder of Sichuan Vtouch. The following diagram illustrates the Company’s current corporate structure: Note 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The accompanying consolidated financial statements include the financial statements of Wetouch and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated upon consolidation. Deconsolidation of Sichuan Wetouch On March 30, 2023, upon transferring Sichuan Wetouch to a third-party individual for a nominal value, the Company was no longer able to operate and exert control over this subsidiary whose operation has been taken over by Sichuan Vtouch since the first quarter of 2021. As a result, Sichuan Wetouch was deconsolidated accordingly since the disposal date. F- 8 The deconsolidated Sichuan Wetouch had assets, liabilities and the non-controlling interest on disposal date as the following: SCHEDULE OF DISPOSAL GROUPS, INCLUDING DISCONTINUED OPERATIONS 2023 March 30, 2023 Total assets as of deconsolidated date $ - Total liabilities as of deconsolidated date - Total gain or loss from deconsolidation $ - Upon the deconsolidation, the Company was no longer entitled to the assets and also legally released from the liabilities previously held by the deconsolidated Sichuan Wetouch, derived nil gain or loss from the deconsolidation in the consolidated statements of operations and comprehensive income for the year ended December 31, 2023. The disposal of Sichuan Wetouch did not represent a strategic shift and did not have a major effect on the Company’s operation. There was no cash outflow for the disposal for the year ended December 31, 2023. (b) Uses of estimates In preparing the consolidated financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date of the consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, the allowance for estimated uncollectible receivables, fair values of financial instruments, inventory valuations, useful lives of property, plant and equipment, intangible assets, the recoverability of long-lived assets, provision necessary for contingent liabilities, revenue recognition and realization of deferred tax assets. Actual results could differ from those estimates. (c) Cash and cash equivalents Cash includes currency on hand and deposits held by banks that can be added or withdrawn without limitation. (d) Accounts receivables, net Accounts receivables are presented net of allowance for doubtful accounts. The Company determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trend. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s best estimate of specific losses on individual exposures, as well as a provision on historical trends of collections. Actual amounts received may differ from management’s estimate of credit worthiness and the economic environment. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the collection is not probable. (e) Inventory Inventory consists of raw materials, work-in-process and finished goods and is stated at the lower of cost or net realizable value. Cost is determined using a weighted average. For work-in-process and manufactured inventories, cost consists of raw materials, direct labor and an allocated portion of the Company’s production overhead. The Company writes down excess and obsolete inventory to its estimated net realizable value based upon assumptions about future demand and market conditions. For finished goods and work-in-process, if the estimated net realizable value for an inventory item, which is the estimated selling price in the ordinary course of business, less reasonably predicable costs to completion and disposal, is lower than its cost, the specific inventory item is written down to its estimated net realizable value. Net realizable value for raw materials is based on replacement cost. Provisions for inventory write-downs are included in the cost of revenues in the consolidated statements of operations. Inventories are carried at this lower cost basis until sold or scrapped. Nil and $ 74,100 inventory write-off were recorded for the years ended December 31, 2023 and 2022, respectively. F- 9 (f) Convertible Promissory Notes The Company accounts for its convertible promissory notes according to guidance of ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, which simplifies the accounting for convertible instruments by eliminating the requirement to separate embedded conversion features from the host contract when the conversion features are not required to be accounted for as derivatives under Topic 815. We analyze the convertible notes for the existence of a beneficial conversion feature. the Company considered the three characteristics of a derivative instrument listed in ASC 815-10-15-83: (i) having one or more underlyings and one or more notional amounts or payment provisions or both; (ii) requiring no initial net investment; (iii) permitting net settlement; Since the Company’s notes have fixed interest rate, specified notional principal and settlement date, which no other events would affect specified settlement, and the Company received net proceeds after issuance costs and discount, which the Company recorded as the net proceeds or net settled investment, the management assessed that the Notes did not meet the definition of a derivative instruments and an embedded feature would not be bifurcated. The discounts on the convertible notes, are amortized to interest expense, using the effective interest method, over the terms of the related convertible notes. (g) Common stock purchase warrants The Company also analyzed the Warrants in accordance with ASC 815, to determine whether the Warrants meet the definition of a derivative and, if so, whether the Warrants meet the scope exception of ASC 815-40, which is that contracts issued or held by the reporting entity that are both (1) indexed to its own stock and (2) classified in stockholders’ equity shall not be considered to be derivative instruments for purposes of ASC 815-40. The Company concluded that the warrants issued in the financings in November and December 2021 should be treated as a derivative liability because these warrants are entitled to a price adjustment to allow the exercise price to be increased or reduced in the event the Company issues or sells any additional shares of common stock at a price per share other than the then-applicable exercise price or without consideration, which is typically referred to as a “Down-round protection” or “anti-dilution” provision. According to ASC 815-40, the “Down-round protection” provision is not considered to be an input to the fair value of a fixed-for-fixed option on equity shares which leads the warrants to fail to be qualified as indexed to the Company’s own stock and then to fail to meet the scope exceptions of ASC 815. Therefore, the Company accounted for the warrants as derivative liabilities under ASC 815. Pursuant to ASC 815, derivatives are measured at fair value and re-measured at fair value with changes in fair value recorded in earnings at each reporting period. The Company used a black-scholes-pricing model to estimate the fair values of common stock purchase warrants at the balance sheet dates. As of December 31, 2023 and 2022, the Company recorded $ 378,371 and $ 256,957 common stock purchase warrant liability, respectively, and $ 121,413 loss and $ 871,677 gain on changes of fair value of common stock purchase warrant liability for the year ended December 31, 2023 and 2022, respectively. F- 10 (h) Fair value of financial instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: ● Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. ● Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by observable market data. ● Level 3 — inputs to the valuation methodology are unobservable. Unless otherwise disclosed, the fair value of the Company’s financial instruments, including cash, accounts receivable, prepaid expenses and other current assets, accounts payable, short-term bank loans, accrued expenses and other current liabilities, taxes payable and due to related parties, common stock purchase warrants liability, approximate the fair value of the respective assets and liabilities as of December 31, 2023 and 2022 based upon the nature of the assets and liabilities. (i) Property, plant and equipment, net Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization of property and equipment is provided using the straight-line method over their expected useful lives, as follows: SCHEDULE OF ESTIMATED USEFUL LIFE OF PROPERTY PLANT AND EQUIPMENT Useful life Buildings 20 years Machinery and equipment 10 years Office and electric equipment 3 years Vehicles 10 years Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of income and other comprehensive income in other income or expenses. (l) Impairment of long-lived Assets Long-lived assets, such as property, plant and equipment, land use rights, are reviewed for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Recoverability of a long-lived asset or asset group to be held and used is measured by a comparison of the carrying amount of an asset or asset group to the estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying value of an asset or asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount that the carrying value exceeds the estimated fair value of the asset or asset group. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. Assets to be disposed are reported at the lower of carrying amount or fair value less costs to sell, and are no longer depreciated. There was nil impairment of intangible assets recognized for the years ended December 31, 2023 and 2022. (m) Foreign Currency Translation The Company uses US dollars as the reporting currency. The Company’s subsidiary HK Wetouch’s functional currency for HK Wetouch is Hong Kong dollar. The functional currency of Sichuan Vtouch is the Chinese Yuan (“RMB”). The Company’s consolidated financial statements have been translated into US$. Assets and liabilities accounts are translated using the exchange rate at each reporting period end date. Equity accounts are translated at historical rates. Income and expense accounts are translated at the average rate of exchange during the reporting period. The resulting translation adjustments are reported under other comprehensive income (loss). Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the results of operations. F- 11 The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation. The following table outlines the currency exchange rates that were used in creating the consolidated financial statements in this report: SCHEDULE OF CURRENT EXCHANGE RATES December 31, 2023 December 31, 2022 Year-end spot rate US$1=RMB 7.0999 US$1=RMB 6.8972 Average rate US$1=RMB 7.0809 US$1=RMB 6.7312 (n) Revenue Recognition The Company adopted Accounting Standards Codification (“ASC”) 606 using the modified retrospective approach. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. Therefore, no adjustments to opening retained earnings were necessary. ASC 606, Revenue from Contracts with customers, establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. ASC 606 requires the use of a five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenue. The Company has assessed the impact of the guidance by reviewing its existing customer contracts and current accounting policies and practices to identify differences that would result from applying the new requirements, including the evaluation of its performance obligations, transaction price, customer payments, transfer of control and principal versus agent considerations. Based on the assessment, the Company concluded that there was no change to the timing and pattern of revenue recognition for its current revenue streams. In accordance with ASC 606, the Company recognizes revenue when it transfers its goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. The Company accounts for the revenue generated from sales of its products primarily to its customers in PRC and overseas, as the Company is acting as a principal in these transactions, is subject to inventory risk, has latitude in establishing prices, and is responsible for fulfilling the promise to provide customers the specified goods, which the Company has control of the goods and has the ability to direct the use of goods to obtain substantially all the benefits. All of the Company’s contracts have one single performance obligation as the promise is to transfer the individual goods to customers, and there is no separately identifiable other promises in the contracts. The Company’s revenue streams are recognized at a point in time when title and risk of loss passes and the customer accepts the goods, which generally occurs at delivery. The Company’s products are sold with no right of return and the Company does not provide other credits or sales incentive to customers. The Company’s sales are net of value added tax (“VAT”) and business tax and surcharges collected on behalf of tax authorities in respect of product sales. F- 12 Contract Assets and Liabilities Payment terms are established on the Company’s pre-established credit requirements based upon an evaluation of customers’ credit quality. Contract assets are recognized for in related accounts receivable. Contract liabilities are recognized for contracts where payment has been received in advance of delivery. The contract liability balance can vary significantly depending on the timing when an order is placed and when shipment or delivery occurs. As of December 31, 2023 and 2022, other than accounts receivable and advances from customers, the Company had no other material contract assets, contract liabilities or deferred contract costs recorded on its consolidated balance sheet. Costs of fulfilling customers’ purchase orders, such as shipping, handling and delivery, which occur prior to the transfer of control, are recognized in selling, general and administrative expense when incurred. Disaggregation of Revenues The Company disaggregates its revenue from contracts by geography, as the Company believes it best depicts how the nature, amount, timing and uncertainty of the revenue and cash flows are affected by economic factors. The Company’s disaggregation of revenues for the years ended December 31, 2023 and 2022 are disclosed in Note 14 to the financial statements. (o) Selling, General and Administrative Expenses Selling expenses represents primarily costs of payroll, benefits, commissions for sales representatives and advertising expenses. General and administrative expenses represent primarily payroll and benefits costs for administrative employees, rent and operating costs of office premises, depreciation and amortization of office facilities, professional fees and other administrative expenses. (p) Research and Development Expense Research and development costs are expensed as incurred. (q) Share-Based Compensation The Company awards share options and other equity-based instruments to its employees, directors and third party service providers (collectively “share-based payments”). Compensation cost related to such awards is measured based on the fair value of the instrument on the grant date. The Company recognizes the compensation cost over the period the employee is required to provide service in exchange for the award, which generally is the vesting period. The amount of cost recognized is adjusted to reflect the expected forfeiture prior to vesting. When no future services are required to be performed by the employee in exchange for an award of equity instruments, and if such award does not contain a performance or market condition, the cost of the award is expensed on the grant date. The Company recognizes compensation cost for an award with only service conditions that has a graded vesting schedule on a straight-line basis over the requisite service period for the entire award, provided that the cumulative amount of compensation cost recognized at any date at least equals the portion of the grant-date value of such award that is vested at that date. (r) Government grant The Company follows other authoritative accounting guidance since there is no clear guidance with regard to government grants. Government grants are recognized at fair value where there is reasonable assurance that the grant will be received and all grant conditions will be met. Grants relating to expense items are recognized as income over the periods necessary to match the grant to the costs it is compensating. Grants relating to assets are credited to deferred income at fair value and are credited to income over the expected useful life of the asset on a straight-line basis. F- 13 (s) Income taxes The Company accounts for income taxes in accordance with the asset and liability method. Deferred taxes are recognized for the future tax consequences attributable to temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and income tax purposes using enacted rates expected to be in effect when such amounts are realized or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established, as needed, to reduce the amount of deferred tax assets if it is considered more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The Company recognizes the effect of uncertain income tax positions only if those positions are more-likely-than-not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company’s policy is to record interest and penalties related to uncertain tax positions as a component of income tax expense. There were no such interest or penalty for the years ended December 31, 2023 and 2022. On December 22, 2017, the Tax Cut and Jobs Act of 2017 (“the Tax Act”) was signed into law, which among other effects, reduces the U.S. federal corporate income tax rate to 21% from 34% (or 35% in certain cases) beginning in 2018 , and requires companies to pay a one-time transition tax on certain unrepatriated earnings from non-U.S. subsidiaries that is payable over eight years. No tax was due under this provision. The Tax Act also makes the receipt of future non-U.S. sourced income of non-U.S. subsidiaries tax-free to U.S. companies and creates a new minimum tax on the earnings of non-U.S. subsidiaries relating to the parent’s deductions for payments to the subsidiaries. (t) Value added tax (“VAT”) Sales revenue represents the invoiced value of goods, net of VAT. The VAT is based on gross sales price. Since April 1, 2019, VAT rate was lowered from 16 % to 13 %. The VAT may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing or acquiring its finished products. The Company recorded a VAT payable or recoverable net of VAT payments in the accompanying consolidated financial statements. For export sales, VAT is not imposed on gross sales price, but the VAT related to purchasing raw materials is refunded after the export is completed. (u) Earnings per Share The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. As of December 31, 2023 and 2022, warrants were included for the dilutive EPS calculation, respectively. (v) Comprehensive income (loss) Comprehensive income (loss) consists of two components, net income and other comprehensive income (loss). The foreign currency translation gain or loss resulting from translation of the financial statements expressed in RMB to US$ is reported in other comprehensive income (loss) in the consolidated statements of income and comprehensive income. F- 14 (w) Recent Accounting Pronouncements The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. In August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current U.S. GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting, and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as additional paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. For public business entities, the amendments in ASU 2020-06 are effective for public entities which meet the definition of a smaller reporting company are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, including interim periods within those fiscal years. Early application of the guidance will be permitted for all entities for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted ASU 2020-06 effective January 1, 2021. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which introduces new guidance for the accounting for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale (AFS) debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The pronouncement will be effective for public business entities that are SEC filers in fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early application of the guidance will be permitted for all entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted ASU 2016-13 utilizing the modified retrospective transition method on January 1, 2022. The adoption of ASU 2016-13 did not have a material impact on the Company’s consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. The amendment simplifies the accounting for income taxes by eliminating some exceptions to the general approach in ASC 740, Income Taxes. It also clarifies certain aspects of the existing guidance to promote more consistent application, among other things. The guidance is effective for interim and annual reporting periods beginning within 2021 with early adoption permitted. In October 2021, the FASB issued ASU No. 2021-08, which will require companies to apply the definition of a performance obligation under ASC Topic 606 to recognize and measure contract assets and contract liabilities (i.e., deferred revenue) relating to contracts with customers that are acquired in a business combination. Under current U.S. GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. ASU No. 2021-08 will result in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC Topic 606. ASU No. 2021-08 is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company adopted ASU No. 2021-08 on January 1, 2023. The adoption of ASU No. 2021-08 did not have a material impact on the Company’s consolidated financial statements. In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832). This ASU requires business entities to disclose information about government assistance they receive if the transactions were accounted for by analogy to either a grant or a contribution accounting model. The disclosure requirements include the nature of the transaction and the related accounting policy used, the line items on the balance sheets and statements of operations that are affected and the amounts applicable to each financial statement line item and the significant terms and conditions of the transactions. The ASU is effective for annual periods beginning after December 15, 2021. The disclosure requirements can be applied either retrospectively or prospectively to all transactions in the scope of the amendments that are reflected in the financial statements at the date of initial application and new transactions that are entered into after the date of initial application. The ASU is currently not expected to have a material impact on the Company’s financial results or financial position. From time to time, the FASB or other standards setting bodies issue new accounting pronouncements. Updates to the FASB ASCs are communicated through issuance of ASUs. Unless otherwise discussed, the Company believes that the recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on its consolidated financial statements upon adoption. F- 15 Recently issued accounting pronouncements not yet adopted In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, which provides optional expedients and exceptions for applying U.S. GAAP on contract modifications and hedge accounting to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform, if certain criteria are met. These optional expedients and exceptions provided in ASU No. 2020-04 are effective for the Company as of March 12, 2020 through December 31, 2022. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 (“ASU 2022-06”), which deferred the application dates of Topic 848 to December 31, 2024. The Group currently does not have any financial instrument that reference to LIBOR and does not anticipate the adoption will have a material impact to the Group’s combined and consolidated financial statements. In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment’s profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. This ASU will likely result in the group including the additional required disclosures when adopted. The Group is currently evaluating the provisions of this ASU and expect to adopt them for the year ending December 31, 2024. In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. The Group has evaluated this ASU and expects to add additional disclosures to our combined and consolidated financial statements, once adopted. NOTE-3- ACCOUNTS RECEIVABLE Accounts receivable consists of the following: SCHEDULE OF ACCOUNTS RECEIVABLE December 31, 2023 December 31, 2022 Accounts receivable $ 7,455,252 $ 9,057,741 Allowance for doubtful accounts - - Accounts receivable, net $ 7,455,252 $ 9,057,741 The Company’s accounts receivable primarily includes balance due from customers when the Company’s products are sold and delivered to customers. F- 16 NOTE-4 — PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consist of the following: SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS December 31, 2023 December 31, 2022 Advance to suppliers $ 334,852 $ 333,920 VAT input credits - 355,482 Issue cost related to convertible promissory notes 64,802 81,614 Prepayment for land use right (i) 537,998 569,105 Security deposit (ii) 53,865 56,979 Others receivable (iv) 72,110 53,520 Prepaid expenses and other current assets $ 1,063,627 $ 1,450,620 (i) On July 23, 2021, Sichuan Vtouch entered into a contract with Chengdu Wenjiang District Planning and Natural Resources Bureau for the purchase of a land use right of a parcel of land of 131,010 square feet for a consideration of RMB 3,925,233 (equivalent to $ 537,998 ) for the Company’s new facility. The Company paid the consideration in full by November 18, 2021. Upon issuance of a certificate of land use right by the local government, which is estimated to be obtained by the fourth quarter of 2024, 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 $ 53,865 ) to Chengdu Cross-Strait Science and Technology Industry Development Park Management Committee to obtain a construction license for its new facility. This deposit will be refunded upon the issuance of the construction license by the end of 2024. (iv) Other receivables are mainly employee advances, and prepaid expenses. NOTE 5— PROPERTY, PLANT AND EQUIPMENT, NET SCHEDULE OF PROPERTY , PLANT AND EQUIPMENT September 30, 2023 December 31, 2022 Buildings $ 12,130 $ 12,487 Machinery and equipment 3,944 - Vehicles 41,241 42,453 Construction in progress 12,825,896 10,883,051 Subtotal 12,883,211 10,937,991 Less: accumulated depreciation ( 23,348 ) ( 14,381 ) Property, plant and equipment, net $ 12,859,863 $ 10,923,610 Depreciation expense was $ 9,465 and $ 9,891 for the year ended December 31, 2023 and 2022, respectively. Pursuant to local PRC government guidelines on local environment 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 RMB 115.2 million ($ 16.2 million) (the “Compensation Funds”) for the withdrawal of the right to use of state-owned land (the “property”) and the demolition of all buildings, facilities, equipment and all other appurtenances on the land. F- 17 On March 16, 2021, in order to minimize interruption of the Company’s business, Sichuan Vtouch entered into a leasing agreement with Sichuan Renshou Shigao Tianfu Investment Co., Ltd. (later renamed as Meishan Huantian Industrial Co., Ltd.), a limited liability company owned by the local government, to lease the property, and all buildings, facilities and equipment thereon (the “Demised Properties) of Sichuan Wetouch, commencing from April 1, 2021 until December 31, 2021 at a monthly rent of RMB 300,000 ($ 42,254 ). The lease was renewed on December 31, 2021 at a monthly rent of RMB 400,000 ($ 56,339 ) with a term from January 1, 2022 to October 31, 2024 for the use of the Demised Properties. NOTE 6 – RELATED PARTY TRANSACTIONS Amounts due to a related party are as follows: SCHEDULE OF RELATED PARTY TRANSACTIONS Relationship December 31, 2023 December 31, 2022 Note Mr. Zongyi Lian President and CEO of the Company - 1,665 Payable to employee Total $ - $ 1,665 NOTE 7 — INCOME TAXES Wetouch Wetouch is subject to a tax rate of 21 % per beginning 2018, and files a U.S. federal income tax return. BVI Wetouch Under the current laws of the British Virgin Islands, BVI Wetouch, a wholly owned subsidiary of Wetouch, is not subject to tax on its income or capital gains. In addition, no British Virgin Islands withholding tax will be imposed upon the payment of dividends by the Company to its shareholders. Hong Kong HK Wetouch is subject to profit taxes in Hong Kong at a progressive rate of 16.5 %. PRC Sichuan 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 (the “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 (the “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 an HNTE , entitled to a reduced income tax rate of 15% from October 21, 2020 until October 20, 2023. Sichuan Vtouch is subject to a 25 % income tax rate. F- 18 The CIT Law and its implementation rules impose a withholding income tax at 10%, unless reduced by a tax treaty or arrangement, on the amount of dividends distributed by a PRC-resident enterprise to its immediate holding company outside the PRC that are related to earnings accumulated beginning on January 1, 2008. Dividends relating to undistributed earnings generated prior to January 1, 2008 are exempt from such withholding income tax. The components of the income tax provision are as follows: SCHEDULE OF COMPONENTS OF THE INCOME TAX PROVISION For the Years Ended December 31, 2023 2022 Current tax provision PRC $ 4,082,606 $ 3,352,802 Total current tax provision $ 4,082,606 $ 3,352,802 Deferred tax provision BVI - - Hong Kong - - China - - Total deferred tax provision - - Income tax provision $ 4,082,606 $ 3,352,802 The following table reconciles the PRC statutory rates to the Company’s effective tax rate for the years ended December 31, 2023 and 2022: SCHEDULE OF INCOME TAX RATE For the Years Ended December 31, 2023 2022 PRC statutory income tax rate 25.0 % 25.0 % Effect of income tax holiday 0.0 % 0.0 % Tax rate differential on entities not subject to PRC income ( 1.1 )% ( 0.5 )% R&D additional deduction ( 0.7 )% ( 1.0 )% Non-deductible expenses in the PRC 2.2 % 4.2 % Effective tax rate 25.4 % 27.7 % Deferred tax assets The Company’s had no deferred tax assets are as of December 31, 2023 and 2022, respectively. The Company follows ASC 740, “Income Taxes”, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. As of December 31, 2023 and 2022, taxes for Sichuan Wetouch and Sichuan Vtouch remained open for statutory examination by PRC tax authorities. F- 19 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 December 31, 2023 December 31, 2022 Advance from customers (i) $ 182,277 $ 397,886 Accrued payroll and employee benefits 84,280 89,359 Accrued interest expenses 240,805 122,135 Accrued private placement agent fees (ii) 1,200,000 - Accrued consulting fees (iii) 1,370,972 - Accrued litigation charges (iv) 45,828 - Accrued professional fees 330,180 - Accrued director fees 106,824 - Other tax payables (v) 143,035 261 Other payable to a former stockholder (vi) - 191,180 Others (vii) 288,704 153,803 Accrued expenses and other current liabilities $ 3,992,905 $ 944,624 (i) RMB 2,587,825 (equivalent to $ 365,465 ) of the beginning balance of advance from customers was recognized as revenues for the year ended December 31, 2023 (ii) On March 18, 2023, the Company entered into a private placement consent agreement with a third-party investment bank firm (see Note 10) on the agent fees of US$ 1.2 million, payable only on the completion of the private placement . The Company made the full payment in February, 2024. (iii) In May, 2023, the Company entered into two third-party consulting service agreements for a fee of $ 1.35 million and $ 3.1 million, respectively, payable only on the completion of an underwriting offering. The Company made the full payment in February 2024. (iv) As of December 31, 2023, the Company accrued litigation compensation of RMB 324,501 ($ 45,705 ) and court fee of RMB 10,627 ($ 1,497 ). For the details, please see NOTE 13 — COMMITMENTS AND CONTINGENCIES - Legal Proceedings - vii) and viii). (v) Other tax payables are mainly VAT payable. (vi) Other payable to a former shareholder was paid in March 2023. (vii) 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 (the “Notes”) of an aggregate principal amount of US$ 2,250,000 , due in one year with issuance price discounted 90.0 %. The Notes bore interest at a rate of 8.0 % per annum, payable in one year and matured on October 27, November 5, November 16, November 29 and December 2 of 2022. Net proceeds after debt issuance costs and debt discounts 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 the 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 %. F- 20 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 $ 15.0 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. 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. The following table summarizes the outstanding promissory notes as of December 31, 2023 and December 31, 2022: SUMMARY OF OUTSTANDING PROMISSORY NOTES December 31, 2023 December 31, 2022 Interest rate Principal Amount Carrying Amount Principal Amount Carrying Amount Convertible Note - Talos Victory (Note 9 (b)) 8 % $ - $ - $ - - Convertible Note - Mast Hill (Note 9 (b)) 8 % 740,000 700,448 740,000 635,535 Convertible Note - First Fire (Note 9 (b)) 8 % 156,250 151,457 181,250 156,594 Convertible Note - LGH Note 9 (b)) 8 % 202,500 204,929 207,500 188,987 Convertible Note - Fourth Man (Note 9 (b)) 8 % 152,000 142,397 157,000 128,703 Convertible Note - Jeffery Street Note 9 (b)) 8 % 165,000 150,641 170,000 142,554 Convertible Note - Blue Lake Note 9 (b))Total 8 % - - - - Total $ 1,400,750 $ 1,349,872 $ 1,455,750 $ 1,252,373 Amortization of Discounts for the Year Ended December 31, 2023 ( 110,746 ) Convertible Promissory Notes payable as of December 31, 2023 $ 1,239,126 From December 28, 2022 to April 6, 2023, the lenders of five outstanding Notes and the Company entered into an amendment to the Notes (“Amendment to Promissory Note”) extending the term of the Notes for an additional 6 months. F- 21 From August 29 to September 9, 2023, the lenders of the outstanding Notes and the Company entered into an amendment to the Notes (“Amendment to Promissory Note”) that the Company’s ordinary shares on the Nasdaq Capital Market (the “Uplist”), the Company shall within three (3) business days after the Uplist, pay to the Holders amounts equal to 105% of the total outstanding balance of the Convertible Debenture. During the year ended December 31, 2023, principal and default charges totaling $ 1,200,000 were converted into 25,000 shares of common stock of the Company. During the year ended December 31, 2022, principal, accrued and unpaid interest and default charges totaling $ 1,038,426 were converted into 69,228 shares of common stock of the Company. Two notes were fully converted For the year ended December 31, 2023 and 2022, the Company recognized interest expenses of the Notes in the amount of US$ 252,325 and US$ 224,885 , respectively. *The Company prepaid $ 10,000 legal deposit for each Note till the repayment of the Notes. As of the date of the Report, the Company has repaid remaining Principal and interests accrued. b) Warrants Accounting for Warrants In connection with the issuance of the Notes, the Company also issued to the lenders seven (7) three-year warrants (the “Note Warrants”) to purchase an aggregate of 90,000 shares of the Company’s common stock (the “Warrant Shares”). The Note Warrants issued to the lenders granted the holders the rights to purchase up to 10,000 shares of common stock of the Company at an exercise price of $ 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 Note 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 $ 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 Note 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 Note 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 Note Warrants, the exercise price of the Note Warrants shall be reduced to such lower price, subject to customary exceptions. The lenders may not convert the Notes or exercise the Note 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 shares of common stock immediately after giving effect to such exercise unless such lender notifies the Company at least 61 days prior to such exercise. During the year ended December 31, 2022, three lenders exercised the Note Warrants cashlessly for 14,233 shares of common stock. F- 22 During the year ended December 31, 2023, two lenders exercised the Note Warrants cashlessly for 22,338 shares of common stock. The fair values of these warrants as of December 31, 2023 were calculated using the Black-Scholes option-pricing model with the following assumptions: SCHEDULE OF FAIR VALUE OF WARRANTS December 31, 2023 Volatility (%) Expected dividends yield (%) Weighted average expected life (year) Risk-free interest rate (%) (per annum) Common stock purchase warrants liability as of December 31, 2022(US$) Changes of fair value of common stock purchase warrants liability (+ (loss)/(- (gain)(US$) Common stock purchase warrants liability as of December 31, 2023 (US$) Convertible Note - Talos Victory (Note 9 (a)) 545.7 % 0.0 % 0.8 5.03 % 14,803 28,310 43,113 Convertible Note - Mast Hill (Note 9 (a)) 545.7 % 0.0 % - 5.03 % 101,293 ( 101,293 ) - Convertible Note - First Fire (Note 9 (a)) 545.7 % 0.0 % 0.9 5.03 % 33,919 64,456 98,375 Convertible Note - LGH Note 9 (a)) 545.7 % 0.0 % 0.9 5.03 % 34,028 64,489 98,517 Convertible Note - Fourth Man (Note 9 (ab)) 545.7 % 0.0 % 0.9 5.03 % 14,398 27,241 41,639 Convertible Note - Jeffery Street Note 9 (a)) 545.7 % 0.0 % 0.9 5.03 % 34,134 ( 7,870 ) 26,264 Convertible Note - Blue Lake Note 9 (a)) 545.7 % 0.0 % 0.9 5.03 % 24,382 46,080 70,463 Total Total 256,957 121,413 378,371 (c) Registration Rights Agreements Pursuant to the terms of the Registration Rights Agreements between the Company and lenders of the Notes, 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 Note Warrants within sixty days from the date of each Registration Rights Agreement. The Company also granted the lenders piggyback registration rights on such securities pursuant to the Purchase Agreements . NOTE 10— STOCKHOLDERS’ EQUITY 1) Common Stock The Company’s authorized shares of common stock was 15,000,000 shares with par value of $ 0.001 . On December 22, 2020, the Company issued 5,181 shares of common stock to The Crone Law Group, P.C. or its designees for legal services (see Note 11). On January 1, 2021, the Company issued an aggregate of 15,541 shares to a third party service provider for consulting services that had been rendered. F- 23 On April 14, April 27 and September 1, 2022, the Company issued 5,777 , 5,599 and 2,857 shares of common stock upon cashless exercise of the Note Warrants to three lenders, respectively. (see Note 9 (b)). During the year ended December 31, 2022, the Company issued 6,211 shares of common stock to a third party upon exercise of warrants (see Note 11). During the year ended December 31, 2022, the Company issued 69,228 shares of common upon conversion of convertible promissory note payable (see note 9 (a)). On January 19, 2023, the Company sold an aggregate of 8,000,000 shares of common stock to purchasers in a private placement for an aggregate purchase price of $ 40,000,000 , or $ 5.00 per share. On January 20, 2023, the Company received net proceeds of $ 40 million accordingly. During the year ended December 31, 2023, the Company issued 25,000 shares of common stock upon conversion of convertible promissory note payable (see note 9 (a)). During the year ended December 31, 2023, the Company issued 22,338 shares to two third parties upon exercise of warrants (see Note 9(b)). As of December 31, 2023, the Company had 9,732,948 issued and outstanding shares of common stock. 2) Reverse Stock Split On February 17, 2023, the Company’s board of directors authorized a reverse stock split of common stock with a ratio of not less than one to five (1:5) and not more than one to eighty (1:80), with the exact amount and the timing of the reverse stock split to be determined by the Chairman of the Board. Upon effectiveness of such reverse stock split, the number of authorized shares of the common stock of the Company will also be decreased in the same ratio. Pursuant to Section 78.209 of the Nevada Revised Statutes, the reverse stock split does not have to be approved by the stockholders of the Company. On July 16, 2023, the Company’s board of directors approved the reverse stock split of the Company’s common stock at a ratio of 1-for-20. On July 16, 2023, the Company filed a certificate of change (with an effective date of July 16, 2023) with the Nevada Secretary of State pursuant to Section 78.209 of the Nevada Revised Statutes to effectuate a 1-for-20 reverse stock split of its common stock. On September 11, 2023, the reverse stock split was approved by the Financial Industry Regulatory Authority and took effect on September 12, 2023. All share information included in this annual report has been adjusted as if the reverse stock split occurred as of the earliest period presented. 3) Statutory Reserve and Restricted Net Assets Under PRC rules and regulations, all companies in the PRC are required to appropriate 10% of their net income to a statutory surplus reserve until the reserve balance reaches 50% of their registered capital. The appropriation to this statutory surplus reserve must be made before distribution of dividends can be made. The statutory reserve is non-distributable, other than during liquidation, and can be used to fund previous years losses, if any, and may be converted into share capital by issuing new shares to existing shareholders in proportion to their shareholders or by increasing the par value of the shares currently outstanding, provided that the remaining balance of the statutory reserve after such issue is not less than 25% of the registered capital. Appropriations to the discretionary surplus reserve are made at the discretion of the board of directors. The statutory reserve may be applied against prior year losses, if any, and may be used for general business expansion and production or increase in registered capital, but are not distributable as cash dividends. For the years ended December 31, 2023 and 2022, the Company made appropriations to the reserve fund of RMB 8,172,303 (equivalent to US$ 1,154,131 ) and RMB 6,554,271 (equivalent to US$ 973,718 ), respectively. F- 24 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 the 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 5,181 shares and warrants to purchase 10,518 shares of common stock 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. 5,181 shares of common stock underlying such warrants were vested on December 22, 2020 and 6,211 shares were issued upon exercise of these warrants on September 21, 2022 and warrant to purchase 4,307 shares remained outstanding for The Crone law Group, P.C. or its designees for legal services. 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 15,541 shares and warrants to purchase 31,554 shares of common stock to a third party service provider for consulting services that had been rendered. These warrants have a five-year term and are exercisable at one cent per share. The 15,541 shares of common stock and warrants to purchase 31,554 shares of commons stock vested on January 1, 2021. The fair value of the above warrants 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 51.3 % and an average interest rate of 0.12 %. As of December 31, 2023, the Company had warrants outstanding to purchase 35,861 shares of common stock related to above mentioned services with i) weighted average exercise price of $ 0.2 ; ii) weighted average remaining contractual life of 0.2 years; and iii) aggregate intrinsic value of $ 0.3 million. NOTE 12. WEIGHTED AVERAGE NUMBER OF SHARES In October 2020, the Company entered into a reverse merger transaction. The Company computes the weighted-average number of shares of common stock outstanding in accordance with ASC 260 states that in calculating the weighted average shares when a reverse merger takes place in the middle of the year, the number of common shares outstanding from the beginning of that period to the acquisition date shall be computed on the basis of the weighted-average number of shares of common stock of the legal acquiree (accounting acquirer) outstanding during the period multiplied by the exchange ratio established in the merger agreement. The number of shares of common stock outstanding from the acquisition date to the end of that period shall be the actual number of shares of common stock of the legal acquirer (the accounting acquiree) outstanding during that period. NOTE 13 - RISKS AND UNCERTAINTIES Credit Risk – The carrying amount of accounts receivable included in the balance sheet represents the Company’s exposure to credit risk in relation to its financial assets. No other financial asset carries a significant exposure to credit risk. The Company performs ongoing credit evaluations of each customer’s financial condition. The Company maintains allowances for doubtful accounts and such allowances in the aggregate have not exceeded management’s estimates. The Company has its cash in bank deposits primarily at state owned banks located in the PRC. Historically, deposits in PRC banks have been secured due to the state policy of protecting depositors’ interests. The PRC promulgated a Bankruptcy Law in August 2006, effective June 1, 2007, which contains provisions for the implementation of measures for the bankruptcy of PRC banks. The bank deposits with financial institutions in the PRC are insured by the government authority for up to RMB 500,000 . F- 25 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 year ended December 31, 2023, six customers accounted for 22.5 %, 16.5 %, 15.6 %, 14.1 %, 11.3 % and 10.1 %, respectively, of the Company’s revenue. For the year ended December 31, 2022, six customers accounted for 21.2 %, 16.1 %, 14.8 %, 13.7 %, 11.9 % and 10.1 %, respectively, of the Company’s revenue. And the Company’s top 10 customers aggregately accounted for 99.7 % and 98.7 % of the total revenue for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, four customers accounted for 31.7 %, 16.2 %, 15.8 % and 11.5 % of the total accounts receivable balance, respectively. As of December 31, 2022, three customers accounted for 32.2 %, 22.8 %, and 14.0 % 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 13.3 % (one supplier) and 13.2 %, 12.7 %, 10.7 % and 10.6 %(four suppliers) of the Company’s total raw material purchases for the years ended December 31, 2023 and 2022, respectively. NOTE 14 — COMMITMENTS AND CONTINGENCIES Legal Proceedings From time to time, the Company and its subsidiaries are parties to various legal actions arising in the ordinary course of business. Although Hong Kong Wetouch, Sichuan Wetouch, the deconsolidated subsidiary of the Company (see Note 2- (a) - Deconsolidation of Sichuan Wetouch) , Sichuan Vtouch and Mr. Guangde Cai, the former Chairman and director of the Company, were named as defendants in several litigation matters, as of the date of this report, all such matters have been settled and Sichuan Wetouch, Hong Kong Wetouch and Mr. Guangde Cai were unconditionally and fully discharged and released therefrom Accordingly, there are no pending material legal proceedings against the Company as of the date of this report. i) An equity dispute case with Yunqing Su with a disputed amount of RMB 1,318,604 (equivalent to $ 185,721 ) On June 22, 2017, Yunqing Su, a former shareholder, entered an Equity Investment Agreement with Sichuan Wetouch and Guangde Cai, agreed that Yunqing Su would invest RMB 1 million (equivalent to $ 140,847 ) to purchase 370,370.37 original listed shares of the target company, Sichuan Wetouch, and provided for the exit mechanism in the agreement. However, the target company failed to be listed prior to December 31, 2017 as agreed. On June 22, 2017, Guangde Cai and Yunqing Su entered into a supplementary agreement, pursuant to which Guangde Cai shall repurchase all of Yunqing Su’s equity interest and pay the interest. Sichuan Wetouch repaid Yunqing Su the interest of RMB 220,000 (equivalent to $ 30,986 ) and the principal of RMB 128,000 (equivalent to $ 18,028 ) in November 2018. The repayment period set forth in the supplementary agreement expired, but Sichuan Wetouch and Guangde Cai failed to pay the principal and interest owed to Yunqing Su. Yunqing Su sued Sichuan Wetouch and Guangde Cai in the Renshou County People’s Court of Sichuan Province, and the case was filed on February 9, 2022. On May 9, 2022, pursuant to a civil mediation statement issued by the Renshou County People’s Court of Sichuan Province, Sichuan Wetouch and Guangde Cai agreed to repay Yunqing Su the principal and interest in the total amount of RMB 1,318,604 (equivalent to $ 185,721 ). Sichuan Wetouch fully paid the aforesaid amount on March 15, 2023. F- 26 ii) Legal case with Chengdu SME Credit Guarantee Co., Ltd. on a court acceptance fee of RMB 338,418 (equivalent to $ 47,665 ) On July 5, 2013, Sichuan Wetouch obtained a one-year loan of RMB 60.0 million (equivalent to $ 8.5 million) from Bank of Chengdu, at an annual interest rate of 8.61 %. Chengdu SME Credit Guarantee Co., Ltd (“Chengdu SME”), a third party, provided a 70% guarantee and Bank of Chengdu retained 30% of the risk, while Chengdu Wetouch , a related party company, owned by Mr. Guangde Cai and Mr. Guangde Cai provided joint and several liability guarantee for 100% of the loan. On July 31, 2014, Sichuan Wetouch repaid RMB 5.0 million (equivalent to $ 0.7 million). The remaining loan of RMB 55.0 million (equivalent to $ 7.7 million) was twice extended to be due on August 22, 2018. Upon the loan becoming due, but unpaid by the Company, Chengdu SME paid the outstanding balance of RMB 55 million (equivalent to $ 7.7 million) to Bank of Chengdu. The Company subsequently repaid RMB 55 million (equivalent to $ 7.7 million) to Chengdu SME; however, Chengdu SME filed two separate lawsuits against the Company to recover loan default penalties from the Company. The loan default penalties were (a) RMB 5.8 million (equivalent to $ 0.8 million) related to the 30% of the remaining loan balance repaid by Chengdu SME and (b) RMB 6.0 million (equivalent to $ 0.8 million) related to the 70% of the remaining loan balance repaid by Chengdu SME. During the year ended December 31, 2017, the Company recorded loan default penalties, and related liabilities, of $ 1.7 million. Chengdu SME applied to the Chengdu High-tech Court for enforcement of the above-mentioned loan default penalties of RMB 5.8 million (equivalent to $ 0.8 million) and RMB 6.0 million (equivalent to $ 0.8 million) on December 30, 2018. On March 12, 2020, the Enforcement Settlement Agreement issued by the Chengdu High-tech Court confirmed that Sichuan Wetouch still owed RMB 5.8 million (equivalent to $ 0.8 million) and RMB 6.0 million (equivalent to $ 0.8 million) of loan default penalties. The agreement did not specify which party shall pay the court fee. On September 16, 2020, Sichuan Wetouch made a full repayment of RMB 11.8 million (equivalent to $ 1.7 million) of the above loan default penalties to Chengdu SME. On March 16, 2023, pursuant to an Enforcement Settlement Agreement entered among Chengdu SME, Sichuan Wetouch and Chengdu Wetouch, Chengdu Wetouch agreed to pay the court acceptance fee of RMB 338,418 (equivalent to $ 47,665 ). On March 17, 2023, Chengdu Wetouch made a full payment of the above court fee to Chengdu SME. iii) Legal case with Lifan Financial Leasing (Shanghai) Co., Ltd. and Sichuan Wetouch, Chengdu Wetouch, Meishan Wetouch and Xinjiang Wetouch Electronic Technology Co., Ltd. on a court acceptance fee of RMB 250,470 (equivalent to $ 35,278 ) On November 20, 2014, Lifan Financial Lease (Shanghai) Co., Ltd. (“Lifan Financial”) and Chengdu Wetouch entered into a Financial Lease Contract (Sale and Leaseback), which stipulated that Lifan Financial shall lease the equipment to Chengdu Wetouch after the purchase of the production equipment owned by Chengdu Wetouch at a purchase price, the purchase price/lease principal shall be RMB 20 million, the rental interest rate of the leased equipment shall be 8 % per year, and the lease term shall be 24 months. Upon the expiration of the lease term, Lifan Financial shall transfer the leased property to Chengdu Wetouch or a third party designated by Chengdu Wetouch at the price of RMB0 after Chengdu Wetouch has fully fulfilled its obligations, including, without limitation, the payment of the rent, liquidated damages (if any) and other contractual obligations. Guangde Cai, Sichuan Wetouch, Meishan Wetouch, an affiliated company to Mr. Guangde Cai and Xinjiang Wetouch Electronic Technology Co., Ltd. (“Xinjiang Wetouch”) provided Lifan Financial with joint and several liability guarantee. F- 27 On August 9, 2021, Lifan Financial filed a lawsuit against Chengdu Wetouch, Guangde Cai, Sichuan Wetouch, Meishan Wetouch and Xinjiang Wetouch in the Chengdu Intermediate People’s Court. The court ruled that: 1) the Financial Lease Contract (Sale and Leaseback) was terminated; 2) the leased property was owned by Lifan Financial; 3) Chengdu Wetouch shall pay Lifan Financial all outstanding rent and interest thereon in the total amount of RMB 22,905,807 (equivalent to $ 3.2 million) as well as the difference between the liquidated damages and the value of the leased property recovered; etc. The parties executed a settlement agreement on March 7, 2023, in which the parties confirmed that the outstanding payment of RMB 22,905,807 (equivalent to $ 3.2 million) has been fully paid up on December 23, 2021 and the above cases have been settled. As for the court acceptance fees that were not previously agreed upon by the parties, Chengdu Wetouch agreed to pay the court acceptance fee of RMB 250,470 (equivalent to $ 35,278 ). Chengdu Wetouch paid the aforesaid fees to Lifan Financial on March 10, 2023. iv) Legal case with Sichuan Renshou Shigao Tianfu Investment Co., Ltd and Renshou Tengyi Landscaping Co., Ltd. on a court acceptance fee of RMB 103,232 (equivalent to $ 14,540 ) On March 19, 2014, Chengdu Wetouch, a related party, obtained a two and half-year loan of RMB 15.0 million (equivalent to $ 2.1 million) from Chengdu Bank Co., Ltd. Gaoxin Branch (“Chengdu Bank Gaoxin Branch”) , with Chengdu Hi-tech Investment Group Co., Ltd. (“CDHT Investment”) acting as guarantor to pay off the loan principal and related interests, while Sichuan Wetouch and Hong Kong Wetouch as guarantors, were jointly and severally liable for such debts. Upon the loan due in January 2017, Chengdu Wetouch defaulted the loan, thus, CDHT Investment filed a lawsuit against Chengdu Wetouch, Sichuan Wetouch, and Hong Kong Wetouch demanding a full repayment of such debts. To support the local economic development as well as Chengdu Wetouch, two government-backed companies, Sichuan Renshou Shigao Tianfu Investment Co., Ltd. (“Sichuan Renshou”) and Renshou Tengyi Landscaping Co., Ltd. (“Renshou Tengyi”) provided their bank deposits of RMB 12.0 million (equivalent to $ 1.7 million) as pledge, while Mr. Guangde Cai and Sichuan Wetouch also provided counter-guarantee. Upon the expiration of the guarantee, Chengdu Wetouch still defaulted on repayment of the above pledge. As a result, CDHT Investment levied this collateral of RMB 12.0 million. On November 21, 2019. Subsequently, Sichuan Renshou and Renshou Tengyi filed with Chengdu Intermediate People’s Court a lawsuit demanding an asset recovery of RMB 12.0 million (equivalent to $ 1.7 million) pursuant to the counter guarantee agreement. On December 2, 2019, pursuant to the reconciling agreement issued by Chengdu Intermediate People’s Court, the parties agreed to cancel the demand to seize property of Sichuan Wetouch rather than the property of Chengdu Wetouch, and to waive freezing Guangde Cai’s 60% shareholding equity in Xinjiang Wetouch Electronic Technology Co., Ltd. On October 9, 2020, pursuant to a settlement and release agreement, Sichuan Wetouch, Hong Kong Wetouch and Guangde Cai are fully discharged and released from any and all obligations under the outstanding debts, and from all liabilities under guarantee with Chengdu Wetouch being responsible for the outstanding debts by December 31, 2020. On October 27, 2020, Chengdu Wetouch made a full payment of the above debts. The settlement and release agreement did not specify which party shall pay the court acceptance fee. On March 10, 2023, pursuant to an enforcement settlement agreement entered among Sichuan Renshou, Renshou Tengyi, Sichuan Wetouch, Chengdu Wetouch, and other relevant parties, Sichuan Wetouch agreed to pay the court acceptance fee of RMB 103,232 (equivalent to $ 14,540 ). On March 17, 2023, Chengdu Wetouch made a full payment of the above court fee to Sichuan Renshou. F- 28 v) Legal case with Chengdu High Investment Financing Guarantee Co. on a court acceptance fee of RMB 250,000 (equivalent to $ 35,211 ) On March 22, 2019, Chengdu High Investment Financing Guarantee Co., Ltd, (“Chengdu High Investment”) filed a lawsuit against Hong Kong Wetouch in the Chengdu Intermediate People’s Court, claiming that Hong Kong Wetouch should assume the guarantee liability for the debt payable by Chengdu Wetouch. On May 21, 2020, the court rendered a judgment ordering Hong Kong Wetouch to pay compensation of RMB 17,467,042 (equivalent to $ 2,460,181 ), interest, liquidated damages, liquidated damages for late performance, etc. On March 16, 2023, Chengdu Wetouch, Sichuan Wetouch and Chengdu High Investment entered into a settlement enforcement agreement, confirming that Chengdu High Investment had received RMB 17,547,197 (equivalent to $ 2,471,471 ) on October 27, 2020 paid by Chengdu Wetouch, and the above case has been settled. As for the court acceptance fees that were not previously agreed upon by the parties, Chengdu Wetouch agreed to pay the court acceptance fee of RMB 250,000 (equivalent to $ 35,211 ). Chengdu Wetouch paid the aforesaid fees to Chengdu High Investment on March 20, 2023. vi) Legal case with Hubei Lai’en Optoelectronics Technology Co., Ltd. on a product payment of RMB 157,714 (equivalent to $ 22,213 ) Sichuan Wetouch purchased products from Hubei Lai’en Optoelectronics Technology Co., Ltd. (“Hubei Lai’en) multiple times from March to June 2019, but failed to pay the corresponding amount of RMB 137,142.7 for the purchased products. On April 6, 2022, Hubei Lai’en filed a lawsuit against Sichuan Wetouch in the Renshou County People’s Court of Sichuan Province, requesting payment of overdue payment for the products and liquidated damages. On May 31, 2022, the Renshou County People’s Court rendered a judgment that Sichuan Wetouch shall pay Hubei Lai’en the price of goods of RMB 137,143 and liquidated damages of RMB 20,571 . Sichuan Wetouch paid the above amount to Hubei Lai’en on March 15, 2023. vi) Legal case with Chengdu Hongxin Shunda Trading Co., Ltd. on settlement of accounts payable and related fund interests totalling RMB 3,021,294 ($ 425,540 ) In March 2022, Sichuan Vtouch purchase steel products from Chengdu Hongxin Shunda Trading Co., Ltd. (“Chengdu Hongxin”) for facility construction, but failed to settle the accounts payable on time. In July 2023, Chengdu Hongxin filed a lawsuit to a local district court against the Company and its new facility constructors (“the three defendants”) requesting the settlement of the remaining accounts payable and the corresponding fund interests, penalties and legal fees, totalling of RMB 3,021,294 ($ 425,540 ). The court judged Sichuan Vtouch to pay and ordered the freezing of bank accounts of these three defendants. On September 25, 2023, the Company appealed to Chengdu Municipal Intermediate People’s Court, arguing the calculation of fund interests and penalties ordered by the lower court unfair and not in line with the law regulations. As of the date of this report, the management assessed that possibility and amount of contingency cannot be estimated given the current status. vii) Legal case with Mr. Guangchuang Liu on a refund of equity transfer price and related interests totalling RMB 324,501 ($ 45,705 ) In July 2022 Mr. Liu entered into an equity transfer agreement with Mr. Guangde Cai and Sichuan Vtouch with the intention to subscribe the Company’s shares of 20,000 for RMB 315,245 ($ 44,104 ). In April, 2023, Mr. Liu filed a lawsuit to Shenzhen Nanshan District People’s Court against Mr. Guangde Cai and Sichuan Vtouch requesting the refund of this equity transfer price and related fund interests totalling RMB 324,501 ($ 45,705 ). Per the court decision of December 13, 2023, the defendants were ordered to make the payments by the end of 2023. As of December 31, 2023, the Company recorded the liabilities of RMB 324,501 ($ 45,705 ) and subsequently, the Company has made the payment in full in January, 2024. F- 29 viii) Legal case with Sichuan Yali Cement Manufacturing Co., Ltd. and Sichuan Chunqiu Development & Construction Group Co. Ltd. on a debt payable of RMB RMB 1,656,480 (equivalent to $ 233,310 ) and related interest, legal fees and penalties. On August 10, 2022, Sichuan Yali Cement Manufacturing Co., Ltd. (“Yali Co.”) and Sichuan Chunqiu Development & Construction Group Co. Ltd. (“ Chunqiu Co.”) entered into construction materials contract for Sichuan Vtouch’s new facility. Under this contract, Sichuan Vtouch was listed as the joint responsibility party for the payment settlement between Yali Company and Chunqiu Company. On February 15, 2023, Yali Co. filed a lawsuit against Chunqiu Co. to the Chengdu Wenjiang District People’s Court, claiming that Chunqiu Co. should pay the remaining debt of RMB RMB 1,656,480 (equivalent to $ 233,310 ) and related interest, legal fees and penalties, and that Sichuan Vtouch should assume the guarantee liability for the debt payable by Chunqiu Co. On August 12, 2023, the court rendered a judgment ordering Chunqiu Co. to pay to Yali Co. for above mentioned amount. Sichuan Vtouch was ordered joint liability of such aforesaid repayment. On August 22, 2023, Chunqiu Co. appealed to Chengdu Municipal Intermediate People’s Court against Yali Co. and Sichuan Vtouch requesting Sichuan Vtouch to be responsible for this debt payable. On October 30, 2023, the court ordered Chunqiu Co. to pay pack all the debts, and Sichuan Vtouch to bear the joint and several liability for the above debts of Chunqiu Co. including a court fee of RMB 10,627 ($ 1,497 ) with Chunqiu liability. As of December 31, 2023, Sichuan Vtouch accrued this court fee of RMB 10,627 ($ 1,497 ). Capital Expenditure Commitment As of December 31, 2023, the Company has no capital expenditure commitment. NOTE 15 — REVENUES The Company’s geographical revenue information is set forth below: SCHEDULE OF GEOGRAPHICAL REVENUE INFORMATION For the Years Ended December 31, 2023 2022 Sales in PRC $ 27,668,985 $ 26,438,509 Sales in Overseas -Republic of China (ROC, or Taiwan) 6,255,602 6,146,043 -South Korea 5,619,228 5,221,209 -Others 162,124 126,351 Sub-total 12,036,954 11,484,603 Total revenues $ 39,705,939 $ 37,923,112 NOTE 16 — SUBSEQUENT EVENTS On February 20, 2024, Wetouch entered into an underwriting agreement (the “Underwriting Agreement”) with WestPark Capital, Inc. and Craft Capital Management LLC, as representatives (the “Representatives”) of the underwriters listed therein (the “Underwriters”), pursuant to which the Company agreed to sell to the Underwriters in a firm commitment underwritten public offering (the “Offering”) an aggregate of 2,160,000 shares of the Company’s common stock at a public offering price of $ 5.00 per share. In addition, the Underwriters were granted an over-allotment option for a period of 45 days to purchase up to an additional 324,000 shares of common stock. The Offering closed on February 23, 2024. The common stock began trading on the Nasdaq Capital Market under the symbol WETH on February 21, 2024. The Company conducted the Offering pursuant to a Registration Statement on Form S-1 (File No. 333-270726), as amended, which was declared effective by the United States Securities and Exchange Commission on February 14, 2024 (the “Registration Statement”). The Offering was closed on February 23, 2024. The net proceeds to the Company from the Offering, after deducting the underwriting discount, the Underwriters’ fees and expenses, and the Company’s Offering expenses, are approximately $ 9.2 million. Proceeds from the Offering will be used for the construction of a new factory, facilities and office buildings, the purchase of two production lines in the new factory, research and development, the repayment of the remaining five convertible promissory notes, and working capital and general corporate purposes. On February 23, 2024, pursuant to the Underwriting Agreement, the Company issued the Representatives’ Warrants (the “Representatives’ Warrants”) to the Representatives to purchase a number of shares of Common Stock equal to 2.0 % of the total number of shares of Common Stock (including any shares sold in the Offering to cover over-allotments) sold in the Offering at an exercise price equal to 125.0 % of the public offering price. The Representatives’ Warrants will not be exercised, sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the securities for a period of 180 days beginning on the date of commencement of sales of the Offering. In addition, the Representatives’ Warrants will not be exercisable for more than five years from the commencement of sales of the Offering. F- 30