Wetouch Technology Inc.
For the period ended Dec 31, 2024. Filed Sep 11, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Sep 11, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-04-17.
0001493152-24-014934
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-09-11.
0001213900-25-086651
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 132 previous paragraphs and 128 current paragraphs.
45 unchanged; 41 reworded; 39 added; 46 removed; 0 previous and 3 current paragraphs rearranged.
Tables are not compared: 17 previous and 14 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (39)
Current report
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Current report
Because our operations are primarily in China, we are subject to complex and evolving PRC laws and regulations. These include restrictions on capital flows, dividend payments, currency conversion, cybersecurity and data privacy, and governmental discretion over overseas securities offerings. These risks could materially affect our ability to transfer funds, conduct offerings, or continue operations in their current form. See “Item 1A. Risk Factors—Risks Related to Doing Business in China.”
Current report
As of March 31, 2025, the Company has contributed RMB 348.0 million (US$47.7 million) to its PRC subsidiary through intermediate holding companies, which were accounted for as long-term investments. These funds have been used by our PRC subsidiary in its operations. To date, no dividends or other distributions have been made by our PRC subsidiary to the Company. We may rely on future distributions from our PRC subsidiary to fund our holding company obligations, subject to PRC law and restrictions. For more details, see “Item 1A. Risk Factors—Risks Related to Doing Business in China—As a holding company, we conduct our operations primarily through our PRC subsidiary and face risks and uncertainties associated with this structure.”
Current report
Under current PRC law, dividend payments by our PRC subsidiary are limited to accumulated profits determined in accordance with PRC accounting standards and are subject to statutory reserve requirements. Dividends to the Company are also subject to withholding tax, generally 10%, but reduced to 5% if treaty conditions are met. There is no assurance that the reduced rate will apply. For more details, see “Item 1A. Risk Factors—Risks Related to Doing Business in China—Uncertainties with respect to the PRC legal system, including the enforcement of laws and changes in laws and regulations, could adversely affect us and limit the legal protections available.”
Current report
We generate revenues through sales of our various touchscreen products. For the years ended December 31, 2024 and 2023, we recognized approximately $42.3 million and $39.7 million, respectively, in total revenues.
Current report
We sell our touchscreen products both domestically in China and internationally, covering major areas in Mainland China, including but not limited to the eastern, southern, northern and southwest regions of Mainland China, Taiwan, South Korea, and Germany. We believe that we have established a strong and diversified client base. For the years ended December 31, 2024 and 2023, our domestic sales accounted for approximately 64.7% and 69.6%, respectively, of our revenues, and our international sales accounted for approximately 35.3% and 30.3%, respectively, of our revenues.
Current report
Since our incorporation, we have effected two reverse stock splits of our common stock, including a 1-for-70 reverse split in 2020 and a 1-for-20 reverse split in 2023, and all share and per share information in this Annual Report has been retroactively adjusted to reflect these actions. For more details, see “Item 1. Business - Corporate History and Structure - Reverse Stock Splits.”
Current report
Results of Operations
Current report
PRC Domestic Market
Current report
Gross profit was $13.6 million during the year ended December 31, 2024, compared to $17.2 million in the same period of 2023. Our gross profit margin decreased to 32.2% during the year ended December 31, 2024 as compared to 43.3% for the same period of 2023, primarily due to i) an increase of 29.9% in cost of goods sold, and ii) sales discount to certain long-term customers at year-end. During the year ended December 31, 2024, we had an increase of 31.8% in costs of raw materials, among which the chip cost accounted for 43%, and the increase of 24.3% of labor costs due to additional hiring of technicians. Chip costs increased starting in the first quarter of 2024 and stabilized by the third quarter of 2024.
Current report
Selling expenses were $0.8 million for the year ended December 31, 2024, compared to $0.6 million in the same period in 2023, representing an increase of $0.2 million, or 133.3%, primarily due to an increase in traveling and transportation expenses of our selling and marketing team to visit customers and attend exhibitions in order to promote the increase of sales during the year ended December 31, 2024.
Current report
General and administrative expenses were $3.5 million for the year ended December 31, 2024, compared to $3.8 million in the same period in 2023, representing a decrease of $0.3 million, or 7.9%. The decrease was primarily due to i) accrued placement agent fees of $1.2 million related to the private placement consent agreement with representatives of the private placement that took place on January 19, 2023, partially offset by only ii) increase of amortized consulting fees of $0.6 million (see NOTE 4- PREPAID EXPENSES AND OTHER CURRENT ASSETS of the accompanying financial statements), and $0.1 million of miscellaneous expenses including $44,862 allowance for credit losses of advance to vendors and $54,873 provision for obsolete inventory.
Current report
Research and development (“R&D”) expenses were nil and $84,551 for the years ended December 31, 2024 and 2023, respectively. The Company did not incur any research and development expenses during the year ended December 31, 2024.
Current report
In connection with the issuance of convertible promissory notes in October, November and December, 2021, the Company also issued seven (7) three-year warrant (the “ Note Warrants”) to purchase an aggregate of 1,800,000 shares of the Company’s common stock (the “Warrant Shares”) (see NOTE 10 — CONVERTIBLE PROMISSORY NOTES PAYABLE).
Current report
Net cash provided by operating activities was $1.1 million for the year ended December 31, 2024, as compared to $12.7 million provided by operating activities for the same period in 2023, representing a decrease of $11.6 million, or 91.3%.
Current report
The positive cash flow for the year ended December 31, 2024 was primarily due to i) $6.0 million net income during the year ended December 31, 2024, ii) the increase of $0.6 million in accounts payable and $0.1 million in amounts due to a related party, partially offset by iii) the increase of $0.4 million gain on changes in fair value of common stock purchase warrants liability, $0.2 million in accounts receivable and $1.8 million in prepaid expenses and other current assets (mainly in prepaid $0.9 million of consulting service fees and $1.0 million in market research fees) , and iv) the decrease of $3.3 million in accrued expenses and other current liabilities.
Current report
The positive cash flow for the year ended December 31, 2023 was primarily due to i) $8.3 million net income during the year ended December 31, 2023; ii) the decrease of $1.2 million in accounts receivable, $0.2 in inventory and $0.3 million in prepaid expenses and other current assets, iii) the increase of $3.1 million in accrued expenses and other current liabilities, and partially offset by iv) the decrease of $0.7 million in accounts payable.
Current report
Net cash provided by financing activities for the year ended December 31, 2024 was $7.6 million, including $9.0 million in net proceeds from the 2024 Uplisting Offering, partially offset by $1.4 million repayment of convertible promissory notes.
Current report
As of December 31, 2024, the Company had commitment of RMB5.0 million (equivalent to $0.7 million) for construction in progress.
Current report
On February 23, 2024, immediately upon the closing of the 2024 Public Offering, the Company made a full payment on the remaining five outstanding promissory notes. (see details in NOTE 10 – CONVERTIBLE PROMISSORY NOTES PAYABLE-a) Convertible promissory notes). There were no convertible promissory notes as of December 31, 2024.
Current report
The Note Warrant (see details in NOTE 10 – CONVERTIBLE PROMISSORY NOTES PAYABLE-b) Note Warrant) was issued in 2021 and was valid for three years and expired during the year ended December 31, 2024.
Current report
Construction in progress, funded by the Company’s working capital, represents manufacturing facilities and office buildings under construction. It is stated at cost and transferred to property, plant and equipment when it is substantially ready for its intended use. No depreciation is recorded for construction in progress. Management estimates that construction in progress for our new facilities will be completed by the end of the fourth quarter of 2025, at which time it will be transferred to property, plant and equipment and depreciation will begin.
Current report
Fair value measurement
Current report
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact as well as assumptions that market participants would use when pricing the asset or liability.
Current report
Authoritative literature provides a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset or liability categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement as follows:
Current report
Level 1
Current report
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Current report
Level 2
Current report
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Current report
Level 3
Current report
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
Current report
Accounting guidance also describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach, and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.
Current report
When available, the Company uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Company measures fair value using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates and currency rates.
Current report
Lease
Current report
The Company adopted ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) for all periods presented. The Company elected the short-term lease exemption for all contracts with lease terms of 12 months or less.
Current report
Under the guidance of ASU 2016-02, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements.
Current report
The Company’s lease terms include options to renew or terminate the lease when it is reasonably certain that it will exercise the option. The Company determines if a contract contains a lease based on whether it has the right to obtain substantially all of the economic benefits from the use of an identified asset that the Company does not own and whether it has the right to direct the use of an identified asset in exchange for consideration. Right of use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are recognized as the amount of the lease liability, adjusted for lease incentives received. Lease liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is the Company’s incremental borrowing rate (“IBR”), because the interest rate implicit in most of the Company’s leases is not readily determinable. The IBR is a hypothetical rate based on the Company’s understanding of what its credit rating would be and the resulting interest it would pay to borrow an amount equal to the lease payments in a similar economic environment over the lease term on a collateralized basis. Lease payments may be fixed or variable, however, only fixed payments or in-substance fixed payments are included in the Company’s lease liability calculation. Variable lease payments are recognized in operating expenses in the period in which the obligation for those payments is incurred.
Current report
The lease right-of-use assets are initially measured at the carrying amount of the lease liability and adjusted for any prepaid or accrued lease payments, remaining balance of lease incentives received, unamortized initial direct costs, or impairment charges relating to the right-of-use-asset. Lease expense for minimum lease payments exclusive of value-added tax is recognized on a straight-line basis over the lease term The new standard provides a number of optional practical expedients at transition. The Company elected certain practical expedients that must be elected as a package, which permit the Company to not reassess, under the new standard, prior conclusions about (1) lease identification, (2) lease classification and (3) initial direct costs. Additionally, the Company elected a short-term lease exception policy, which allows entities to not apply Topic 842 to short-term leases (i.e. leases with terms of 12 months or less) and a hindsight policy, which allows an entity to include current considerations for existing leases when determining initial lease terms. The Company has also elected to account for lease and non-lease components as a single component for all leases and elected to utilize an IBR (incremental borrowing rate) that equals the risk free rate plus premium for all leases when calculating the lease liability.
Current report
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards issued.
Removed paragraphs (46)
Previous report
We were originally incorporated under the laws of the state of Nevada in August 1992. On October 9, 2020, we entered into the Share Exchange Agreement with BVI Wetouch and all the shareholders of BVI Wetouch, to acquire all the issued and outstanding capital stock of BVI Wetouch in exchange for the issuance to such shareholders an aggregate of 28 million shares of our common stock. The Reverse Merger closed on October 9, 2020. As a result of the Reverse Merger, BVI Wetouch became our wholly-owned subsidiary.
Previous report
On July 16, 2023, the Company’s board of directors approved a 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 Nevada Revised Statutes 78.209 to effectuate a 1-for-20 reverse stock split of its outstanding common stock. On September 11, 2023, the Company received notice from FINRA/OTC Corporate Actions the reverse split would take effect at the open of business on September 12, 2023, and the reverse stock that split took effect on that date. All share information included in this Form 10-K has been reflected as if the reverse stock split occurred as of the earliest period presented.
Previous report
Effects of COVID-19
Previous report
There has been a global pandemic of a novel strain of coronavirus (COVID-19) that first emerged in China in December 2019 and has spread globally. In March 2020, the World Health Organization declared COVID-19 as a global pandemic. The COVID-19 pandemic has resulted in quarantines, travel restrictions, and the temporary closures of stores and business facilities in China for the first half year of 2020, along with various government-initiated COVID-19 containment measures implemented intermittently. Since the end of 2022, the Chinese government has eased the COVID-19 restrictions. Although we are currently fully functional, potential impact on our results of operations will also depend on future developments and information that may emerge regarding the duration and severity of COVID-19 and the actions taken by governmental authorities and other entities to contain COVID-19 or to mitigate its impacts, almost all of which are beyond our control.
Previous report
The Company has several shutdowns during the first quarter of 2023.
Previous report
To serve our customers while also providing for the safety of our employees and service providers, we have modified numerous aspects of our logistics, transportation, supply chain, purchasing, and after-sale processes. The Company has taken proactive measures to promote products to new customers and entering more regions during the year ended December 31, 2022.
Previous report
The World Health Organization (WHO) announced on May 5, 2023 that COVID-19 is no longer a public health emergency of international concern. In the long term, the aftermath of the COVID-19 pandemic is likely to adversely affect the economies and financial markets of many countries and may result in a global economic downturn or a recession. This would likely adversely affect demand on some of our products or services, which may, in turn negatively impact our results of operations.
Previous report
PRCDom estic Market
Previous report
*Others include applications in self-service kiosks, ticket vending machines and financial terminals.
Previous report
Gross profit was $17.2 million during the year ended December 31, 2023, compared to $14.0 million in the same period of 2022. Our gross profit margin increased to 43.3% during the year ended December 31, 2023 as compared to 37.0% for the same period of 2022, primarily due to the increase in sales of 4.7%, particularly high-end products such as industrial control computer touchscreens, automotive touchscreens, and gaming touchscreens for the year ended December 31, 2023, the decrease of 1.4% in material costs, partially offset by the increase in labor cost of 9.0% for the year ended December 31, 2023.
Previous report
Selling expenses were $0.6 million for the years ended December 31, 2023, compared to $1.3 million in the same period in 2022, representing a decrease of $0.7 million, or 53.8%. During the year ended December 31, 2022, the Company incurred more marketing expenses to reduce the negative impact of tighter COVID-19 control in China during the second half of 2022.
Previous report
General and administrative expenses were $3.8 million for the year ended December 31, 2023, compared to $1.3 million in the same period in 2022, representing an increase of $2.5 million, or 192.3%. The increase was primarily due to the increase in accrued underwriting fees of $2.5 million in connection with a private placement. On March 18, 2023, the Company entered into a private placement consent agreement with Representatives of the private placement taken place on January 19, 2023 on the agent fees of US$1.2 million, payable only on the completion of the underwriting offering. The Company made the full payment in February, 2024 (see Note 8).
Previous report
And 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 the underwriting offering. The Company made the full payment in February, 2024 (see Note 8).
Previous report
Research and development expenses were $84,551 for the year ended December 31, 2023 compared to $85,251 in the same period in 2022.
Previous report
Other Expenses
Previous report
During the year ended December 31, 2023, the Company accrued litigation compensation of RMB324,501 ($45,828) and court fee of RMB10,627 ($1,500).
Previous report
Loss on Conversion of Notes Payable
Previous report
Loss on conversion of notes payable were $0.1 million for the years ended December 31, 2022, as lenders of convertible promissory notes converted certain principal, accrued and unpaid interest and default charges totaling $1,038,426 into 69,228 shares of common stock of the Company, including two notes fully converted. As a result, the Company recorded a loss on the conversion of notes payable of $0.1 million accordingly.
Previous report
Net cash provided by operating activities was $12.7 million for the year ended December 31, 2023, as compared to $8.6 million used in operating activities for the same period of the last year, a change of $4.1 million, primarily due to (i) an increase of $2.4 million in accrued expenses and other current liabilities, a decrease of $2.8 million in accounts receivable and $0.4 million in inventories, and a decrease of $0.1 million in amortization of discounts and issuance cost of the Notes, partially offset by (ii) a decrease of $0.5 million in net income for the year ended December 31, 2023, (iii) a decrease of $1.3 million in accounts payable, an increase of $0.5 million in prepaid expenses and other current assets, and an increase of $1.0 million in loss on changes in fair value of common stock purchase warrant liability.
Previous report
There were nil investing activities for the year ended December 31, 2022.
Previous report
Net cash used in the financing activities was $0.7 million for the year ended December 31, 2022, including $1.4 million of repayment of convertible promissory note payable, partially offset by proceeds of a third party loan of $0.4 million.
Previous report
The following table provides an analysis of the aging of accounts receivable as of December 31, 2023 and 2022:
Previous report
Holding Company Structure
Previous report
We face various risks and uncertainties relating to doing business in China. Our business operations are primarily conducted in China, and we are subject to complex and evolving PRC laws and regulations. For example, we face risks associated with regulatory approvals on offshore offerings, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy, which may impact our ability to conduct certain businesses, accept foreign investments, or list and conduct offerings on a United States or other foreign exchange. These risks could result in a material adverse change in our operations and the value of our common stock, significantly limit or completely hinder our ability to continue to offer securities to investors, or cause the value of such securities to significantly decline. For a detailed description of risks relating to doing business in China, see “Item 1.A. Risk Factors—Risks Related to Doing Business in China.”
Previous report
The PRC government’s significant discretion and authority in regulating our operations and its oversight and control over offerings conducted overseas by, and foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors. Implementation of industry-wide regulations in this nature may cause the value of our securities to significantly decline or become worthless. For more details, see “Item 1.A. Risk Factors—Risks Relating to Doing Business in China— Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations. The PRC government has recently indicated an intent to exert more oversight and control over overseas securities offerings and other capital markets activities and foreign investment in China-based companies like us. Any such action, once taken by the PRC government, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or in extreme cases, become worthless.”
Previous report
Risks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations in China, could result in a material adverse change in our operations and cause our Common Stock to decrease in value or become worthless. For more details, see “Item 1.A. Risk Factors—Risks Relating to Doing Business in China— Uncertainties with respect to the PRC legal system, including uncertainties regarding the enforcement of laws and sudden and unexpected changes in laws and regulations in China, could adversely affect us and limit the legal protections available to you and us.”
Previous report
Cash and Other Assets Transfers between the Holding Company and Its Subsidiaries
Previous report
As of March 31, 2024, Wetouch had made cumulative capital contributions of RMB346.0 million (US$51.9 million) to its PRC subsidiary through intermediate holding companies, and were accounted as long-term investments of Wetouch. These funds have been used by the Company’s PRC subsidiary for its operations.
Previous report
To date, there have not been any dividends or other distributions from our PRC subsidiary to Wetouch, both of which are located outside of mainland China. Wetouch, as a holding company, may rely on dividends and other distributions on equity paid by its PRC subsidiary for its cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to its stockholders, subject to Wetouch’s charter and M&A and Nevada law or to service any expenses and other obligations it may incur.
Previous report
Within our direct holding structure, the cross-border transfer of funds from Wetouch to its PRC subsidiary is permitted under laws and regulations of the PRC currently in effect. Specifically, Wetouch is permitted to provide funding to its PRC subsidiary in the form of shareholder loans or capital contributions, subject to satisfaction of applicable government registration, approval and filing requirements in China. There are no quantity limits on Wetouch’s ability to make capital contributions to its PRC subsidiary under the PRC law and regulations. However, the PRC subsidiary may only procure stockholder loans from HK Wetouch in an amount equal to the difference between its registered capital and total investment amount as recorded in the Chinese Foreign Investment Comprehensive Management Information System or 2.5 times of its net assets, at the discretion of such PRC subsidiary.
Previous report
For additional information, see “Item 1.A. Risk Factors—Risks Related to Doing Business in China PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of any offerings or financings to make loans or additional capital contributions to our Chinese subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.”
Previous report
The PRC Enterprise Income Tax Law (the “EIT Law”) and its implementation rules provide that a withholding tax at a rate of 10% will be applicable to dividends payable by PRC companies to non-PRC-resident enterprises unless reduced under treaties or arrangements between the PRC central government and the governments of other countries or regions where the non-PRC resident enterprises are tax resident. Pursuant to the tax agreement between mainland China and the Hong Kong Special Administrative Region, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10%. However, if the relevant tax authorities determine that our transactions or arrangements are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax in the future. Accordingly, there is no assurance that the reduced 5% withholding rate will apply to dividends received by our Hong Kong subsidiary from our PRC subsidiaries. This withholding tax will reduce the amount of dividends we may receive from our PRC subsidiaries.
Previous report
Restrictions on Our Ability to Transfer Cash Out of China and to U.S. Investors
Previous report
Our PRC subsidiary’s ability to distribute dividends is based upon its distributable earnings. Current PRC regulations permit our PRC subsidiary to pay dividends to its shareholders only out of its accumulated profits, if any, as determined in accordance with PRC accounting standards and regulations. In addition, under PRC law, our PRC subsidiary is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. These reserves are not distributable as cash dividends. If our PRC subsidiary incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability to pay dividends to Wetouch.
Previous report
To address persistent capital outflows and the RMB’s depreciation against the U.S. dollar in the fourth quarter of 2016, the People’s Bank of China and the State Administration of Foreign Exchange, or SAFE, implemented a series of capital control measures in the subsequent months, including stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments and shareholder loan repayments. The PRC government may continue to strengthen its capital controls and our PRC subsidiary’s dividends and other distributions may be subject to tightened scrutiny in the future. The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of mainland China. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any.
Previous report
From time to time, the Company is a party to various legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.
Previous report
For a discussion of the Company’s legal proceedings, see Note 14 to the Financial Statements in Item 8.
Previous report
As of December 31, 2023, the Company has no capital expenditure commitment.
Previous report
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.
Previous report
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.
Showing the first 40 of 46 passages. Open the source sections for the rest.
Reworded paragraphs (41)
Previous wording
Wetouch is a holding company and a company incorporated in Nevada with no material operations of its own. We conduct substantially all of our operations through our subsidiary established in mainland China. Our equity structure is a direct holding structure, that is, Wetouch, a Nevada corporation listed in the U.S., controls Sichuan Vtouch though BVI Wetouch. See “Item 1.Business – Corporate History and Structure” for more details.
Current wording
The Company is a Nevada holding company with no material operations of its own. We conduct substantially all of our operations through our subsidiary in mainland China, which we control through BVI Wetouch. See “Item 1. Business – Corporate History and Structure” for more details.
Previous wording
There is no assurance that the PRC government will not intervene or impose restrictions on the ability of us or our subsidiary to transfer cash. Most of our cash is in Renminbi, and the PRC government could prevent the cash maintained in our bank accounts in mainland China from leaving mainland China, could restrict deployment of the cash into the business of our subsidiaries and restrict the ability to pay dividends. For details regarding the restrictions on our ability to transfer cash between us, and our subsidiaries, see “Item 1A. Risk Factors—Risks Related to Doing Business in China — “Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.” We currently do not have cash management policies that dictate how funds are transferred between our holding company and our subsidiaries.
Current wording
We currently do not have cash management policies dictating how funds are transferred between the Company and its subsidiaries. Most of our cash is maintained in Renminbi in mainland China and may be subject to PRC restrictions on outbound transfers. For details, see “Item 1A. Risk Factors - Risks Related to Doing Business in China - Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.”
Previous wording
Through our wholly-owned subsidiaries, BVI Wetouch, HK Wetouch, and Sichuan Vtouch, we are engaged in the research, development, manufacturing, sales and servicing of medium to large sized projected capacitive touchscreens. We are specialized in large-format touchscreens, which are developed and designed for a wide variety of markets and used in by the financial terminals, automotive, POS, gaming, lottery, medical, HMI, and other specialized industries. Our product portfolio comprises medium to large sized projected capacitive touchscreens ranging from 7.0 inch to 42 inch screens.
Current wording
Through our wholly owned subsidiaries, BVI Wetouch, HK Wetouch, and Sichuan Vtouch, we are engaged in the research, development, manufacturing, sales and servicing of medium- to large-sized projected capacitive touchscreens. We are specialized in large-format touchscreens, which are developed and designed for a wide variety of markets and used in the financial terminals, automotive, POS, gaming, lottery, medical, HMI, and other specialized industries. Our product portfolio comprises medium- to large-sized projected capacitive touchscreens ranging from 7.0 inch to 42 inch screens.
Previous wording
The following table sets forth, for the periods indicated, statements of income data:
Current wording
Thefollowing table sets forth, for the periods indicated, statements of income data:
Previous wording
Revenues were $39.7 million in the year ended December 31, 2023, an increase of $1.8 million, or 4.7%, compared with $37.9 million in the same period of last year. This was mainly due to the increase of 2.6% in sales volume, and an increase of 7.1% in the average selling price of our products in RMB, and 5.2% negative impact from exchange rate due to depreciation of RMB against US dollars, as compared with those of the same period of last year.
Current wording
Revenues were $42.3 million for the year ended December 31, 2024, representing an increase of $2.6 million, or 6.5%, compared with $39.7 million for the same period in 2023. This was mainly due to the increase of 4.8% in sales volume, and an increase of 3.2% in the average selling price of our products in RMB, and 1.6% negative impact from exchange rate due to depreciation of RMB against US dollars, as compared with those of the same period in 2023.
Previous wording
For the year ended December 31, 2023, revenue from the PRC domestic market increased by $1.2 million or 4.6%, as a combined result of (i) the increase of 2.7% in sales volume, and an increase of 6.8% in the average sales price of our products in RMB, and (ii) 5.2% negative impact from exchange rate due to depreciation of RMB against US dollars, as compared with those of the same period of last year.
Current wording
For the year ended December 31, 2024, revenue from the PRC domestic market decreased by $0.3 million or 1.2%, as a combined result of (i) the decrease of 1.6% in sales volume, primarily attributable to weakened market demand, consistent with the overall macroeconomic conditions in China in 2024, and (ii) 1.6% negative impact from exchange rate due to depreciation of RMB against US dollars, partially offset by (iii) an increase of 2.0% in the average sales price of our products in RMB, and as compared with those of the same period in 2023.
Previous wording
The increase of 6.8% in sales price in RMB was mainly due to the marketing initiatives to enhance sales of new models of higher-end products such as multi-functional printer touchscreens, industrial control computer touchscreens, medical touchscreens, and POS touchscreens in - Southwest and East China during the year ended December 31, 2023.
Current wording
Theincrease of 2.0% in sales price of our products in RMB was mainly due to the marketing initiatives to enhance sales of new models of higher-end products such as medical touchscreens, automotive touchscreen, and multi-functional printer touchscreens during the year ended December 31, 2024.
Previous wording
Due to our proactive efforts to market new models and efforts to obtain new customers and penetrate into new regions, our sales increased by 23.3% in Southwest China, and 13.4% in East China, partially offset by a decrease of 23.4% in South China during the year ended December 31, 2023.
Current wording
During the year ended December 31, 2024, the Company undertook proactive marketing initiatives for new models and sought to obtain new customers in order to reduce the impact the weakening macroeconomic conditions in China. Our sales increased by 6.0% in Southwest China, partially offset by a decrease of 2.4% in East China, and 0.8% in South China during the year ended December 31, 2024,
Previous wording
For the year ended December 31, 2023, revenue from overseas market was $12.1 million as compared to $11.5 million of the same period of 2022, an increase of $0.6 million, or 5.0%, mainly due to an increase of 2.5% in sales volume and an increase of 7.8% in average selling price in RMB for gaming touchscreens and industrial control computer touchscreens. The Company had more pricing control capability due to the higher demand during the year ended December 31, 2023.
Current wording
For theyear ended December 31, 2024, revenue from overseas markets was $14.9 million as compared to $12.1 million of the same period of 2023, representing an increase of $2.8 million, or 24.1%, primarily due to i) an increase of 17.9% in sales volume, particularly driven by higher demand for the automotive touchscreens, gaming touchscreens, and industrial control touchscreens, (ii) 6.8% increase in average RMB selling price of the products, particularly in the product of industrial control touchscreens and automotive touchscreens, as the Company had greater pricing power due to the higher demand for the products during the year ended December 31, 2024, partially offset by (iii) the 1.6% negative impact from exchange rate due to depreciation of RMB against US dollars, compared with those of the same period in 2023.
Previous wording
The following table summarizes the breakdown of revenues by categories in US dollars:
Current wording
Thefollowing table summarizes the breakdown of revenues by categories in US dollars:
Previous wording
The Company continued to shift production mix from traditional lower-end products to high-end touchscreens used in industrial control computers, gaming machines, and automobiles, primarily due to (i) greater growth potential of computer screen models in China, and (ii) stronger demand and better quality demand from consumers’ recognition of higher-end touchscreens made with better materials.
Current wording
The Company continued to shift production mix from traditional lower-end products to high-end touchscreens used in automotive touchscreens, gaming touchscreens, medical touchscreens, and industrial control computer touchscreens, primarily due to (i) greater growth potential of computer screen models in China and overseas, and (ii) stronger demand for higher-end touchscreens made with better materials and better quality.
Previous wording
Total operating income was $12.7 million for the year ended December 31, 2023 as compared to $11.4 million of the same period of last year due to higher gross profit and lower selling expenses, partially offset by higher general and administrative expenses.
Current wording
Total operating income was $9.3 million for the year ended December 31, 2024 as compared to $12.7 million for the same period in 2023, a decrease of $3.4 million or 26.8%. The decrease wasprimarily due to lower gross profit, higher selling expenses, partially offset by lower general & administration expenses, andlower research and development expenses.
Previous wording
Loss on changes in fair value of common stock purchase warrants was $0.1 million for the year ended December 31, 2023, as compared to a gain of $0.9 million in the same period of 2022.
Current wording
Gain on changes in fair value of common stock purchase warrants was $378,371 for the year ended December 31, 2024, as compared to a loss of $121,413 in the same period of 2023.
Previous wording
The effective income tax rate for the year ended December 31, 2023 and 2022 was 25.4% and 27.7%, respectively.
Current wording
The effective income tax rate for the years ended December 31, 2024 and 2023 was 30.6% and 33.1%, respectively.
Previous wording
Our PRC subsidiary had $98.0 million of cash and cash equivalents of December 31, 2023, which are planned to be indefinitely reinvested in the PRC. The distributions from our PRC subsidiary are subject to the U.S. federal income tax at 21%, less any applicable foreign tax credits. Due to our policy of indefinitely reinvesting our earnings in our PRC business, we have not provided for deferred income tax liabilities related to PRC withholding income tax on undistributed earnings of our PRC subsidiaries.
Current wording
Our PRCsubsidiary had $103.7 million of cash as of December 31, 2024, which is planned to be indefinitely reinvested in our business operations in the PRC. Distributions from our PRC subsidiary to our stockholders would be subject to the U.S. federal income tax at 21%, less any applicable foreign tax credits. Due to our policy of indefinitely reinvesting our earnings in our PRC business, we have not provided for deferred income tax liabilities related to PRC withholding income tax on undistributed earnings of our PRC subsidiary.
Previous wording
As a result of the above factors, we had a net income of $8.3 million in the year ended December 31, 2023 compared to a net income of $8.7 million in the same period of 2022.
Current wording
As a result of the above factors, we had a net income of $6.0 million in the year ended December 31, 2024 compared to a net income of $8.3 million in the same period of 2023.
Previous wording
We may, however, require additional cash resources due to changes in business conditions or other future developments. If these sources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or equity-linked securities could result in additional dilution to stockholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financial covenants that would restrict operations. Financing may not be available in amounts or on terms acceptable to us, or at all.
Current wording
We may, however, require additional cash resources due to changes in business conditions or other future developments. If these sources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or equity-linked securities could result in additional dilution to stockholders. The incurrence of indebtedness would result in increased debt service obligations and could result inoperating and financial covenants that would restrict operations. Financing may not be available in amounts or on terms acceptable to us, or at all.
Previous wording
As of December 31, 2023, we had current assets of $106.8 million, consisting of $98.0 million in cash, $7.4 million in accounts receivable, $0.2 million in inventories, and $1.1 million in prepaid expenses other current assets. Our current liabilities as of December 31, 2023, were $6.3 million, which is comprised of $0.6 million in accounts payable, $0.5 million in loans from a third party, $4.0 million in accrued expenses and other current liabilities and $1.2 million in convertible promissory notes payable.
Current wording
As of December 31, 2024, we had current assets of $114.1 million, consisting of $103.7 million in cash, $7.5 million in accounts receivable, $0.1 million in inventories, and $2.8 million in prepaid expenses and other current assets. Our current liabilities as of December 31, 2024 were $3.0 million, which comprised of $1.3 million in accounts payable, $0.1 million due to related parties, $1.0 million in accrued expenses and other current liabilities and $0.6 million in operating lease liabilities, current portion. We also had $0.5 million in operating lease liabilities, non- current as of December 31, 2024.
Previous wording
Our Days Sales Outstanding (“DSO”) decreased to 75 days for the year ended December 31, 2023 from 81 days for the year ended December 31, 2022.
Current wording
Our Days Sales Outstanding (“DSO”) decreased to 64 days for the year ended December 31, 2024 from 75 days for the year ended December 31, 2023 due to our faster collection of accounts receivables.
Previous wording
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.
Current wording
The Company adopted Accounting Standards Codification (“ASC”) 606 using the modified retrospective approach. Theadoption 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.
Previous wording
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.
Current wording
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 tocustomers. 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.
Previous wording
In accordance to 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.
Current wording
In accordance with ASC 606, the Company recognizes revenue when it transfers its goods or 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, because it has control of the goods and the ability to direct their use to obtain substantially all the benefits. All of the Company’s contracts have onesingle 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.
Previous wording
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, 2022 and 2021, 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.
Current wording
Payment terms are established based on the Company’s pre-established credit requirements after an evaluation of customers’ credit quality. Contract assets are recognized as 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 of when an order is placed and when shipment or delivery occurs. As of December 31, 2024 and 2023, 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.
Previous wording
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, 2022 and 2021 are disclosed in Note 14 to the financial statements.
Current wording
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’sdisaggregation of revenues for the years ended December 31, 2024 and 2023 is disclosed in Note 16 to the financial statements.
Previous wording
In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“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, 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.
Current wording
In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), management makes estimates and assumptions that affect the reported amounts of assetsand liabilities and the 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 available at 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, inventory valuations, useful lives of property, plant and equipment, intangible assets, operating leases, the recoverability of long-lived assets, provisions necessary for contingent liabilities, revenue recognition and realization of deferred tax assets. Actual results could differ from those estimates.
Previous wording
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 was recorded for the year ended December 31, 2023 and 2022, respectively.
Current wording
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 the weighted average method. 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 predictable 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.
Previous wording
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.
Current wording
The Company accounts for its convertible promissory notes in according with 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 theaccounting 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.
Previous wording
The Company analyzes 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; and (iii) permitting net settlement.
Current wording
The Company analyzes the convertible notes for the existence of a beneficial conversion feature. The Company considered thethree 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; and (iii) permitting net settlement.
Previous wording
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 do 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.
Current wording
Since the Company’s notes have a fixed interest rate, specified notional principal and settlement date, with no other events affecting settlement, and because the Company received net proceeds after issuance costs and discount (recorded as net proceeds or net settled investment), management assessed that the Notes do not meet the definition of derivative instruments and that any embedded feature would not be bifurcated. The discounts on the convertible notes, were amortized to interest expense, using the effective interest method, over the terms of the related convertible notes.
Previous wording
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.
Current wording
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 provides hat 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 derivative instruments for purposes of ASC 815-40.
Previous wording
The Company concluded that the Warrants issued in November and December 2021 financing should be treated as a derivative liability because the Warrants are entitled to a price adjustment provision 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 more or less 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.
Current wording
The Company concluded that the Note Warrants (as defined in NOTE 10 – CONVERTIBLE PROMISSORY NOTES PAYABLE – ii) Warrants) issued in October, November and December 2021 financings should be treated as a derivative liability because the Warrants are entitled to a price adjustment provision that allows the exercise price to be adjusted if the Company issues or sells any additional shares of common stock at a price per share more or less 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 an input to the fair value of a fixed-for-fixed option on equity shares which causes the Warrants to fail to qualify as indexed to the Company’s own stock and therefore 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 remeasured at fair value with changes in fair value recorded in earnings for each reporting period.
Previous wording
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 loss of $121,413 and gain of $871,677 on change of fair value of common stock purchase warrant liability for the year ended December 31, 2023 and 2022, respectively.
Current wording
As of December 31, 2024 and 2023, the Company recorded nil and $378,371 of common stock purchase warrant liability, respectively, and a $378,371 gain and a $121,413 loss on changes in the fair value of common stock purchase warrant liability for the year ended December 31, 2024 and 2023, respectively.
Previous wording
The Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
Current wording
The Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
Previous wording
An uncertain tax position is recognized only if it is “more likely than not” that the tax position would be sustained in a tax examination. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. No significant penalties or interest relating to income taxes have been incurred during the years ended December 31, 2023 and 2022. The Company does not believe there was any uncertain tax provision at December 31, 2023 and 2022.
Current wording
An uncertain tax position is recognized only if it is “more likely than not” that the tax position would be sustained in a tax examination. The amount recognized is the largest amount of tax benefit that is greater than 50% likely to beg realized upon examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. No significant penalties or interest relating to income taxes were incurred during the years ended December 31, 2024 and 2023. The Company believes that there were no uncertain tax positions as of December 31, 2024 and 2023.
Previous wording
The Company’s operating subsidiaries in China are subject to the income tax laws of the PRC. No significant income was generated outside the PRC for the fiscal years ended December 31, 2023 and 2022. As of December 31, 2023, all of the Company’s tax returns of its PRC Subsidiaries remain open for statutory examination by PRC tax authorities.
Current wording
The Company’s operating subsidiaries in China are subject to the income tax laws of the PRC. No significant income was generated outside the PRC for the fiscal years ended December 31, 2024 and 2023. As of December 31, 2024 and 2023, all of the Company’s tax returns for its PRC Subsidiaries remain open for statutory examination by PRC tax authorities.
Previous wording
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:
Current wording
Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization ofproperty and equipment is provided using the straight-line method over their expected useful lives, as follows:
Previous wording
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.
Current wording
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 arecapitalized. 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 (loss) as other income or expenses.
Previous wording
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. No impairment of long-lived assets was recognized for any of the years presented.
Current wording
Long-lived assets, such as property, plant and equipment, and 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 for 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 of are reported at the lower of carrying amount or fair value less costs to sell, and are no longer depreciated. No impairment of long-lived assets was recognized for the years ended December 31, 2024 and 2023.
Previous wording
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.
Current wording
Comprehensive income (loss) consists of two components, net income and other comprehensive income (loss). The foreign currency translation gain or loss resulting from translating the financial statements expressed in RMB to US$ is reported in other comprehensive income (loss) in the consolidated statements of income and comprehensive income.
Previous wording
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.
Current wording
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 Company currently does not have any financial instrument that reference to LIBOR and does not anticipate the adoption will have a material impact to the Company’s combined and consolidated financial statements.
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Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
Net cash used in investing activities for the year ended December 31, 2024 was $0.3 million for the purchase of property, plant andequipment and construction in progress.
Current report — wording carried from elsewhere
$54,873 and nil inventory write-off was recorded for the years ended December 31, 2024 and 2023, respectively.
Current report — wording carried from elsewhere
The Company used a Black-Scholes pricing model to estimate the fair values of common stock purchase warrants at the balance sheet dates.