Wetouch Technology Inc.
For the period ended Dec 31, 2025. Filed Apr 13, 2026.
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.
FY2025 · Filed Apr 13, 2026
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious 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 OPERATIONSCurrent report: 10-K
Period ended 2025-12-31; filed 2026-04-13.
0001213900-26-043017
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 128 previous paragraphs and 152 current paragraphs.
62 unchanged; 50 reworded; 38 added; 15 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 14 previous and 13 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 (38)
Current 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.
Current report
Construction of our new facility
Current report
We have been actively engaged in the construction of our new production facilities and office buildings in Chengdu Medicine City (Technology Park), Wenjiang District, Chengdu, Sichuan Province, People’s Republic of China since the summer of 2023. The Company has planned to increase the scope of facility construction by adding a touch machine construction area. Due to the delayed supply of construction materials, the project has been progressed slowly than expected.
Current report
As of the date of this Annual Report, the Company estimated the construction to be completed by the first half of 2027 and commence production by the end of 2027. The total capital requirements for the new facility construction totaled approximately $14.4 million and $13.3 million have been recorded in the construction in progress as of December 31, 2025. The Company primarily fund the project with our existing cash on hand and cash flows generated from operations, and we may seek additional financing if needed to support the timely completion of the project.
Current report
As for the RMB selling price, the decrease of 0.6% was mainly due to the lower demand of higher selling priced products of touchscreen machines in the PRC domestic market, including the decreased average RMB selling price of 4.9% in medical touchscreens and 1.7% in automotive touchscreens, partially offset by the increased average RMB selling price of 7.0% in POS touchscreens during the year ended December 31, 2025.
Current report
For theyear ended December 31, 2025, revenues from overseas market was $14.2 million as compared to $14.9 million of the same period of 2024, representing a decrease by $0.7 million, or 4.9%, mainly due to i) a decrease of 6.0% in sales volume due to decreased sales in gaming touchscreens and industrial control computer touchscreens, partially offset by (ii) an increase of 1.0% in average selling price in RMB, and (iii) 0.1% positive impact from exchange rate due to appreciation of RMB against US dollars, compared with those of the same period of 2024.
Current report
General and administrative expenses were $3.8 million for the year ended December 31, 2025, compared to $3.5 million in the same period in 2024, representing an increase of $0.3 million, or 8.6%. The increase was primarily due to the increase of $0.3 million in professional fees, $0.1 million in allowance for credit loss, $0.2 million in impairment loss of construction in progress, and $0.4 million in amortization of right-of-use assets, and $0.1 million of payroll expenses, partially offset by the decrease of $0.9 million of amortization of prepaid marketing research fees (see Note 4 of the accompanying financial statements).
Current report
We recorded gain of $378,371 on changes in fair value of common stock purchase warrants for the year ended December 31, 2024.
Current report
Under PRC CIT Law, domestic enterprises and foreign investment enterprises (the “FIEs”) are usually subject to a unified 25% enterprise income tax rate. The Company’s PRC subsidiary Sichuan Vtouch is subject to a 25% income tax rate.
Current report
Investing Activity
Current report
There was no cash flow in financing activities for the year ended December 31, 2025.
Current report
As of December 31, 2025, our cash and cash equivalents were $118.4 million, as compared to $103.8 million at December 31, 2024.
Current report
Based on past performance and current expectations, we believe our cash and cash equivalents provided by operating activities and financing activities will satisfy our working capital needs, capital expenditures and other liquidity requirements associated with our operations for at least the next 12 months.
Current report
Holding Company Structure
Current 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.”
Current 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.”
Current 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.”
Current report
Cash and Other Assets Transfers between the Holding Company and Its Subsidiaries
Current report
As of March 31, 2026, Wetouch made cumulative capital contributions of RMB348.0 million (US$49.8 million) to its PRC subsidiary through intermediate holding companies and were accounted as long-term investments of Wetouch. As of the date of this Annual Report, these funds have been used by the Company’s PRC subsidiary for its operations.
Current report
To date, there have not been any dividends or other distributions from our PRC subsidiary to Wetouch. 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 Nevada law, or to service any expenses and other obligations it may incur.
Current 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. 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.”
Current 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.
Current report
Restrictions on Our Ability to Transfer Cash Out of China and to U.S. Investors
Current 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.
Current 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.
Current report
Legal Proceedings
Current 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.
Current report
Land use right, net
Current report
A land use right in the PRC represents an exclusive right to occupy, use and develop a piece of land during the contractual term of the land use right. Land use right is usually paid in one lump sum at the date the right is granted or at the date of the prepayment pursuant to the land use right transfer contract with the local government. The prepayment usually covers the entire duration period of the land use right. The lump sum advance payment is capitalized and recorded as land use right and then charged to expense on a straight-line basis over the period of the right.
Current report
On August 6, 2021, Sichuan Vtouch entered into a contract with Chengdu Wenjiang District Planning and Natural Resources Bureau (“Wenjiang Bureau”) for the purchase of a land use right of a parcel of land of 131,010 square feet (12,171. 28 square meters) for a consideration of RMB3,925,234 (equivalent to $561,301) for the Company’s new facility. The Company paid the consideration in full by November 18, 2021 and recorded in the prepayment.
Current report
Pursuant to the contract, Sichuan Vtouch will construct a new facility on this parcel according to the specifications. Once the Project is fully completed, Wenjiang Bureau shall transfer the title of land use right to Sichuan Vtouch for 20 years.
Current report
The Company’s new facility started in August 2021 yet was delayed and suspended due to the outbreak of Covid-19 and government-ordered shutdowns in China. The Company has rescheduled and extended the completion by first half of 2027 with the production at the new facilities will commencing by the end of 2027.
Current report
During the years ended December 31, 2025, management assessed the probability of the obtaining the land use right upon the completion of the new facility, reclassified prepayment of RMB3,925,234 (equivalent to $561,301) to land use right, started the amortization by a useful life of approximately 16 years.
Current report
The amortization expense of land use rights was US$16,718 for the years ended December 31, 2025, and included in general and administrative expenses.
Current report
In October 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-06, Disclosure Improvements—codification amendments in response to SEC’s disclosure Update and Simplification initiative which amend the disclosure or presentation requirements of codification subtopic 230-10 Statement of Cash Flows—Overall, 250-10 Accounting Changes and Error Corrections—Overall, 260-10 Earnings Per Share—Overall, 270-10 Interim Reporting—Overall, 440-10 Commitments—Overall, 470-10 Debt—Overall, 505-10 Equity—Overall, 815-10 Derivatives and Hedging—Overall, 860-30 Transfers and Servicing—Secured Borrowing and Collateral, 932-235 Extractive Activities—Oil and Gas—Notes to Financial Statements, 946-20 Financial Services—Investment Companies—Investment Company Activities, and 974-10 Real Estate—Real Estate Investment Trusts—Overall. The amendments represent changes to clarify or improve disclosure and presentation requirements of above subtopics. Many of the amendments allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the SEC’s requirements. Also, the amendments align the requirements in the Codification with the SEC’s regulations. For entities subject to existing SEC disclosure requirements or those that must provide financial statements to the SEC for securities purposes without contractual transfer restrictions, the effective date aligns with the date when the SEC removes the related disclosure from Regulation S-X or Regulation S-K. Early adoption is not allowed. For all other entities, the amendments will be effective two years later from the date of the SEC’s removal.
Current report
ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, establishes incremental disaggregation of income tax disclosures pertaining to the effective tax rate reconciliation and income taxes paid. This standard is effective for fiscal years beginning after December 15, 2024, and requires prospective application with the option to apply it retrospectively. The Company adopted ASU 2023-09 beginning January 1, 2025. The adoption did not have a material impact on the Company’s consolidated financial statements.
Current report
In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” requiring public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2024-03.
Current report
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s consolidated financial statements.
Removed paragraphs (15)
Previous 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.”
Previous 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.”
Previous 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.”
Previous 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.”
Previous report
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 report
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 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.
Previous report
Research and Development Expenses
Previous 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.
Previous report
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 report
Investing Activities
Previous report
Net cash provided by financing activities was $40.0 million for the year ended December 31, 2023, consisting of $40.0 million proceeds from a private placement, partially offset by the repayment of $55,000 in convertible promissory note payable.
Previous report
$54,873 and nil inventory write-off was recorded for the years ended December 31, 2024 and 2023, respectively.
Previous report
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.
Previous report
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 Company is evaluating this ASU and expects to add additional disclosures to our combined and consolidated financial statements, once adopted.
Reworded paragraphs (50)
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 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 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.
Previous wording
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 wording
We generate revenues through sales of our various touchscreen products. For the years ended December 31, 2025 and 2024, we recognized approximately $45.1 million and $42.3 million, respectively, in total revenues.
Previous wording
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 wording
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, 2025 and 2024, our domestic sales accounted for approximately 68.5% and 64.7%, respectively, of our revenues, and our international sales accounted for approximately 31.5% and 35.3%, respectively, of our revenues.
Previous 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.
Current wording
Revenues were $45.1 million for the year ended December 31, 2025, representing an increase of $2.8 million, or 6.6%, compared with $42.3 million for the same period in 2024. This was mainly due to the increase of 6.5% in sales volume, and an increase of 0.1% in the average selling price of our products in RMB, and 0.1% positive impact from exchange rate due to appreciation of RMB against US dollars, as compared with those of the same period in 2024.
Previous 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.
Current wording
For the year ended December 31, 2025, revenue from the PRC domestic market increased by $3.6 million or 13.1%, as a combined result of (i) an increase of 13.7% in sales volume, particularly in medical touchscreens, multi-functional printer touchscreens, industrial control computer touchscreens, automotive touchscreens, POS touchscreens and POS touchscreens, (ii) 0.1% positive impact from exchange rate due to appreciation of RMB against US dollars partially offset by (iii) a decrease of 0.6% in the average RMB selling price of our products in the domestic market, and (iii), compared with those of the same period in 2024.
Previous 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,
Current wording
The Company has taken proactive efforts to market new models and efforts to obtain new customers in existing markets, our sales increased by 9.7% in South China, and 10.6% in East China, and 17.9% in Southwest China during the year ended December 31, 2025.
Previous 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.
Current wording
The Company continued to shift production mix from traditional lower-end products such as automotive touchscreens to high-end products such as industrial control computer touchscreens, gaming touchscreens, POS touchscreens, and multi-functional printer touchscreens, primarily due to (i) greater growth potential of computer screen models in China, (ii) the stronger demand on higher-end touch screens made with better materials and better quality.
Previous wording
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 wording
Gross profit was $14.4 million during the year ended December 31, 2025, compared to $13.6 million in the same period in 2024. Our gross profit margin decreased to 31.8% during the year ended December 31, 2025 as compared to 32.2% for the same period of 2024, primarily due to i) an increase of 7.0% in cost of goods sold, mainly in an increase of 3.9% in labor costs due to additional hiring of technicians, and an increase of 5.7% in costs of materials, among which the chip cost accounted for 11.1%, and ii) sales discount of $1.2 million (accounted for 2.6% of the revenues) to certain long-term customers at year-end of 2025, partially offset by the increase of revenue by 6.8%, particularly high-end products such as industrial control computer touchscreens, POS touchscreens, medical touchscreens, and multi functional printer touchscreens during the year ended December 31, 2025.
Previous wording
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 wording
Selling expenses were $0.6 million for the years ended December 31, 2025, compared to $0.8 million in the same period in 2024, representing a decrease of $0.2 million, or 25.0%, primarily due to the continued decrease in traveling and transportation expenses as our selling and marketing team continued the practice of online client communications to promote sales since end of 2024.
Previous 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.
Current wording
Total operating income was $10.0 million for the year ended December 31, 2025 as compared to $9.3 million of the same period in 2024, primarily due to higher gross profit and lower selling expenses, partially offset by higher general & administration expenses
Previous wording
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 wording
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 11 — CONVERTIBLE PROMISSORY NOTES PAYABLE- b) Warrants).
Previous wording
The effective income tax rate for the years ended December 31, 2024 and 2023 was 30.6% and 33.1%, respectively.
Current wording
The effective income tax rate for the year ended December 31, 2025 and 2024 stayed at 29.5% and 30.6%, respectively.
Previous 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.
Current wording
Our PRCsubsidiary had $118.4 million of cash of December 31, 2025, which are planned to be indefinitely reinvested in our business operations in the PRC. The distributions from our PRC subsidiary to our stockholders 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 subsidiary.
Previous 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.
Current wording
As a result of the above factors, we had a net income of $7.2 million in the year ended December 31, 2025compared to a net income of $6.0 million in the same period of 2024.
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 inoperating 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 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.
Previous 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.
Current wording
As of December 31, 2025, we had current assets of $126.1 million, consisting of $118.4 million in cash, $6.5 million in accounts receivable, $45,202 in inventories, and $1.2 million in prepaid expenses and other current assets Our current liabilities as of December 31, 2025 were $3.2 million, which is comprised of $1.1 million in accounts payable, $0.3 million in amounts due to a related party, $1.4 million in accrued expenses and other current liabilities. and $0.5 million in operating lease liabilities, current portion.
Previous wording
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 wording
Net cash provided by operating activities was $7.4 million for the year ended December 31, 2025, as compared to $1.1 million provided by operating activities for the same period in 2024, representing an increase of $6.3 million, or 572.7%.
Previous wording
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 wording
The positive cash flow of $7.4 million for the year ended December 31, 2025 was primarily due to i) $7.2 million net income, ii) $0.2 million impairment loss of construction in progress and $0.6 million of amortization of operating right-of-use assets, iii) the decrease of $1.3 million in accounts receivable, net, $1.6 million in prepaid expenses and current assets, iii) the increase of $0.1 million in amounts due to a related party, $0.4 million in accrued expenses and current liabilities, and $0.6 million in operating lease liabilities, partially offset by iv) the increase of $4.4 million in long-term prepayment, reclassified from construction in progress due to delayed schedule, and the decrease of $0.2 million in accounts payable.
Previous wording
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 wording
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 decrease of $0.4 million gain on changes in fair value of common stock purchase warrants liability, $0.3 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 iv) the decrease of $3.3 million in accrued expenses and other current liabilities.
Previous wording
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 wording
Net cash used in investing activities for the year ended December 31, 2025 and 2024 stayed at $0.3 million, respectively, representing the purchase of property, plant and equipment and construction in progress.
Previous 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.
Current wording
Days Sales Outstanding (“DSO”) has decreased to 56 days for the year ended December 31, 2025 from 64 days for the year ended December 31, 2024.
Previous wording
The majority of the Company’s revenues and expenses were denominated primarily in RMB, the currency of the People’s Republic of China. There is no assurance that exchange rates between the RMB and the U.S. Dollar will remain stable. Inflation has not had a material impact on the Company’s business.
Current wording
The majority of the Company’s revenues and expenses were denominated in Renminbi (“RMB”), the currency of the People’s Republic of China. There is no assurance that exchange rates between the RMB and the U.S. Dollar will remain stable. Inflation has not had a material impact on the Company’s business.
Previous 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.
Current wording
Wetouch is a holding 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.
Previous 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.”
Current 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.
Previous wording
As of December 31, 2024, the Company had commitment of RMB5.0 million (equivalent to $0.7 million) for construction in progress.
Current wording
As of December 31, 2025, the Company had commitment of RMB7.3 million (equivalent to $1.05 million) for construction in progress.
Previous 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.
Current 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 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 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.
Current 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, 2025 and 2024, 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’sdisaggregation of revenues for the years ended December 31, 2024 and 2023 is disclosed in Note 16 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, 2025 and 2024 are 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 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.
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 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, operating lease, 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.
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 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.
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 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. Reversal of obsolete inventory and write-off inventory were $36,971 and $54,873 were recorded for the years ended December 31, 2025 and 2024, respectively.
Previous 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.
Current 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 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
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.
Current 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.
Previous wording
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 wording
On February 23, 2024, immediately upon the closing of the 2024 Public Offering, the Company made a full payment to the remaining five outstanding promissory notes. (see details in NOTE 11 – CONVERTIBLE PROMISSORY NOTES PAYABLE-a) Convertible promissory notes). There were no convertible promissory notes as of December 31, 2024.
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 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.
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 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.
Previous 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.
Current wording
The Company concluded that the Note Warrants (as defined in NOTE 11 – CONVERTIBLE PROMISSORY NOTES PAYABLE – ii) Warrants) issued in October, 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.
Previous wording
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 wording
The Note Warrant (see details in NOTE 11 – CONVERTIBLE PROMISSORY NOTES PAYABLE-b) Note Warrant) was issued in 2021 which was valid for three years and expired during the year ended December 31, 2024.
Previous 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.
Current wording
The Company recorded nil and $378,371 gain on changes of fair value of common stock purchase warrant liability for the year ended December 31, 2025 and 2024, 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 that includes 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 including 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 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.
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 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, 2025 and 2024. The Company believes that there were no uncertain tax positions as of December 31, 2025 and 2024.
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, 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.
Current wording
The Company’s operating subsidiary Sichuan Vtouch in China is subject to the income tax laws of the PRC. No significant income was generated outside the PRC for the fiscal years ended December 31, 2025 and 2024. As of December 31, 2025 and 2024, all of the Company’s tax returns of its PRC Subsidiaries remain open for statutory examination by PRC tax authorities.
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Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
The Note Warrant was valid for three years and expired during the year ended December 31, 2024.
Current report — wording carried from elsewhere
The majority of the Company’s revenues and expenses were denominated in Renminbi (“RMB”), the currency of the People’s Republic of China. There is no assurance that exchange rates between the RMB and the U.S. Dollar will remain stable. Inflation has not had a material impact on the Company’s business.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Net cash used in investing activities for the year ended December 31, 2023 was $2.3 million for the purchase of property, plant and equipment.