Wetouch Technology Inc.

Previous wording

The discussion should be read in conjunction with the Company’s consolidated financial statements and the notes presented herein. In addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Actual results could differ significantly from those expressed, implied or anticipated in these forward-looking statements as a result of certain factors discussed herein and any other periodic reports filed and to be filed with the Securities and Exchange Commission.** **See “Cautionary Note Regarding Forward Looking Statement.”

Current wording

The discussion should be read in conjunction with the Company’s consolidated financial statements and the notes presented herein. In addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Actual results could differ significantly from those expressed, implied or anticipated in these forward-looking statements as a result of certain factors discussed herein and any other periodic reports filed and to be filed with the Securities and Exchange Commission.** **For more information regarding the risks and uncertainties of our business,See “Risk Factors”, “Cautionary Note Regarding Forward Looking Statement.”

Previous wording

As of September 30, 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 wording

As of March 31, 2026, the Company has contributed RMB 348.0 million (US$50.4 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 wording

We generate revenues through sales of our various touchscreen products. 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 three months ended September 30, 2025 and 2024, our domestic sales accounted for approximately 68.9% and 64.3%, respectively, of our revenues, and our international sales accounted for approximately 31.1% and 35.7%, respectively, of our revenues. For the nine months ended September 30, 2025 and 2024, our domestic sales accounted for approximately 67.9% and 64.0%, respectively, of our revenues, and our international sales accounted for approximately 32.1% and 36.0%, 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 client base, although our revenues remain concentrated among a limited number of major customers, as described in Note 13 to the condensed consolidated financial statements. For the three months ended March 31, 2026 and 2025, our domestic sales accounted for approximately 67.5% and 67.4%, respectively, of our revenues, and our international sales accounted for approximately 32.5% and 32.6%, respectively, of our revenues.

Previous wording

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, to be completed by the end of 2025.

Current wording

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.

Previous wording

As of the date of this Quarterly Report, we estimate to finish the building construction by the end of 2025 and commence production in the second quarter of 2026. In consideration of the capital requirements for the new facility construction, we plan to fund the project primarily with our existing cash on hand, which totaled approximately $113.2 million as of September 30, 2025, and cash flows generated from operations, and we may seek additional financing if needed to support the timely completion of the project.

Current wording

As of the date of this Quarterly 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 $36.7 million (RMB253 million) and $13.7 million (RMB 94.6 million) have been recorded in the construction in progress as of March 31, 2026. 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.

Previous wording

We generated revenue of $12.2 million for the three months ended September 30, 2025, an increase of $0.7 million, or 6.1%, compared to $11.5 million in the same period of last year. This was due to an increase of 9.0% in sales volume, 0.1% positive impact from exchange rate due to appreciation of RMB against US dollars, partially offset by a decrease of 3.3% in the average selling price of our products, compared with that of the same period of last year.

Current wording

We generated revenue of $16.3 million for the three months ended March 31, 2026, an increase of $1.0 million, or 6.5%, compared to $15.3 million in the same period of last year. This was due to an increase of 0.1% in sales volume, an increase of 1.5% in the average selling price of our products , and 4.8% positive impact from exchange rate due to appreciation of RMB against US dollars, compared with that of the same period of last year.

Previous wording

For the nine months ended September 30, 2025, revenue from PRC market increased by $2.4 million or 9.7% as a combined result of (i) an increase of 14.8% in sales volume, particularly in industrial control computer touchscreens, automotive touchscreens, POS touchscreens and multi-functional printer touchscreens, partially offset by (ii) a decrease of 4.1% in the average RMB selling price of our products, and (iii) 0.3% negative impact from exchange rate due to depreciation of RMB against US dollars, compared with those of the same period of last year.

Current wording

For the three months ended March 31, 2026, revenue from the PRC domestic market increased by $0.7 million, or 6.8%, as a combined result of: (i) an increase of 2.7% in the average RMB selling price of our products, and 4.8% positive impact from exchange rate due to appreciation of RMB against US dollars, partially offset by (iii) a decrease of 1.1% in sales volume due to higher pricing offset by the lower demand in broader types of touchscreens exclusive of the medial touchscreens, compared with that of the same period of last year.

Previous wording

As for the RMB selling price, the decrease of 4.1% 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 18.3% in medical touchscreens and 1.2% in automotive touchscreens during the nine-month period ended September 30, 2025.

Current wording

As for the RMB selling price, the increase of 2.7% was mainly due to the higher demand of higher selling priced products of touchscreen machines in the PRC domestic market, average RMB selling price of 10.8% in medical touchscreens and 1.0% in automotive computer touchscreens during the three-month period ended March 31, 2026.

Previous wording

The Company has taken proactive efforts to market new models and efforts to obtain new customers in existing markets, our sales increased by 14.1% in South China, 13.4 in East China, and 10.5% in Southwest China during the three months ended September 30, 2025.

Current 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 9.1% in Southwest China, partially offset by a decrease of 1.8% in South China and 1.8% in East China during the three months ended March 31, 2026.

Previous wording

For the three months ended September 30, 2025, revenues from the overseas market were $3.8 million as compared to $4.1 million of the same period of 2024, representing a decrease by $0.3 million, or 7.3%, mainly due to i) a decrease of 2.5% in sales volume mainly in gaming touchscreens and automotive touchscreens, ii) a decrease of 5.1% in average selling price in RMB due to the lower demand on touchscreen machines in industrial control computer touchscreens and automotive touchscreens, partially offset by iii) the 0.1% positive impact from exchange rate due to appreciation of RMB against US dollars, compared with those of the same period of last year.

Current wording

For the three-month period ended March 31, 2026, revenues from the overseas market were $5.3 million as compared to $5.0 million of the same period of 2025, representing an increase by $0.3 million, or 6.0%, primarily due to (i) 2.4% increase in sales volume because of higher demand on automotive computer touchscreens and gaming touchscreens, (ii) 4.8% positive impact from exchange rate due to appreciation of RMB against US dollars, partially offset by (iii) a decrease of 1.0% in average selling price in RMB (mainly in medical touchscreens and gaming touchscreens), compared to the same period of last year.

Previous wording

The Company continued to shift production mix from traditional lower-end products to high-end products such as medical touchscreens and automotive touchscreens, primarily due to (i) greater growth potential of computer screen models in China and overseas market, and (ii) the stronger demand on higher-end touch screens made with better materials and better quality.

Current wording

The Company continued to shift production mix from traditional lower-end products to high-end products such as medical touchscreens, automotive touchscreens, POS touchscreens, industrial control computer touchscreens, and multi-functional printer touchscreens, primarily due to (i) greater growth potential of computer screen models in China and overseas market, and (ii) the stronger demand on higher-end touch screens made with better materials and better quality.

Previous wording

Gross profit was $4.0 million in the third quarter ended September 30, 2025, compared to $4.4 million in the same period of 2024. Our gross profit margin decreased to 32.7% for the third quarter ended September 30, 2025, as compared to 38.4% for the same period of 2024, primarily due to the increase of cost of goods sold by 13.8% resulting from the increase of 14.2% in costs of raw materials, and 2.7% in labor cost, partially offset by the increased sales of 6.1% during the quarter ended September 30, 2025.

Current wording

Gross profit was $5.8 million in the first quarter ended March 31, 2026, compared to $5.7 million in the same period of 2025. Our gross profit margin decreased to 35.7% for the first quarter ended March 31, 2026, as compared to 36.9% for the same period of 2025, primarily due to an increase of 8.7% in cost of goods sold, consisting of an increase of 10.5% in labor costs due to additional hiring of technicians, and an increase of 2.7% in costs of materials, and partially offset by the increase of revenue by 6.5%, particularly high-end products as stated above during the three months ended March 31, 2026.

Previous wording

Total operating income was $3.1 million for the three months ended September 30, 2025 as compared to $3.5 million of the same period of last year, primarily due to lower gross margin for the three months ended September 30, 2025.

Current wording

Total operating income was $5.1 million for the three-month period ended March 31, 2026 as compared to $4.1 million of the same period of last year, primarily due to higher revenues and gross profit, and lower general and administrative expenses, partially offset by the higher selling expenses for the three-month period ended March 31, 2026.

Previous wording

The effective income tax rates for the three months ended September 30, 2025 and 2024 were 20.1% and 26.9%, respectively.

Current wording

The effective income tax rates for the three-month period ended March 31, 2026 and 2025 were 24.3% and 36.5%, respectively.

Previous wording

As a result of the above factors, we had a net income of $2.5 million in the third quarter of 2025 compared to a net income of $2.7 million in the same quarter of 2024.

Current wording

As a result of the above factors, we had a net income of $3.9 million in the first quarter of 2026 compared to a net income of $2.6 million in the same quarter of 2025.

Previous wording

Historically, our primary uses of cash have been to finance working capital needs. We expect that we will be able to meet our needs to fund operations, capital expenditures and other commitments in the next 12 months primarily with our cash and cash equivalents, operating cash flows and bank borrowings.

Current wording

Historically, our primary uses of cash have been to finance working capital needs. We expect to be able to meet our needs to fund operations, capital expenditures, and other commitments over the next 12 months primarily with our cash and cash equivalents, operating cash flows and bank borrowings.

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

However, we may require additional cash resources due to changes in business conditions or other future developments. If these sources prove insufficient to meet our cash requirements, we may seek to raise additional funds through the sale of equity or debt securities or by obtaining a credit facility. Any issuance of additional equity or equity-linked securities could dilute the ownership interests of existing shareholders, while the incurrence of additional indebtedness would increase our debt service obligations and could subject us to operating and financial covenants that may restrict our business activities. There can be no assurance that financing will be available in the necessary amounts, on terms acceptable to us, or at all.

Previous wording

As of September 30, 2025, we had current assets of $125.2 million, consisting of $113.2 million in cash, $10.8 million in accounts receivable, $0.1 million in inventories, and $1.1 million in prepaid expenses and other current assets Our current liabilities as of September 30, 2025 were $4.7 million, which is comprised of $1.3 million in accounts payable, $0.6 million in amounts due to a related party, $0.7 million in income tax payable, $1.5 million in accrued expenses and other current liabilities. and $0.6 million in operating lease liabilities, current portion. We also had $51,503 in operating lease liabilities, non- current as of September 30, 2025.

Current wording

As of March 31, 2026, we had current assets of $132.7 million, consisting of $120.5 million in cash and cash equivalent, $11.1 million in accounts receivable, $29,060 in inventories, and $1.1 million in prepaid expenses and other current assets. Our current liabilities as of March 31, 2026 were $4.1 million, which is comprised of $0.9 million in accounts payable, $0.3 million in amounts due to a related party, $1.2 million income tax payable, $1.3 million in accrued expenses and other current liabilities. and $0.4 million in operating lease liabilities, current portion.

Previous wording

The following is a summary of our cash flows provided by (used in) operating, investing, and financing activities for the nine months ended September 30, 2025 and 2024:

Current wording

The following is a summary of our cash flows provided by operating, investing, and financing activities for the three-month periods ended March 31, 2026 and 2025:

Previous wording

The negative cash flow of 0.7 million for the nine months ended September 30, 2024 was primarily due to i) increase of $2.1 million in accounts receivable, $2.3 million in prepaid expenses and current assets, ii) the decrease of $3.7 million in accrued expenses and current liabilities, partially offset by iii) net income of $5.9 million and iv) the increase of $0.6 million in accounts payable and $1.0 million in income tax payable.

Current wording

The positive cash flow for the three months ended March 31, 2025 was primarily due to i) $2.5 million net income, ii) the decrease of $0.6 million in prepaid expenses and current assets, iii) the increase of in $0.3 million accounts payable, $0.3 million due to a related party, $1.3 million in tax payable and $0.6 million in accrued expenses and current liabilities, partially offset by iv) the increase of $3.5 million in accounts receivable.

Previous wording

As of September 30, 2025, our cash and cash equivalents were $113.2 million, as compared to $103.8 million at December 31, 2024.

Current wording

As of March 31, 2026, our cash and cash equivalents were $120.5 million, as compared to $118.4 million on December 31, 2025.

Previous wording

Days Sales Outstanding (“DSO”) has decreased to 62 days for the nine months ended September 30, 2025 from 64 days for the year ended December 31, 2024.

Current wording

Days Sales Outstanding (“DSO”) has decreased to 48 days for the three-month period ended March 31, 2026 from 56 days for the year ended December 31, 2025.

Previous wording

There have been no changes to the Company’s holding company structure during the nine months ended September 30, 2025. For more details, refer to the Company’s holding company structure disclosures set forth in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations- Holding Company Structure” of the 2024 Form 10-K.

Current wording

There have been no changes to the Company’s holding company structure during the three months ended March 31, 2026. For more details, refer to the Company’s holding company structure disclosures set forth in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations- Holding Company Structure” of the 2025 Form 10-K.

Previous wording

As of September 30, 2025, the Company had commitment of RMB4.6 million (equivalent to $0.7 million) for construction in progress.

Current wording

As of March 31, 2026, the Company had commitment of RMB7.3 million (equivalent to $1.06 million) for construction in progress.

Previous wording

The preparation of financial statements and related disclosures in conformity with GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Note 2, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of the 2024 Form 10-K describe the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements. There have been no material changes to the Company’s critical accounting estimates since the 2024 Form 10-K.

Current wording

The preparation of financial statements and related disclosures in conformity with GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Note 2, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report and in the Notes to Consolidated Financial Statements in Part II, Item 8 of the 2025 Form 10-K describe the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements. There have been no material changes to the Company’s critical accounting estimates since the 2025 Form 10-K.