UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to __________

Commission file number: 001-41957

WETOUCH TECHNOLOGY INC.

(Exact name of registrant as specified in its charter)

Nevada		20-4080330
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

No. 29, Third Main Avenue Shigao Town, Renshou County Meishan, Sichuan, China		620500
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (+86) 28-3739-0666

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.001 par value per share		WETH		Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes ☐ No ☒

As of November 12, 2025, there were 11,931,534 shares of the registrant’s common stock, par value $0.001 per share, issued and outstanding.

WETOUCH TECHNOLOGY INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

		Page Number
	Cautionary Note Regarding Forward Looking Statements	ii
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of September 30, 2025 (Unaudited) and December 31, 2024	F-1
	Condensed Consolidated Statements of Income and Comprehensive Income for the Three and Nine Months Ended September 30, 2025 and 2024 (Unaudited)	F-2
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2025 and 2024 (Unaudited)	F-3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 (Unaudited)	F-4
	Notes to Condensed Consolidated Financial Statements	F-5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	12
Item 4.	Controls and Procedures	13

PART II	OTHER INFORMATION	15
Item 1.	Legal Proceedings	15
Item 1A.	Risk Factors	15
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	15
Item 3.	Defaults Upon Senior Securities	15
Item 4.	Mine Safety Disclosures	15
Item 5.	Other Information	15
Item 6.	Exhibits	16
	Signatures	17

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be preceded by, or contain, words such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “predict,” “potential,” “might,” “could,” “would,” “should” or other words indicating future results, though not all forward-looking statements necessarily contain these identifying words. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, without limitation, statements about our future business operations and results, our strategy and competition. These statements represent our current expectations or beliefs concerning various future events and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations, including, but not limited to:

●

Our reliance on our top customers is significant. Failure to attract new customers or retain existing ones cost-effectively could materially and adversely impact our business, financial condition, and results of operations.

●

We hold a substantial amount of accounts receivable, which may become uncollectible.

●

We face fines and penalties from the Chinese government for not completing required filings.

●

Our capacity to uphold the quality and safety standards of our products.

●

Our ability to compete effectively within the touchscreen display industry.

●

Without substantial additional financing, our ability to execute our business plan will be compromised.

●

Failure to secure a new parcel for constructing our new buildings and facilities, as well as acquiring and installing new production lines on the new parcel, could materially and adversely affect our business, financial condition, and results of operations.

●

Revocation or unavailability of preferential tax treatments and government subsidies, or successful challenges to our tax liability calculation by PRC tax authorities, may necessitate payment of tax, interest, and penalties exceeding our tax provisions.

●

Significant interruptions in the operations of our third-party suppliers could potentially disrupt our operations.

●

Risks associated with fluctuations in the cost, availability, and quality of raw materials may adversely affect our results of operations.

●

We are reliant on key executives and highly qualified managers, and retention cannot be assured.

●

Absence of long-term contracts with our suppliers allows them to reduce order quantities or terminate sales to us at any time.

●

Failure to adopt new technologies to evolving customer needs or emerging industry standards may materially and adversely affect our business.

●

Lack of business liability or disruption insurance exposes us to significant costs and business disruption.

●

Adverse regulatory developments in Mainland China may subject us to additional regulatory review, restrictions, disclosure requirements, and regulatory scrutiny by the SEC, increasing compliance costs and hindering future securities offerings.

●

Our common stock may be prohibited from trading in the U.S. under the Holding Foreign Companies Accountable Act if PCAOB inspection of our auditor is incomplete, leading to delisting or prohibition and potential decline in stock value.

●

Changes in China’s economic, political, or social conditions or government policies may adversely affect our business and operations.

●

Uncertainties regarding the PRC legal system, including enforcement and sudden changes in laws and regulations, could adversely affect us and limit legal protections.

●

Fluctuations in exchange rates could materially and adversely affect our results of operations and your investment value.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We undertake no obligation to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

You should read this Quarterly Report with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in the foregoing documents by these cautionary statements.

iii

Item 1. Financial Statements

WETOUCH TECHNOLOGY INC. AND ITS SUBSIDIARIES

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets at September 30, 2025 (Unaudited) and December 31, 2024	F-1

Condensed Consolidated Statements of Income and Comprehensive Income for the Three and Nine Months Ended September 30, 2025 and 2024 (Unaudited)	F-2

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30,2025 and 2024 (Unaudited)	F-3

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30,2025 and 2024 (Unaudited)	F-4

Notes to Condensed Consolidated Financial Statements	F-5 - F-21

WETOUCH TECHNOLOGY INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Currency expressed in United States Dollars(“US”), except for number of shares)

	September 30, 2025			December 31, 2024
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash	$	113,194,898		$	103,760,324
Accounts receivable, net		10,806,772			7,504,630
Inventories		46,878			112,327
Prepaid expenses and other current assets		1,127,278			2,762,580
TOTAL CURRENT ASSETS		125,175,826			114,139,861

Property, plant and equipment, net		13,426,772			12,782,997
Land use right, net		542,935
Operating right-of-use assets		666,003			1,055,208
Deferred tax assets		96,371			41,397
TOTAL ASSETS	$	139,907,907		$	128,019,463

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	1,289,512		$	1,263,981
Due to a related party		614,372			149,211
Income tax payable		699,178			-
Accrued expenses and other current liabilities		1,472,125			966,461
Operating lease liabilities- current		614,500			571,539
TOTAL CURRENT LIABILITIES		4,689,687			2,951,192

Operating lease liabilities- non current		51,503			482,606
TOTAL LIABILITIES	$	4,741,190		$	3,433,798

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 15,000,000 shares authorized, 11,931,534 and 11,931,534 issued and outstanding as of September 30, 2025 and December 31, 2024, respectively*	$	11,932		$	11,932
Additional paid in capital*		52,501,680			52,501,680
Statutory reserve		8,073,968			8,073,968
Retained earnings		81,961,116			74,629,374
Accumulated other comprehensive loss		(7,381,979	)		(10,631,289	)
TOTAL STOCKHOLDERS’ EQUITY		135,166,717			124,585,665
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	139,907,907		$	128,019,463

Retrospectively restated for effect of reverse stock split (1-for-20), see Note 10 (2)

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-1

WETOUCH TECHNOLOGY INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(Currency expressed in United States Dollars(“US”),except for number of shares)

(Unaudited)

	Three-Month Period Ended						Nine-Month Period Ended
	September 30,						September 30,
	2025			2024			2025			2024
REVENUES	$	12,179,802		$	11,537,989		$	39,888,835		$	38,649,823
COST OF REVENUES		(8,201,011	)		(7,101,645	)		(26,156,902	)		(26,014,703	)
GROSS PROFIT		3,978,791			4,436,344			13,731,933			12,635,120

OPERATING EXPENSES
Selling expenses		(143,556	)		(159,032	)		(360,588	)		(908,540	)
General and administrative expenses		(708,928	)		(750,441	)		(3,189,400	)		(2,083,568	)
Research and development expenses		-			(43,859	)		-			(129,808	)
OPERATING EXPENSES		(852,484	)		(953,332	)		(3,549,988	)		(3,121,916	)

INCOME FROM OPERATIONS		3,126,307			3,483,012			10,181,945			9,513,204

Interest income		36,564			39,003			133,304			108,396
Interest expense		-			-			-			(1,169,974	)
Other income		-			-			-			46,560
(Gain) on changes in fair value of common stock purchase warrants liability		-			118,120			-			163,692
TOTAL OTHER INCOME (LOSS)		36,564			157,123			133,304			(851,326	)

INCOME BEFORE INCOME TAX EXPENSE		3,162,871			3,640,135			10,315,249			8,661,878

INCOME TAX EXPENSE		(635,679	)		(979,436	)		(2,983,507	)		(2,740,615	)

NET INCOME	$	2,527,192		$	2,660,699		$	7,331,742		$	5,921,263

OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustment		834,341			4,352,118			3,249,310			1,643,719	)
COMPREHENSIVE INCOME	$	3,361,533		$	7,012,817		$	10,581,052		$	7,564,982

EARNINGS PER COMMON SHARE*
Basic	$	0.21		$	0.22		$	0.61		$	0.51
Diluted	$	0.21		$	0.22		$	0.61		$	0.51
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING*
Basic		11,931,534			11,931,534			11,931,534			11,529,234
Diluted		11,931,534			11,982,239			11,931,534			11,579,938

Retrospectively restated for effect of reverse stock split (1-for-20), see Note 10 (2)

The accompanying notes are an integral part of these consolidated financial statements.

F-2

WETOUCH TECHNOLOGY INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Currency expressed in United States Dollars(“US”), except for number of shares)

(Unaudited)

	Common stock at Par value $0.001				Additional paid-in		Statutory		Retained		Accumulated other comprehensive			Total stockholders’
	Shares		Amount		capital		reserve		Earnings		loss			equity
Balance as of December 31 2024		11,931,534	$	11,932	$	52,501,680	$	8,073,968	$	74,629,374	$	(10,631,289	)	$	124,585,665
Net income		-		-		-		-		4,804,550		-			4,804,550
Foreign currency translation adjustment		-		-		-		-		-		2,414,969			2,414,969
Balance as of June 30, 2025		11,931,534	$	11,932	$	52,501,680	$	8,073,968	$	79,433,924	$	(8,216,320	)	$	131,805,184
Net income										2,527,192					2,527,192
Foreign currency translation adjustment		-		-		-		-		-		834,341			834,341
Balance as of September 30, 2025		11,931,534	$	11,932	$	52,501,680	$	8,073,968	$	81,961,116	$	(7,381,979	)	$	135,166,717

	Common stock at Par value $0.001				Additional paid-in			Statutory		Retained		Accumulated other comprehensive			Total stockholders’
	Shares		Amount		capital			reserve		Earnings		loss			equity
Balance as of December 31 2023*		9,732,948	$	9,733	$	43,514,125		$	7,195,092	$	69,477,092	$	(7,275,432	)	$	112,920,610

Issuance of common stock from the 2024 Public Offering, net of issuance costs		2,160,000		2,160		8,987,594			-		-		-			8,989,754
Exercise of warrants issued in conjunction with legal/consultant services in 2020 and 2021		35,861		36		(36	)		-		-		-			-
Exercise of warrants issued to third parties in conjunction with debt issuance in 2021		2,725		3		(3	)		-		-		-			-
Net income		-		-		-			-		3,260,564		-			3,260,564
Foreign currency translation adjustment		-		-		-			-		-		(2,708,399	)		(2,708,399	)
Balance as of June 30, 2024		11,931,534	$	11,932	$	52,501,680		$	7,195,092	$	72,737,656	$	(9,983,831	)	$	122,462,529
Net income		-		-		-			-		2,660,699		-			2,660,699
Foreign currency translation adjustment		-		-		-			-		-		4,352,118			4,352,118
Balance as of September 30, 2024		11,931,534	$	11,932	$	52,501,680		$	7,195,092	$	75,398,355	$	(5,653,713	)	$	129,475,346

Retrospectively restated for effect of reverse stock split (1-for-20), see Note 10 (2)

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-3

WETOUCH TECHNOLOGY INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Currency expressed in United States Dollars(“US”),except for number of shares)

(Unaudited)

	For the Nine Months Ended September 30,
	2025			2024
Cash flows from operating activities
Net income	$	7,331,742		$	5,921,263
Adjustments to reconcile net income to cash provided by (used in) operating activities
Allowance for credit losses		204,967			-
Provision for obsolete inventory		6,640			-
Depreciation and amortization		13,626			7,307
Amortization of discounts and issuance cost of the notes		-			5,715
Amortization of operating Right-of-use assets		450,229			-
Gain on changes in fair value of common stock purchase warrants liability		-			(163,692	)
Changes in operating assets and liabilities:
Accounts receivable		(3,070,577	)		(2,135,259	)
Inventories		60,698			35,410
Prepaid expenses and other current assets		1,443,905			(2,288,804	)
Deferred tax assets		(53,170	)		-
Accounts payable		(6,391	)		555,824
Amounts due to related parties		465,161			-
Income tax payable		689,391			975,226
Accrued expenses and other current liabilities		493,658			(3,658,027	)
Operating lease liabilities		457,440			-
Net cash provided by (used in) operating activities		8,487,319			(745,037	)

Cash flows from investing activity

Purchase of property, plant and equipment		-			(119,204	)
Net cash used in investing activity		-			(119,204	)

Cash flows from financing activities
Proceeds from issuance of common stock, net of issue costs		-			8,989,754
Proceeds from advances from a related party		-			434,576
Repayments of convertible promissory notes payable		-			(1,400,750	)
Net cash provided by financing activities		-			8,023,580

Effect of changes of foreign exchange rates on cash		947,255			1,537,599
Net increase in cash		9,434,574			8,696,938
Cash, beginning of period		103,760,324			98,040,554
Cash, end of period	$	113,194,898		$	106,737,492
Supplemental disclosures of cash flow information
Income tax paid	$	2,305,715		$	1,765,389
Interest paid	$	-		$	1,186,210
Issue costs charged to additional paid-in capital	$	-		$	1,810,246
Exercise of warrant shares	$	-		$	38,586
Lease liabilities arising from obtaining right-of-use assets	$	7,211		$	-

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-4

WETOUCH TECHNOLOGY INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BUSINESS DESCRIPTION

Wetouch Technology Inc. (“Wetouch”, or the “Company”), formerly known as Gulf West Investment Properties, Inc., was originally incorporated in August 1992, under the laws of the state of Nevada.

On October 9, 2020, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) with Wetouch Holding Group Limited (“BVI Wetouch”) and all the shareholders of BVI Wetouch (each, a “BVI Shareholder” and collectively, the “BVI Shareholders”), to acquire all the issued and outstanding capital stock of BVI Wetouch in exchange for the issuance to the BVI Shareholders an aggregate of 28,000,000 shares (1,400,000 shares post-Reverse Stock Split) of the Company’s common stock (the “Reverse Merger”). In the Reverse Merger, each ordinary share of BVI Wetouch was exchanged for 2,800 shares (140 shares post-Reverse Stock Split) of common stock of Wetouch. Immediately after the closing of the Reverse Merger on October 9, 2020, the Company had a total of 31,396,394 (1,569,820 shares post-Reverse Stock Split) issued and outstanding shares of common stock. As a result of the Reverse Merger, BVI Wetouch became a wholly-owned subsidiary of the Company.

BVI Wetouch is a holding company whose only asset, held through a subsidiary, is 100% of the registered capital of Sichuan Wetouch Technology Co., Ltd. (“Sichuan Wetouch”), a limited liability company organized under the laws of the People’s Republic of China (“China” or the “PRC”). Sichuan Wetouch is primarily engaged in the business of research and development, manufacture, and distribution of touchscreen displays to customers both in the PRC and overseas. The touchscreen products, which are manufactured by the Company, are primarily for use in financial terminals, automotive, Point of Sales, gaming, lottery, medical, Human-Machine Interface (HMI), and other specialized industries.

The Reverse Merger was accounted for as a recapitalization effected by a share exchange, wherein BVI Wetouch is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of BVI Wetouch have been brought forward at their book value and no goodwill has been recognized. The number of shares, par value amount, and additional paid-in capital in the prior years are retrospectively adjusted accordingly.

Corporate History of BVI Wetouch

BVI Wetouch was incorporated under the laws of British Virgin Islands on August 14, 2020. It became the holding company of Hong Kong Wetouch Electronics Technology Limited (“Hong Kong Wetouch”) on September 11, 2020.

Hong Kong Wetouch Technology Limited (“HK Wetouch”), was incorporated as a holding company under the laws of Hong Kong Special Administrative Region (the “SAR”) on December 3, 2020. On March 2, 2021, HK Wetouch acquired all shares of Hong Kong Wetouch. Due to the fact that Hong Kong Wetouch and HK Wetouch are both under the same sole stockholder, the acquisition is accounted for under common control.

In June 2021, Hong Kong Wetouch completed its dissolution process pursuant to the minutes of its special stockholder meeting.

Sichuan Wetouch was formed on May 6, 2011 in the PRC and became a Wholly Foreign-Owned Enterprise (“WFOE”) in PRC on February 23, 2017. On July 19, 2016, Sichuan Wetouch was 100% held by HK Wetouch.

On December 30, 2020, Sichuan Vtouch was incorporated in Chengdu, Sichuan, under the PRC laws.

F-5

In March 2021, pursuant to local PRC government guidelines on local environmental issues and the national plan, Sichuan Wetouch was under the government directed relocation order. Sichuan Vtouch took over the operating business of Sichuan Wetouch.

On March 30, 2023, an independent third party acquired all shares of Sichuan Wetouch for a nominal amount.

As a result of the above restructuring, HK Wetouch became the sole stockholder of Sichuan Vtouch.

The following diagram illustrates the Company’s current corporate structure:

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted as permitted by rules and regulations of the United States Securities and Exchange Commission (the “SEC”). The condensed consolidated balance sheet as of December 31, 2024 was derived from the audited consolidated financial statements of Wetouch. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated balance sheet of the Company as of December 31, 2024, and the related consolidated statements of income and comprehensive income changes in stockholders’ equity and cash flows for the years then ended.

In the opinion of the management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the financial position as of September 30, 2025, the results of operations and cash flows for the nine months ended September 30, 2025 and 2024 have been made. However, the results of operations included in such financial statements may not necessarily be indicative of annual results.

F-6

Deconsolidation of Sichuan Wetouch

On March 30, 2023, upon transferring Sichuan Wetouch to a third-party individual for a nominal value, the Company was no longer able to operate and exert control over Sichuan Wetouch whose operation has been taken over by Sichuan Vtouch since the first quarter of 2021. As a result, Sichuan Wetouch was deconsolidated accordingly since the disposal date.

The deconsolidated Sichuan Wetouch had assets, liabilities and the non-controlling interest on disposal date as the following:

		March 30, 2023
Total assets as of deconsolidated date	$	-
Total liabilities as of deconsolidated date		-
Total gain or loss from deconsolidation	$	-

Upon the deconsolidation, the Company was no longer entitled to the assets and also legally released from the liabilities previously held by the deconsolidated Sichuan Wetouch, derived nil gain or loss from the deconsolidation in the condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2023. The disposal of Sichuan Wetouch did not represent a strategic shift and did not have a major effect on the Company’s operation. There was no cash outflow for the disposal for the three months ended March 31, 2023.

(b) Uses of Estimates

In preparing the consolidated financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date of the consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, the allowance for estimated uncollectible receivables, fair values of financial instruments, inventory valuations, useful lives of property, plant and equipment and land use right, the recoverability of long-lived assets, provision necessary for contingent liabilities, and revenue recognition. Actual results could differ from those estimates.

(c) Significant Accounting Policies

For a detailed discussion about Wetouch’s significant accounting policies, refer to Note 2 — “Summary of Significant Accounting Policies,” in Wetouch’s consolidated financial statements included in Company’s 2024 audited consolidated financial statements. Other than the revised accounting policies on land use right, net, lease and segment reporting as below, during the nine months ended September 30, 2025, there were no significant changes made to Wetouch significant accounting policies.

Land use right, net

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.

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 RMB3,925,233 (equivalent to $551,374) for the Company’s new facility. The Company paid the consideration in full by November 18, 2021 and recorded in the prepayment.

F-7

Pursuant to the contract, Sichuan Vtouch will construct a new facility on this parcel according to the specifications. Once the Project is fully completed, Sichuan Vtouch will obtain the title of land use right.

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 end of December 31, 2025 with the production at the new facilities will commencing in the second quarter of 2026.

During the nine months ended September 30, 2025, management assessed the probability of the obtaining the land use right upon the completion of the new facility, reclassified prepayment of RMB3,925,233 (equivalent to $551,374) to land use right, started the amortization by a useful life of approximately 16 years.

The amortization expense of land use rights was US$8,321 for the nine months ended September 30, 2025, and included in general and administrative expenses.

			Useful life
Land use right			16 years

Lease

The Company adopted ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) for all periods presented. The Company elected the short-term lease exemption for all contracts with lease terms of 12 months or less.

Under the guidance of ASU 2016-02, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements.

The Company’s lease terms include options to renew or terminate the lease when it is reasonably certain that it will exercise the option. The Company determines if a contract contains a lease based on whether it has the right to obtain substantially all of the economic benefits from the use of an identified asset that the Company does not own and whether it has the right to direct the use of an identified asset in exchange for consideration. Right of use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are recognized as the amount of the lease liability, adjusted for lease incentives received. Lease liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is the Company’s incremental borrowing rate (“IBR”), because the interest rate implicit in most of the Company’s leases is not readily determinable. The IBR is a hypothetical rate based on the Company’s understanding of what its credit rating would be and the resulting interest it would pay to borrow an amount equal to the lease payments in a similar economic environment over the lease term on a collateralized basis. Lease payments may be fixed or variable, however, only fixed payments or in-substance fixed payments are included in the Company’s lease liability calculation. Variable lease payments are recognized in operating expenses in the period in which the obligation for those payments is incurred.

F-8

The lease right-of-use assets are initially measured at the carrying amount of the lease liability and adjusted for any prepaid or accrued lease payments, remaining balance of lease incentives received, unamortized initial direct costs, or impairment charges relating to the right-of-use-asset. Lease expense for minimum lease payments exclusive of value-added tax is recognized on a straight-line basis over the lease term The new standard provides a number of optional practical expedients at transition. The Company elected certain practical expedients that must be elected as a package, which permit the Company to not reassess, under the new standard, prior conclusions about (1) lease identification, (2) lease classification and (3) initial direct costs. Additionally, the Company elected a short-term lease exception policy, which allows entities to not apply Topic 842 to short-term leases (i.e. leases with terms of 12 months or less) and a hindsight policy, which allows an entity to include current considerations for existing leases when determining initial lease terms. The Company has also elected to account for lease and non-lease components as a single component for all leases and elected to utilize an IBR (incremental borrowing rate) that equals the risk free rate plus premium for all leases when calculating the lease liability.

Segment reporting

In accordance with ASC 280, Segment Reporting, operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) or decision-making group, in deciding how to allocate resources and in assessing performance. The Company evaluated its portfolio of service to determine whether certain services exhibit similar characteristics, such that they should be grouped together in the Company’s disclosure. The Company derives revenue primarily from projects performed under: (i) master and general service contract with customers for electric power supply solutions, mainly for the design and installation of low voltage outlet cable and bridge, power distribution box and electric vehicle power station; (2) installation of power wires, power poles and electricity distribution equipment and facilities for power supply system upgrade for both residential and commercial projects. The Company’s services have similar economic characteristics with respect to construction project nature, raw materials and supplies to be used in the projects, vendors, marketing and promotions, customers and methods of distribution. The Company’s chief operating decision maker (“CODM”) has been identified as the Chief Executive Officer (“CEO”), who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company. The CODM confers regularly to review trends in operating metrics, revisit, assess, and adjust significant strategic and operational matters, and make resource adjustments as needed. These discussions include exploring opportunities for project acquisition, responding immediately and effectively to operational adjustments, aligning ongoing business activities with corporate-level objectives, improving customer satisfaction, and enhancing corporate culture, among other management concerns. The primary measure of segment revenue and profitability for the Company’s operating segment is considered to be consolidated revenue and net income. Certain financial information, such as revenue, can be disaggregated, whereas cost of revenues, selling and marketing expenses, general and administrative expenses, research and development expenses and other income (expenses), are mixed and not disaggregated. Hence, with respect to costs of revenues and operating expenses and other income (expenses), no discrete financial information beyond the consolidated results is prepared and presented to the CODM.

As all of the Company’s assets are all located in the PRC, no geographical segment information of assets is presented. The CODM does not review any information regarding total assets on a reportable segment basis. Through the evaluation, the CODM determined that the Company has only one reporting segment.

Recent accounting pronouncements

On November 27, 2023, FASB issued Accounting Standards Update No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires that an entity disclose significant segment expenses impacting profit and loss that are regularly provided to the chief operating decision maker. The update is required to be applied retrospectively to prior periods presented, based on the significant segment expense categories identified and disclosed in the period of adoption. The amendments in ASU 2023-07 are required to be adopted for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements.

On December 14, 2023, the FASB issued Accounting Standards Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires that entities disclose specific categories in their rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. The new standard is effective for the Company beginning December 15, 2024, with early adoption permitted effective for fiscal years beginning January 1, 2024. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements.

F-9

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 (“ASU 2024-03”), which requires the disaggregation of certain expense captions into specified categories in disclosures within the notes to the consolidated financial statements to provide enhanced transparency into the expense captions presented on the face of the statement of income and comprehensive income. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, with early adoption permitted, and may be applied either prospectively or retrospectively to financial statements issued for reporting periods after the effective date of ASU 2024-03 or retrospectively to any or all prior periods presented in the financial statements. On January 6, 2025, FASB issued ASU 2025-01 that clarifies for non-calendar year-end entities the interim effective date of Accounting Standards Update No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. Public business entities are required to adopt the guidance in Update 2024-03 in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact that the adoption of ASU 2024-03 will have on its related disclosures.

In March 2025, the FASB issued ASU 2025-02—Liabilities (405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 122. The amendments in this Update are effective immediately and on a fully retrospective basis to annual periods beginning after December 15, 2024. The Company is currently evaluating the effect of adoption of this standard to its consolidated financial statements and disclosures.

Other accounting standards that have been issued by FASB that do not require adoption until a future date are not expected to have a material impact on the unaudited condensed consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on, or are unrelated to, its unaudited condensed consolidated financial condition, results of operations, cash flows or disclosures.

NOTE 3 — ACCOUNTS RECEIVABLE

	September 30, 2025			December 31, 2024
	(Unaudited)
Accounts receivable	$	10,808,865		$	7,504,630
Allowance for credit losses		(2,093	)		-
Accounts receivable, net	$	10,806,772		$	7,504,630

The Company’s accounts receivable primarily includes balance due from customers when the Company’s products are sold and delivered to customers.

Movement of allowance for credit losses was as follows:

	For the nine months ended September 30,
	2025		2024
Balance at beginning of period	$	-	$	-
Allowance for the year		2,064		-
Reversal of credit loss		-		-
Foreign exchange adjustment		29		-
Balance at end of Year	$	2,093	$	-

The following table provides an analysis of the aging of accounts receivable as of September 30, 2025 and December 31, 2024:

	September 30, 2025		December 31, 2024
	(Unaudited)
Current	$	4,659,916	$	3,726,124
1-3 months past due		5,931,974		2,536,815
4-6 months past due		175,116		1,241,691
6-12 months past due		39,766		-
Total accounts receivable	$	10,806,772	$	7,504,630

F-10

NOTE 4 — PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

	September 30, 2025		December 31, 2024
	(Unaudited)
Advance to suppliers	$	56,721	$	252,618
Prepayment for land use right (i)		-		537,755
Security deposit (ii)		55,204		53,840
Prepaid consulting service fees (iii)		-		884,687
Prepaid market research fees (iv)		955,000		955,000
Others receivable (v)		60,353		78,680
Prepaid expenses and other current assets	$	1,127,278	$	2,762,580

(i)

On July 23, 2021, Sichuan Vtouch entered into a contract with Chengdu Wenjiang District Planning and Natural Resources Bureau for the purchase of a land use right of a parcel of land of 131,010 square feet for a consideration of RMB3,925,233 (equivalent to $551,374) for the Company’s new facility. The Company paid the consideration in full by November 18, 2021. Upon issuance of a certificate of land use right by the local government, which is estimated to be obtained by the second half of 2026. As the construction is approaching the end, management assessed the certainty of the such a title, accordingly reclassified this prepayment to land use right during the nine months ended September 30, 2025.

(ii)	On July 28, 2021, Sichuan Vtouch made a security deposit of RMB393,000 (equivalent to $55,204) to Chengdu Cross-Strait Science and Technology Industry Development Park Management Committee to obtain a construction license for its new facility. This deposit will be refunded upon the issuance of the construction license, which is expected to be by the second half of 2025.

(iii)	In May 2023, the Company entered into two third-party consulting service agreements for a fee of $1.35 million and $3.05 million, respectively, for the three-year consulting services. The total fee would be amortized over the three-year services and reclassified to stock issuance costs accordingly. As of September 30, 2025, the Company this prepaid consulting service fees has been amortized in full.

(iv)	On February 29, 2024, the Company advanced market research fees $70,000 and $855,000, respectively, to two unrelated individuals, Mr. Chien Hui Chueh and Mr. Cheung Ming Lin, in relation to the Company’s market research service overseas. The two individuals signed borrowing contracts with a principal amount of $70,000 and $855,000, respectively, on February 29, 2024. Those contracts were issued to the Company to evidence the advances, bearing 3.45% interest per annum, and payable on February 28, 2025, and extended till August 29, 2026.

(v)	Other receivables are mainly employee advances, and prepaid expenses.

F-11

NOTE 5 — PROPERTY, PLANT AND EQUIPMENT, NET

	September 30, 2025			December 31, 2024
Buildings	$	12,098		$	11,798
Machinery and equipment		7,866			7,672
Vehicles		41,130			40,114
Construction in progress		13,404,256			12,755,791
Subtotal		13,465,350			12,815,375
Accumulated depreciation		(38,578	)		(32,378	)
Property, plant and equipment, net	$	13,426,772			12,782,997	)

Depreciation expense was $348 and $2,509 for the three months ended September 30, 2025 and 2024, respectively, and $5,305 and $7,307 for the nine months ended September 30, 2025 and 2024, respectively.

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

NOTE 6 — OPERATING LEASE

In March 2021, pursuant to the local PRC government guidelines on local environmental issues and the national plan, the Company was under the government directed relocation order to relocate from a parcel of state-owned land where we maintained our executive offices, research and development facilities and factories. The Company received a total amount of RMB115.2 million (approximately $16.2 million) from the local government to start the construction of the new facility in a neighboring Chengdu Wenjiang District.

On March 16, 2021, in order to minimize interruption of the Company’s business, Sichuan Vtouch entered into a leasing agreement with Sichuan Renshou Shigao Tianfu Investment Co., Ltd. (later renamed as Meishan Huantian Industrial Co., Ltd.), a limited liability company owned by the local government, to lease the property, and all buildings, facilities and equipment thereon (the “Demised Properties) of Sichuan Wetouch, commencing from April 1, 2021 until December 31, 2021 at a monthly rent of RMB300,000 ($42,141), which period was extended to October 31, 2022. The lease was renewed on October 16, 2022, October 30, 2023, August 9, 2024 and September 29, 2025, respectively, with a monthly rent of RMB 400,000 ($56,188), the term of which has been extended to October 31, 2026 for the use of the Demised Properties.

Management makes estimates and assumptions to use the leasing property till the end of October 2026, and applies ASU 2016-02 “Leases (Topic 842) as practical expedients during the three and nine months ended September 30, 2025.

Both operating lease expense and short-term lease expense are recognized in cost of revenues and general and administrative expenses.

The components of lease expense for the three and nine months ended September 30, 2025 and 2024 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
	(Unaudited)				(Unaudited)
Lease expense
Operating lease expense	$	149,196	$	-	$	457,440	$	-
Short-term lease expense		-		148,247		-		442,619
Total lease expense	$	149,196	$	148,247	$	457,440	$	442,619

F-12

The balances for the operating leases where the Company is the lessee are presented as follows:

	September 30, 2025		December 31, 2024
	(Unaudited)
Operating lease right-of-use assets	$	666,003	$	1,055,208
Lease liabilities – current		614,500		571,539
Lease liabilities – non-current		51,503		482,606
Total operating lease liabilities	$	666,003	$	1,054,145

The following is a schedule, by years, of maturities of lease liabilities as of September 30, 2025:

	Operating lease
	(Unaudited)
2025 lease payment (from October 1, 2025 to December 31, 2025)	$	154,644
2026 lease payment		515,482
Imputed interest		(4,123	)
Present value of lease liabilities	$	666,003

Lease term and discount rate:

	For the Nine Months Ended September 30,
	2025			2024
	(Unaudited)
Weighted-average remaining lease term (years)
Operating lease		1.1			-

Weighted-average discount rate
Operating lease		1.09	%		-

Supplemental cash flow information related to leases where the Company was the lessee for the nine months ended September 30,2025 was as follows:

	For the Nine Months Ended September 30,
	2025		2024
	(Unaudited)
Cash payments for operating lease	$	457,440	$	-
Lease liabilities arising from obtaining right-of-use assets		7,211		-

F-13

NOTE 7 — RELATED PARTY TRANSACTIONS

Amounts due to a related party were as follows:

Relationship

September 30,
2025

December 31,
2024

Note

Chengdu Wetouch Intelligent Optoelectronics Co., Ltd.

An affiliate of Ms. Jiaying Cai, director of the Company

614,372

149,211

Payable to affiliate for expenses paid on behalf of the Company

Total

614,372

149,211

Chengdu Wetouch Intelligent Optoelectronics Co., Ltd., was incorporated on January 28, 2021 in Chengdu, Sichuan Province under the laws of PRC, with Ms. Jiaying Cai, a director of the Company as its sole shareholder holding 100% of its equity interests.

NOTE 8 — INCOME TAXES

Wetouch

Wetouch is subject to a tax rate of 21% per year beginning 2018, and files a U.S. federal income tax return.

BVI Wetouch

Under the current laws of the British Virgin Islands, BVI Wetouch, a wholly owned subsidiary of Wetouch, is not subject to tax on its income or capital gains. In addition, no British Virgin Islands withholding tax will be imposed upon the payment of dividends by the Company to its stockholders.

Hong Kong

HK Wetouch is subject to profit taxes in Hong Kong at a progressive rate of 16.5%.

PRC

Sichuan Wetouch and Sichuan Vtouch files income tax returns in the PRC. Effective from January 1, 2008, the PRC statutory income tax rate is 25% according to the Corporate Income Tax (“CIT”) Law which was passed by the National People’s Congress on March 16, 2007.

Under PRC CIT Law, domestic enterprises and foreign investment enterprises (the “FIEs”) are usually subject to a unified 25% enterprise income tax rate while preferential tax rates, tax holidays and even tax exemption may be granted on a case-by-case basis by local government as preferential tax treatment to High and New Technology Enterprises (the “HNTEs”). Under this preferential tax treatment, HNTEs are entitled to an income tax rate of 15%, subject to a requirement that they re-apply for their HNTE status every three years. Pursuant to an approval from the local tax authority in October 2017, Sichuan Wetouch became a qualified enterprise located in the western region of the PRC, entitled it to a preferential income tax rate of 15% from October 11, 2017 to October 11, 2020.

On October 21, 2020, Sichuan Wetouch was granted on a case-by-case basis by Sichuan Provincial government as an HNTE, entitled to a reduced income tax rate of 15% from October 21, 2020 until October 20, 2023.

Sichuan Vtouch is subject to a 25% income tax rate.

The CIT Law and its implementation rules impose a withholding income tax at 10%, unless reduced by a tax treaty or arrangement, on the amount of dividends distributed by a PRC-resident enterprise to its immediate holding company outside the PRC that are related to earnings accumulated beginning on January 1, 2008. Dividends relating to undistributed earnings generated prior to January 1, 2008 are exempt from such withholding income tax.

F-14

The Company’s provision for income taxes expenses consisted of:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2025			2024		2025			2024
	(Unaudited)					(Unaudited)
PRC income tax
Income tax provision	$	699,922		$	979,436	$	3,036,677		$	2,740,615
Deferred income tax expenses		(64,243	)		-		(53,170	)		-
Sub total	$	635,679		$	979,436	$	2,983,507		$	2,740,615

US		-			-		-			-
BVI		-			-		-			-
Hong Kong		-			-		-			-
Income tax provision	$	635,679		$	979,436	$	2,983,507		$	2,740,615

The following table reconciles the PRC statutory rates to the Company’s effective tax rate for the three and nine months ended September 30, 2025 and 2024:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2025			2024			2025			2024
	(Unaudited)						(Unaudited)
PRC statutory income tax rate		25.0	%		25.0	%		25.0	%		25.0	%
Income tax computed at PRC statutory corporate income tax rate of 25%		24.9	%		26.9	%		28.5	%		31.8	%
Tax rate differential on entities not subject to PRC income		0.0	%		(0.3	)%		(0.6	)%		(1.1	)%
R&D additional deduction		0.0	%		1.2	%		0.0	%		1.5	%
Change in valuation allowance		0.0	%		(3.2	)%		0.0	%		(1.9	)%
Temporary differences		1.1	%		0.0	%		0.5	%		0.0	%
Non-deductible expenses		(5.9	)%		2.3	%		0.5	%		1.3	%
Effective tax rate		20.1	%		26.9	%		28.9	%		31.6	%

The Company follows ASC 740, “Income Taxes”, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The Company’s deferred tax assets consisted of the following components:

	As of September 30, 2025			As of December 31, 2024
	(Unaudited)
Deferred tax assets:
Credit loss	$	63,306		$	11,056
Provision of obsolete inventory		33,065			30,607
Leasing liabilities		166,501			263,536
Total gross deferred tax assets		262,872			305,199
Less valuation allowance					-
Deferred tax assets net of valuation allowance		262,872			305,199

Deferred tax liabilities:
Right-of-use assets		(166,501	)		(263,802	)
Deferred tax liabilities		(166,501	)		(263,802	)
Deferred tax assets, net	$	96,371		$	41,397

The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. As of September 30, 2025 and December 31, 2024, taxes for Sichuan Vtouch remained open for statutory examination by PRC tax authorities.

F-15

NOTE 9 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

	September 30, 2025		December 31, 2024
	(Unaudited)
Advance from customers	$	-	$	166,535
Accrued payroll and employee benefits		81,803		81,837
Accrued legal compensation charges		-		35,356
Accrued professional fees		183,354		57,173
Accrued director fees		75,615		66,734
Other payable to third parties		629,694		147,102
Other tax payables (i)		389,487		162,888
Others (ii)		112,172		248,836
Accrued expenses and other current liabilities	$	1,472,125	$	966,461

(i)	Other tax payable mainly represent value added tax payable.

(ii)	Others mainly represent accrued employee reimbursement payable and other accrued miscellaneous operating expenses.

NOTE 10 — CONVERTIBLE PROMISSORY NOTES PAYABLE

a) Convertible promissory notes

In October, November, and December 2021, the Company, issued seven (7) convertible promissory notes (the “Notes”) of an aggregate principal amount of $2,250,000, due in one year with discounted issuance price at 90.0%. The Notes bore interest at a rate of 8.0% per annum, payable in one year and matured on October 27, November 5, November 16, November 29, and December 2, 2022, respectively. Net proceeds after debt issuance costs and debt discounts were approximately $1,793,000. Debt issuance costs in the amount of $162,000 are recorded as deferred charges and included in the other current assets on the consolidated balance sheet. The debt discount and debt issuance costs are amortized into interest expense using the effective interest method over the terms of the Notes.

Unless the Notes are converted, the principal amounts of the Notes, and accrued interest at the rate of 8% per annum, are payable on the one-year anniversary of the issuance of the Notes (the “Maturity Date”). If the Company fails to satisfy its loan obligation by the Maturity Date, the default interest rate will be 16%.

The Lenders have the right to convert any or all of the principal and accrued interest on the Notes into shares of common stock of the Company on the earlier of (i) 180 calendar days after the issuance date of the Notes or (ii) the closing of a listing for trading of the common stock of the Company on a national securities exchange offering resulting in gross proceeds to the Company of $15,000,000 or more (an “Uplist Offering”). If the Company closes an Uplist Offering on or before the 180^th calendar date after the issuance date of the Notes, the conversion price shall be 70% of the per share offering price in the Uplist Offering; otherwise, the conversion price is $15.0 per share.

Subject to customary exceptions, if the Company issues shares or any securities convertible into shares of common stock at an effective price per share lower than the conversion price of the Notes, the conversion rate of the Notes shall be reduced to such lower price.

Until the Notes are either paid or converted in their entirety, the Company agreed with the Lenders not to sell any securities convertible into shares of common stock of the Company (i) at a conversion price that is based on the trading price of the stock or (ii) with a conversion price that is subject to being reset at a future date or upon an event directly or indirectly related to the business of the Company or the market for the common stock. The Company also agreed to not issue securities at a future determined price.

F-16

The Lenders have the right to require the Company to repay the Notes if the Company receives cash proceeds, including proceeds from customers and the issuance of equity (including in the Uplist Offering). If the Company prepays the Notes prior to the Maturity Date, the Company shall pay a 10% prepayment penalty.

From December 28, 2022 to April 6, 2023, the lenders of five outstanding Notes and the Company entered into an amendment to the Notes (“Amendment No. 1 to Promissory Note”) extending the term of the Notes for an additional 6 months.

From August 29 to September 9, 2023, the lenders of the outstanding Notes and the Company entered into an amendment to the Notes (“Amendment No. 2 to Promissory Note”) that upon the listing of the Company’s common stock on the Nasdaq Capital Market (the “Uplist”), the Company shall within three (3) business days after the Uplist, pay to the Holders amounts equal to 105% of the total outstanding balance of the Convertible Debenture.

During the year ended December 31, 2023, principal and default charges totaling $1,200,000 were converted into 25,000 shares of common stock of the Company.

During the year ended December 31, 2023, principal, accrued and unpaid interest and default charges totaling $1,038,426 were converted into 69,228 shares of common stock of the Company. Two notes were fully converted.

On February 23, 2024, immediately upon the closing of the 2024 Public Offering, the Company made a full payment of $2,586,960 under the remaining five outstanding promissory notes, including the principal of $1,400,750 and the related accrued interests and default charges of $1,186,210. There were no convertible promissory notes as of February 23, 2024.

During the three and nine months ended September 30, 2024, amortization of discounts and issuance cost of the notes were $5,715 and $5,715, respectively.

For the three and nine months ended September 30, 2024, the Company recognized interest expenses of the Notes in the amount $1,169,974 and $1,169,974, respectively.

b) Warrants

Accounting for Warrants

In connection with the issuance of the Notes, the Company also issued to the lenders seven (7) three-year warrants (the “Note Warrants”) to purchase an aggregate of 90,000 shares of the Company’s common stock (the “Warrant Shares”).

The Note Warrants issued to the lenders granted the holders the rights to purchase up to 10,000 shares of common stock of the Company at an exercise price of $25 per share. However, if the Company closes an Uplist Offering on or before the 180^th calendar date after the issuance date of the Note Warrants, then the exercise price shall be 125% of the offering price of a share in the Uplist Offering. If the adjusted exercise price as a result of the Uplist Offering is less than $25 per share, then the number of shares for which the Warrants are exercisable shall be increased such that the total exercise price, after taking into account the decrease in the per share exercise price, shall be equal to the total exercise price prior to such adjustment.

The lenders have the right to exercise the Note Warrants on a cashless basis if the highest traded price of a share of common stock of the Company during the 150 trading days prior to exercise of the Note Warrants exceeds the exercise price, unless there is an effective registration statement of the Company which covers the resale of the Lenders.

If the Company issues shares or any securities convertible into shares at an effective price per share lower than the exercise price of the Note Warrants, the exercise price of the Note Warrants shall be reduced to such lower price, subject to customary exceptions.

The lenders may not convert the Notes or exercise the Note Warrants if such conversion or exercise will result in each of the lenders, together with any affiliates, beneficially owning in excess of 4.9% of the Company’s outstanding shares of common stock immediately after giving effect to such exercise unless such lender notifies the Company at least 61 days prior to such exercise.

F-17

During the year ended December 31, 2023, two lenders exercised the Note Warrants cashlessly for 22,338 shares of common stock of the Company.

During the nine months ended September 30, 2024, one lender exercised the Note Warrants cashlessly for 2,725 shares of common stock.

As the Note Warrant was issued in 2021 and was valid for three years, the remaining 38,430 Note Warrants expired during the nine months ended September 30, 2024.

During the three and nine months ended September 30, 2024, the Company recorded $37,751 and $45,572 gain on changes in the fair value of common stock purchase warrants liability using the Black-Scholes option-pricing model.

(c) Registration Rights Agreements

Pursuant to the terms of the Registration Rights Agreements between the Company and lenders of the Notes, the Company agreed to file a registration statement with the Securities and Exchange Commission to register the shares of common stock underlying the Notes and the shares issuable upon exercise of the Note Warrants within sixty days from the date of each Registration Rights Agreement. The Company also granted the lenders piggyback registration rights on such securities pursuant to the Purchase Agreements.

NOTE 11 — STOCKHOLDERS’ EQUITY

1) Common Stock

The Company’s authorized shares of common stock was 15,000,000 shares with par value of $0.001.

On December 22, 2020, the Company issued 5,181 shares of common stock to The Crone Law Group, P.C. or its designees for legal services (see Note 12).

On January 1, 2021, the Company issued an aggregate of 15,541 shares to a third- party service provider for consulting services that had been rendered.

On April 14, April 27 and September 1, 2022, the Company issued 5,777, 5,599 and 2,857 shares of common stock upon cashless exercise of the Note Warrants to three lenders, respectively. (see Note 10 (b)).

During the year ended December 31, 2022, the Company issued 6,211 shares of common stock to a third party upon exercise of warrants (see Note 12).

During the year ended December 31, 2022, the Company issued 69,228 shares of common upon conversion of convertible promissory note payable (see Note 10 (a)).

On January 19, 2023, the Company sold an aggregate of 8,000,000 shares of common stock to purchasers in a private placement for an aggregate purchase price of $40,000,000, or $5.00 per share. On January 20, 2023, the Company received net proceeds of $40 million accordingly.

During the year ended December 31, 2023, the Company issued 25,000 shares of common stock upon conversion of convertible promissory note payable (see Note 10 (a)).

During the year ended December 31, 2023, the Company issued 22,338 shares of common stock to two third parties upon exercise of warrants (see Note 10 (b)).

On February 20, 2024, the Company issued 2,160,000 shares of common stock at a public offering price of $5.00 per share. The Company’s common stock began trading on the Nasdaq Capital Market under the ticker symbol “WETH” on February 21, 2024.

As of September 30, 2025, there were 11,931,534 shares of common stock issued and outstanding.

F-18

2) Reverse Stock Split

On February 17, 2023, the Company’s board of directors authorized a reverse stock split of common stock with a ratio of not less than one to five (1:5) and not more than one to eighty (1:80), with the exact amount and the timing of the reverse stock split to be determined by the Chairman of the Board. Upon effectiveness of such reverse stock split, the number of authorized shares of the common stock of the Company will also be decreased in the same ratio. Pursuant to Section 78.209 of the Nevada Revised Statutes, the reverse stock split does not have to be approved by the stockholders of the Company.

On July 16, 2023, the Company’s board of directors approved the reverse stock split of the Company’s common stock at a ratio of 1-for-20. On July 16, 2023, the Company filed a certificate of change (with an effective date of July 16, 2023) with the Nevada Secretary of State pursuant to Section 78.209 of the Nevada Revised Statutes to effectuate a 1-for-20 reverse stock split of its common stock. On September 11, 2023, the reverse stock split was approved by the Financial Industry Regulatory Authority and took effect on September 12, 2023. All share information included in this report has been adjusted as if the reverse stock split occurred as of the earliest period presented.

3) Closing of the 2024 Public Offering

On February 23, 2024, the Company closed its offering of 2,160,000 shares of common stock at a public offering price of $5.00 per share, for aggregate gross proceeds of $10.8 million before deducting underwriting discounts, and other offering expenses.

The Company complies with the requirements of FASB ASC Topic 340-10-S99-1, “Other Assets and Deferred Costs – SEC Materials” (“ASC 340-10-S99”) and SEC Staff Accounting Bulletin Topic 5A, “Expenses of Offering”, and charged issuance costs of $1,810,246 to additional paid-in capital during the nine months ended September 30, 2024.

3) Statutory Reserve and Restricted Net Assets

Under PRC rules and regulations, all companies in the PRC are required to appropriate 10% of their net income to a statutory surplus reserve until the reserve balance reaches 50% of their registered capital. The appropriation to this statutory surplus reserve must be made before distribution of dividends can be made. The statutory reserve is non-distributable, other than during liquidation, and can be used to fund previous years losses, if any, and may be converted into share capital by issuing new shares to existing shareholders in proportion to their shareholders or by increasing the par value of the shares currently outstanding, provided that the remaining balance of the statutory reserve after such issue is not less than 25% of the registered capital.

Appropriations to the discretionary surplus reserve are made at the discretion of the board of directors. The statutory reserve may be applied against prior year losses, if any, and may be used for general business expansion and production or increase in registered capital, but are not distributable as cash dividends.

As of September 30, 2025 and December 31, 2024, the Company had reserve fund of US$8,073,968 and US$8,073,968, respectively.

NOTE 12 — SHARE BASED COMPENSATION

The Company applied ASC 718 and related interpretations in accounting for measuring the cost of share-based compensation over the period during which the consultants are required to provide services in exchange for the issued shares. The fair value of above award was estimated at the grant date using the Black-Scholes model for pricing the share compensation expenses.

On December 22, 2020, the board of directors of the Company authorized the issuance of an aggregate of 5,181 shares and warrants to purchase an aggregate of 10,518 shares of common stock to The Crone Law Group, P.C. or its designees for legal services that had been rendered. The five-year warrants are exercisable at one cent per share.

5,181 shares of common stock underlying such warrants were vested on December 22, 2020 and 6,211 shares were issued upon exercise of these warrants on September 21, 2022 and warrant to purchase 4,307 shares remained outstanding for The Crone Law Group, P.C. or its designees for legal services. The fair value of above award was estimated at the grant date using Black-Scholes model for pricing the share compensation expenses. The fair value of the Black-Scholes model includes the following assumptions: expected life of 2.5 years, expected dividend rate of 0%, volatility of 43.5% and an average interest rate of 0.11%.

On January 1, 2021, the board of directors of the Company authorized the issuance of an aggregate of 15,541 shares and warrants to purchase 31,554 shares of common stock to a third party service provider for consulting services that had been rendered. These warrants have a five-year term and are exercisable at one cent per share.

The 15,541 shares of common stock and warrants to purchase 31,554 shares of common stock vested on January 1, 2021.

The fair value of the above warrants was estimated at the grant date using Black-Scholes model for pricing the share compensation expenses. The fair value of the Black-Scholes model includes the following assumptions: expected life of 2.5 years, expected dividend rate of 0%, volatility of 51.3% and an average interest rate of 0.12%.

During the nine months ended September 30, 2024, warrants for 35,861 shares of common stock related to above mentioned services were exercised. There were no warrants related to services remaining as of September 30, 2024.

As of September 30, 2024, the Company recognized relevant share-based compensation expense of nil for the vested shares, and nil for the warrants, respectively.

F-19

NOTE 13 — WEIGHTED AVERAGE NUMBER OF SHARES

In October 2020, the Company entered into a reverse merger transaction. The Company computes the weighted-average number of shares of common stock outstanding in accordance with ASC 260 states that in calculating the weighted average shares when a reverse merger takes place in the middle of the year, the number of common shares outstanding from the beginning of that period to the acquisition date shall be computed on the basis of the weighted-average number of shares of common stock of the legal acquiree (accounting acquirer) outstanding during the period multiplied by the exchange ratio established in the merger agreement. The number of shares of common stock outstanding from the acquisition date to the end of that period shall be the actual number of shares of common stock of the legal acquirer (the accounting acquiree) outstanding during that period.

NOTE 14 — RISKS AND UNCERTAINTIES

Credit Risk – The carrying amount of accounts receivable included in the balance sheet represents the Company’s exposure to credit risk in relation to its financial assets. No other financial asset carries a significant exposure to credit risk. The Company performs ongoing credit evaluations of each customer’s financial condition. The Company maintains allowances for doubtful accounts and such allowances in the aggregate have not exceeded management’s estimates.

The Company has its cash in bank deposits primarily at state owned banks located in the PRC. Historically, deposits in PRC banks have been secured due to the state policy of protecting depositors’ interests. The PRC promulgated a Bankruptcy Law in August 2006, effective June 1, 2007, which contains provisions for the implementation of measures for the bankruptcy of PRC banks. The bank deposits with financial institutions in the PRC are insured by the government authority for up to RMB500,000.

Interest Rate Risk – The Company is exposed to the risk arising from changing interest rates, which may affect the ability of repayment of existing debts and viability of securing future debt instruments within the PRC.

Currency Risk - A majority of the Company’s revenue and expense transactions are denominated in RMB and a significant portion of the Company’s assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances in currencies other than RMB by the Company in China must be processed through the PBOC or other China foreign exchange regulatory bodies which require certain supporting documentation in order to affect the remittance.

Concentrations - The Company sells its products primarily to customers in the PRC and to some extent, the overseas customers in European countries and East Asia, such as South Korea and Taiwan. For the three months ended September 30, 2025, five customers accounted for approximately 22.3%, 16.3%, 16.0%, 14.6%, and 12.1%, respectively, of the Company’s revenue. For the three months ended September 30, 2024, five customers accounted for approximately 21.4%, 19.5%, 15.9%, 14.4% and 12.0%, respectively, of the Company’s total revenue. For the nine months ended September 30, 2025, five customers accounted for 21.7%, 16.5%, 15.8%, 14.8%, and 12.1%, respectively, of the Company’s revenue. For the nine months ended September 30, 2024, five customers accounted for approximately 21.7%, 19.9%, 15.4%, 14.0% and 11.7%, respectively, of the Company’s total revenue.

The Company’s top ten customers aggregately accounted for 99.99% and 99.95% of the total revenue for the three months ended September 30, 2025 and 2024, and approximately 99.6% and 99.4% for the nine months ended September 30, 2025 and 2026.

As of September 30, 2025, five customers accounted for approximately 29.7%, 15.3%, 14.2%, 12.0% and 11.8% of the total accounts receivable balance, respectively.

The Company purchases its raw materials through various suppliers. Raw material purchases from these suppliers which individually exceeded 10% of the Company’s total raw material purchases, accounted for an aggregate of approximately 36.7% (three suppliers) and 37.3% (three suppliers) for the three months ended September 30, 2025 and 2024, respectively, and approximately 48.6% (four suppliers) and 39.5% (three suppliers) for the nine months ended September 30, 2025 and 2024, respectively.

NOTE 15 — COMMITMENTS AND CONTINGENCIES

i) Legal Proceedings

We may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of business. Litigation or any other legal or administrative proceeding, regardless of the outcome, can result in substantial cost and the diversion of our resources, including our management’s time and attention.

As of the date of this Report, we are not aware of any material, active, pending or threatened to which the Company or any of its subsidiaries is a party, or to which any of their property is subject.

ii) Capital Expenditure Commitment

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

F-20

NOTE 16 — SEGMENT REPORTING

The Company’s chief operating decision maker has been identified as the Chief Executive Officer (“CEO”), who reviews financial information of operating segments based on U.S. GAAP amounts when making decisions about allocating resources and assessing performance of the Company.

The Company determined that it operated in one operating segment of touch screen business.

The Company primarily operates in People’s Republic of China (“PRC”). and substantially all of the Company’s long-lived assets are located in the PRC.

1)	The Company’s geographical revenue information is set forth below:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Sales in PRC	$	8,371,982	$	7,429,211	$	27,087,977	$	24,671,308
Sales in Overseas
-Republic of China (ROC, or Taiwan)		2,028,805		2,253,523		6,881,397		7,859,989
-South Korea		1,778,931		1,830,671		5,900,450		5,959,287
-Others		84		24,584		19,011		159,239
Sub-total		3,807,820		4,108,778		12,800,858		13,978,515
Total Revenue	$	12,179,802	$	11,537,989	$	39,888,835	$	38,649,823

2)	Segment information is set forth below:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2025		2024			2025		2024
	(Unaudited)		(Unaudited)			(Unaudited)		(Unaudited)
Revenues	$	12,179,802	$	11,537,989		$	39,888,835	$	38,649,823
Less:
Cost of revenues		8,201,011		7,101,645			26,156,902		26,014,703
Allowance for credit losses		159,078		-			204,967		-
Provision for obsolete inventory		97,892		-			6,640		-
Staff cost		361,088		353,318			1,066,281		1,025,972
(Gain) on changes in fair value of common stock purchase warrants liability.		-		(118,120	)		-		(163,692	)
Amortization of discounts and issue cost of the notes		-		-			-		5,715
Depreciation & amortization expense		8,669		2,509			13,626		7,307
Lease expense		149,196		148,247			457,440		442,619
Interest expense		-		-			-		1,169,974
Income tax expense		635,679		979,436			2,983,507		2,740,615
Other segment items*		39,997		410,255			1,667,730		1,485,347

Segment net income		2,527,192		2,660,699			7,331,742		5,921,263

Consolidated net income	$	2,527,192	$	2,660,699		$	7,331,742	$	5,921,263

Consolidated total assets	$	139,907,907	$	133,143,876		$	139,907,907	$	133,143,876

NOTE 17 — SUBSEQUENT EVENTS

The Company has evaluated subsequent events and transactions that occurred after the balance sheet date through the date the consolidated financial statements were issued and no subsequent events occurred that require accrual or disclosure.

F-21

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.”

Overview

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.

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.”

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.”

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.”

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.”

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.

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.

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 Quarterly Report has been retroactively adjusted to reflect these actions. For more details, see “Item 1. Business - Corporate History and Structure - Reverse Stock Splits” of the 2024 Form 10-K.

Construction of our new facility

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.

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.

Highlights for the three months ended September 30, 2025 include:

●

Revenues were $12.2 million, an increase of 6.1% from $ 11.5 million in the third quarter of 2024

●

Gross profit was $4.0 million, a decrease of 9.1% from $ 4.4 million in the third quarter of 2024

●

Gross profit margin was 32.7% as compared to 38.4% in the third quarter of 2024

●

Net income was $2.5 million, a decrease of 7.4% from $ 2.7 million in the third quarter of 2024

●

Total volume shipped was 597,470 units, an increase of 9.0% from 548,335 units in the third quarter of 2024

Results of Operations

The following table sets forth, for the periods indicated, statements of income data:

	For the Three Months Ended September 30,						Change			For the Nine Months Ended September 30,						Change
(in US Dollar millions, except percentage)	2025			2024			%			2025			2024			%
Revenues	$	12.2		$	11.5			6.1	%	$	39.9		$	38.6			3.4	%
Cost of revenues		(8.2	)		(7.1	)		15.5	%		(26.2	)		(26.0	)		0.8	%
Gross profit		4.0			4.4			(9.1	)%		13.7			12.6			8.7	%
Total operating expenses		(0.9	)		(0.9	)		0.0	%		(3.5	)		(3.1	)		12.9	%
Operating income		3.1			3.5			(11.4	)%		10.2			9.5			7.4	%
Total other income (expenses)		0.0			0.1			(100.0	)%		0.1			(0.9	)		(111.1	)%
Income before income taxes		3.1			3.6			(13.8	)%		10.3			8.6			19.8	%
Income tax expense		(0.6	)		(0.9	)		(33.3	)%		(3.0	)		(2.7	)		11.1	%
Net income	$	2.5		$	2.7			(7.4	)%	$	7.3		$	5.9			23.7	%

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024

Revenues

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.

	For the Three Months Ended September 30,
	2025					2024					Change			Change
	Amount		%			Amount		%			Amount			%
	(in US Dollar millions except percentage)
Revenue from sales to customers in Mainland China	$	8.4		68.9	%	$	7.4		64.3	%	$	1.0			13.5	%
Revenue from sales to customers overseas		3.8		31.1	%		4.1		35.7	%		(0.3	)		(7.3	)%
Total Revenues	$	12.2		100	%	$	11.5		100	%	$	0.7			6.1	%

	For the Three Months Ended September 30,
	2025					2024					Change			Change
	Unit		%			Unit		%			Unit			%
	(in UNIT, except percentage)
Units sold to customers in Mainland China		404,105		67.6	%		349,960		63.8	%		54,145			15.5	%
Units sold to customers overseas		193,365		32.4	%		198,375		36.2	%		(5,010	)		(2.5	)%
Total Units Sold		597,470		100	%		548,335		100	%		49,135			9.0	%

(i) PRC market

For the three months ended September 30, 2025, we recorded revenue of $8.4 million in the domestic market, an increase of $1.0 million of 13.5%, as compared to $7.4 million of the same period of 2024. The increase was primarily due to (i) an increase of 15.5% in sales volume due to higher sales volume of automotive touchscreens, industrial control computer touchscreens, POS touchscreens, medical touchscreens and multi-functional printer touchscreens, (ii) 0.1% positive impact from exchange rate due to appreciation of RMB against US dollars, partially offset by a decrease of 2.6% in the average RMB selling price of our products, compared with those of the same period of last year.

As for the RMB selling price, the decrease of 2.6% was mainly due to 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 13.4% in medical touchscreens and 0.9% in automotive touchscreens during the three months ended September 30, 2025.

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.

(ii) Overseas market

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.

The following table summarizes the breakdown of revenues by categories in US dollars:

	Revenues For the Three Months Ended September 30,
	2025					2024					Change			Change
	Amount		%			Amount		%			Amount			Margin%
	(in US Dollars, except percentage)
Product categories by end applications
Automotive Touchscreens	$	3,081,086		25.3	%	$	3,193,024		27.7	%	$	(111,938	)		(3.5	)%
Industrial Control Computer Touchscreens		2,570,332		21.1	%		2,243,509		19.4	%		326,823			14.6	%
POS Touchscreens		1,948,109		16.0	%		1,661,568		14.4	%		286,541			17.2	%
Gaming Touchscreens		1,778,931		14.6	%		1,830,671		15.9	%		(51,740	)		(2.8	)%
Medical Touchscreens		1,655,441		13.6	%		1,647,650		14.3	%		7,791			0.5	%
Multi-Functional Printer Touchscreens		1,145,903		9.4	%		961,567		8.3	%		184,336			19.2	%
Total Revenues	$	12,179,802		100.0	%	$	11,537,989		100.0	%	$	641,813			6.1	%

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.

Gross Profit and Gross Profit Margin

	For the Three Months Ended September 30,						Change
(in millions, except percentage)	2025			2024			Amount			%
Gross Profit	$	4.0		$	4.4		$	(0.4	)		(9.1	)%
Gross Profit Margin		32.7	%		38.4	%					(5.7	)%

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.

Selling Expenses

	For the Three Months Ended September 30,						Change
(in millions, except percentage)	2025			2024			Amount			%
Selling Expenses	$	0.1		$	0.2		$	(0.1	)		(50.0	)%
as a percentage of revenues		0.8	%		1.7	%					(0.9	)%

Selling expenses were $0.1 million for the three months ended September 30, 2025, compared to $0.2 million in the same period in 2024, representing a decrease of $0.1 million, or 50.0%. The decrease was primarily due to the decrease of traveling expenses because of sales department utilizing more online communications for sales forecast and marketing evaluations during the three months ended September 30, 2025.

General and Administrative Expenses

	For the Three Months Ended September 30,						Change
(in millions, except percentage)	2025			2024			Amount		%
General and Administrative Expenses	$	0.8		$	0.7		$	0.1		14.3	%
as a percentage of revenues		6.6	%		6.1	%				(0.5	)%

General and administrative expenses were $0.8 million and $0.7 million for the three months ended September 30, 2025 and 2024, respectively, the increase of $0.1 million was primarily due to the professional fees.

Research and Development Expenses

	For the Three Months Ended September 30,						Change
(in US dollars, except percentage)	2025			2024			Amount			%
Research and Development Expenses	$	-		$	43,859		$	(43,859	)		(100.0	)%
as a percentage of revenues		0.0	%		0.4	%					(0.4	)%

Research and development expenses were nil and $43,859 for the three months ended September 30, 2025 and 2024, respectively.

Operating Income

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.

Gain on Changes in Fair Value of Common Stock Purchase Warrants

	For the Three Months Ended September 30,						Change
(in millions, except percentage)	2025			2024			Amount			%
Gain on changes in fair value of common stock purchase warrants	$	-		$	0.1		$	(0.1	)		(100.0	)%
as a percentage of revenues		0.0	%		0.9	%					(0.9	)%

Gain on changes in fair value of common stock purchase warrants for the three months ended September 30, 2024 was $0.1 million (See Note 10 (b) of the accompanying financial statements).

Income Taxes

	For the Three Months Ended September 30,						Change
(in millions, except percentage)	2025			2024			Amount			%
Income before Income Taxes	$	3.1		$	3.6		$	(0.5	)		(13.9	)%
Income Tax expense		(0.6	)		(0.9	)		0.3			(33.3	)%
Effective income tax rate		20.1	%		26.9	%					(6.8	)%

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

Net Income

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.

Results of Operations - Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

Revenues

We generated revenue of $39.9 million for the nine months ended September 30, 2025, an increase of $1.3 million, or 3.4%, compared to $38.6 million in the same period of last year. This was mainly due to an increase of 8.8% in sales volume, partially offset by a decrease of 4.9% in the average RMB selling price of our products, and 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.

	For the Nine Months Ended September 30,
	2025					2024					Change			Change
	Amount		%			Amount		%			Amount			%
	(in US Dollar millions except percentage)
Revenue from sales to customers in PRC	$	27.1		67.9	%	$	24.7		64.0	%	$	2.4			9.7	%
Revenue from sales to customers overseas		12.8		32.1	%		13.9		36.0	%		(1.1	)		(7.9	)%
Total Revenues	$	39.9		100	%	$	38.6		100	%	$	1.3			3.4	%

	For the Nine Months Ended September 30,
	2025					2024					Change			Change
	Unit		%			Unit		%			Unit			%
	(in UNIT, except percentage)
Units sold to customers in PRC		1,324,108		67.0	%		1,153,140		63.5	%		170,968			14.8	%
Units sold to customers overseas		651,649		33.0	%		662,270		36.5	%		(10,621	)		(1.6	)%
Total Units Sold		1,975,757		100	%		1,815,410		100	%		160,347			8.8	%

(i) PRC market

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.

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.

The Company has taken proactive efforts to market new models and efforts to obtain new customers in existing markets, our sales increased by 14.2% in South China, and 13.1% in East China, and 4.0% in Southwest China during the nine-month period ended September 30, 2025.

(ii) Overseas market

For the nine months ended September 30, 2025, revenues from overseas market was $12.8 million as compared to $13.9 million of the same period of 2024, representing a decrease by $1.1 million, or 7.9%, mainly due to i) a decrease of 6.6% in average selling price in RMB due to the lower demand on touchscreen machines in medical touchscreens, industrial control computer touchscreens, and automotive touchscreens, ii) a decrease of 1.6% in sales volume due to decreased sales in medical touchscreens, industrial control computer touchscreens and gaming touchscreens, 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.

The following table summarizes the breakdown of revenues by categories in US dollars:

	Revenues For the Nine Months Ended September 30,
	2025					2024					Change			Change
	Amount		%			Amount		%			Amount			Margin%
	(in US Dollars, except percentage)
Product categories by end applications
Automotive Touchscreens	$	10,164,491		25.5	%	$	10,769,342		25.2	%	$	(604,851	)		(5.6	)%
Industrial Control Computer Touchscreens		8,534,833		21.4	%		7,458,806		19.8	%		1,076,027			14.4	%
POS Touchscreens		6,309,842		15.8	%		5,544,124		16.3	%		765,717			13.8	%
Gaming Touchscreens		5,900,450		14.8	%		5,959,287		14.4	%		(58,838	)		(1.0	)%
Medical Touchscreens		5,270,186		13.2	%		5,791,538		14.4	%		(521,352	)		(9.0	)%
Multi-Functional Printer Touchscreens		3,709,032		9.3	%		3,126,726		9.9	%		582,306			18.6	%
Total Revenues	$	39,888,835		100.0	%	$	38,649,823		100.0	%	$	1,239,010			3.4	%

The Company continued to shift production mix from traditional lower-end products such as touchscreens used in industrial control computer industries to high-end products such as industrial control computer touchscreens and POS 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.

Gross Profit and Gross Profit Margin

	For the Nine Months Ended September 30,						Change
(in millions, except percentage)	2025			2024			Amount		%
Gross Profit	$	13.7		$	12.6		$	1.1		8.7	%
Gross Profit Margin		34.4	%		32.7	%				1.7	%

Gross profit was $13.7 million during the nine months ended September 30, 2025, compared to $12.6 million in the same period of 2024. Our gross profit margin increased to 34.4% for the nine months ended September 30, 2025, as compared to 32.7% for the same period of 2024, primarily due to the increase of revenue by 3.4%, particularly high-end products such as industrial control computer touchscreens, POS touchscreens and automotive touchscreens, and the decreased cost of materials by 1.2%, partially offset by the increased labor cost by 5.1% for the nine months ended September 30, 2025.

Selling Expenses

	For the Nine Months Ended September 30,						Change
(in millions, except percentage)	2025			2024			Amount			%
Selling Expenses	$	0.4		$	0.9		$	(0.5	)		(55.6	)%
as a percentage of revenues		1.0	%		2.3	%					(1.3	)%

Selling expenses were $0.4 million for the nine months ended September 30, 2025, compared to $0.9 million in the same period in 2024, representing a decrease of $0.5 million, or 55.6%. The decrease was primarily due to the less traveling expenses as the selling team using online communications to market the products during the nine-month period ended September 30, 2025

General and Administrative Expenses

	For the Nine Months Ended September 30,						Change
(in millions, except percentage)	2025			2024			Amount		%
General and Administrative Expenses	$	3.1		$	2.2		$	0.9		40.9	%
as a percentage of revenues		7.8	%		5.7	%				2.1	%

General and administrative (G&A) expenses were $3.1 million for the nine months ended September 30, 2025, compared to $2.2 million in the same period in 2024, representing an increase of $0.9 million or 40.9%. The increase was primarily due to the increase of $0.6 million professional fees, $0.2 million credit loss of receivables, and $0.1 million amortization of right-of-use assets, and $0.1 million of payroll expenses, partially offset by the decrease of $0.4 million of amortization of prepaid marketing research fees (see Note 3 of the accompanying financial statements).

Research and Development Expenses

For the Nine Months Ended
September 30,

Change

(in US dollars, except percentage)

2025

SEC Form 10-Q filed by Wetouch Technology Inc.