Wetouch Technology Inc.

Company Snapshot

• Core Business: Research, development, manufacturing, sales, and servicing of medium to large-sized projected capacitive touchscreens (7.0 to 42 inches).
• Founding & Headquarters: Incorporated in Nevada in 1992. Principal executive offices located in Meishan, Sichuan, China.
• Fiscal Year End Date: December 31.
• Ticker & Exchange: WETH on The Nasdaq Stock Market LLC.
• Recent Launches or Milestones: Completed a public offering of common stock on February 23, 2024, generating net proceeds of approximately $9.2 million.

Financial Highlights

• Total Revenue (Annual): $39.7 million for the year ended December 31, 2023.
• YoY Revenue Growth: 4.7% increase from $37.9 million in 2022.
• Gross Margin (%): 43.3% for the year ended December 31, 2023, an increase from 37.0% in 2022.
• R&D Expenditure: $84,551 for the year ended December 31, 2023.
• Capital Expenditures / Major Investments: $2.3 million for the purchase of property, plant, and equipment during the year ended December 31, 2023.

Business Segments

• Domestic Sales (PRC): Revenue of $27.6 million (69.6% of total), with a 4.6% YoY increase.
• International Sales: Revenue of $12.1 million (30.4% of total), with a 5.0% YoY increase.

Capital Deployment

• Share Buybacks: None reported.
• Dividend Policy: Does not anticipate declaring or paying cash dividends in the foreseeable future, intending to retain earnings for business development.
• Debt Profile: As of December 31, 2023, total liabilities were $6.7 million, including $1.2 million in convertible promissory notes payable and $0.5 million in loans from a third party.

Strategic Focus

• Growth Strategy: Focus on shifting product mix towards higher-end touchscreens (industrial control computers, gaming, automotive) due to higher demand and consumer recognition of better materials.
• Technology & Innovation Priorities: Not explicitly detailed beyond product development for specific industries.
• Product & Platform Roadmap: Specializes in medium to large-sized projected capacitive touchscreens, including Glass-Glass (GG), Glass-Film-Film (GFF), Plastic-Glass (PG), and Glass-Film (GF) structures.
• Mergers & Acquisitions: No recent or pending M&A activity explicitly stated.

Operational Infrastructure

• Manufacturing & Production Model: Made-to-order production model.
• Key Production Partners & Vendors: Does not consider any single supplier material and can utilize any supplier at its discretion. Raw material purchases from the top five suppliers accounted for 47.2% of total raw material purchases in 2022, and 13.3% in 2023.
• Facilities & Geographies: Operates in approximately nine buildings covering 735,745 square feet in Meishan, Sichuan, China. The company is in the process of constructing new facilities in Chengdu, Sichuan.

Distribution & Customer Base

• Sales Channels & Partners: Markets products directly through its own sales personnel; does not rely on distributors.
• Enterprise & Cloud Relationships: Not explicitly detailed.
• Customer Concentration or Highlights: For the year ended December 31, 2023, the top five customers accounted for approximately 80.1% of total revenues. For the year ended December 31, 2022, the top six customers accounted for approximately 85.4% of total revenues.

Competitive Landscape

• Key Competitors: Apex Material Technology Corp., Elo Touch Systems Inc., AbonTouch System Inc.
• Market Position & Differentiators: Focuses on medium to large-sized touchscreens tailored for specific industries (industrial HMI, gaming, financing, lottery, automotive, medical, POS), requiring more stable supply and longer lifespan compared to small-size touchscreens.

Regulatory, Legal & Geopolitical Factors

• Export/Import Controls: Not explicitly detailed.
• Sanctions & Licensing Requirements: Not explicitly detailed.
• Geopolitical Exposure: Operations are primarily in Mainland China, subject to PRC laws and regulations, including foreign investment, environmental protection, consumer rights, intellectual property, foreign exchange, and taxation. Risks associated with U.S.-China trade policies and potential delisting under the Holding Foreign Companies Accountable Act (HFCAA) are noted.
• Ongoing Legal Proceedings: Several legal cases were settled or fully paid as of March 2023. One case with Chengdu Hongxin Shunda Trading Co., Ltd. regarding accounts payable and fund interests is under appeal.

Key Risks

• Material Weaknesses in Internal Control: Identified material weaknesses in segregation of duties, lack of formal policies and procedures, and insufficient risk assessment procedures for internal controls.
• Customer Concentration: Heavy reliance on a few major customers, with the top five accounting for over 80% of revenue in 2023.
• New Facility Construction: Risks associated with delays, cost overruns, and financing for the new factory construction, with estimated completion of buildings by end of 2024 and production commencement in Q3 2025.
• PRC Regulatory Environment: Subject to evolving PRC laws and regulations, including potential government intervention, cybersecurity reviews, and changes in policies that could impact operations and capital raising.
• HFCAA and PCAOB Audits: Potential for delisting from U.S. exchanges if the Public Company Accounting Oversight Board (PCAOB) cannot inspect the company's auditor's work for two consecutive years.
• Financing Needs: Potential need for additional financing to execute business plans, with no assurance of availability on favorable terms.

Sustainability & ESG

• Climate Goals & Emissions Targets: Not explicitly detailed.
• Energy Mix & Renewable Use: Not explicitly detailed.
• ESG in Supply Chain: Not explicitly detailed.
• Other Sustainability Initiatives: Sichuan Vtouch holds ISO14001 Environmental Management System (EMS) Certification of Registration.

Human Capital

• Total Employees: 131 as of the date of the Annual Report.
• Technical vs. Non-Technical Split: 11 employees in the R&D department.
• Hiring & Retention Strategy: Not explicitly detailed beyond reliance on key executives and qualified managers.
• Diversity & Inclusion Efforts: Not explicitly detailed.
• Workforce Flexibility & Remote Policy: Not explicitly detailed.

Leadership

• Zongyi Lian: President and Chief Executive Officer, co-founder of predecessor companies, Master's degree in Automatic Control.
• Yuhua Huang: Chief Financial Officer, CPA in China, Bachelor's degree in Accounting.
• Fei Bai: Chairman and Director, experience in fund management and marketing.
• Jiaying Cai: Secretary and Director, EMBA degree, experience in finance and HR.
• Jing Chen: Director, Doctorate of Business Administration, FCPA, CIMA.
• Xiaojin Tang: Director, Attorney, Master's degree in Sociology.
• Congjin Wang: Director, Attorney, member of legal committees.

Intellectual Property & Licensing

• Patent & IP Strategy: One registered trademark in Mainland China ("WeTouch") and five pending patent applications in Mainland China related to touchscreen technology. Plans to submit patent applications in target market jurisdictions by the end of 2024.
• Licensing Agreements: Not explicitly detailed.

Cybersecurity & Technology Risk (if disclosed)

• Cyber Risk Management Strategy: Robust governance and oversight of risks, implementing mechanisms, technologies, and processes to assess, identify, and eliminate risks. IT leadership reports to the CEO.
• Incidents or Disclosures: No material cybersecurity threat or incident experienced that materially impacted business or operations as of the report date.
• Governance Structure for Cybersecurity: IT leadership reports to the CEO; company-wide culture of cybersecurity risk management promoted.

Other Notable Disclosures

• Seasonality / Demand Cycles: No significant seasonality in the business.
• Stockholder Information: Approximately 417 stockholders of record as of April 15, 2024.