Wetouch Technology Inc. — 2023 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter report; the filing does not provide a clear set of Q4-only results. The company is a Nevada holding company whose touchscreen manufacturing operations are conducted primarily through its PRC subsidiary, Sichuan Vtouch.
Business context
Wetouch develops, manufactures and sells projected-capacitive touchscreens, primarily 7–42 inches, for automotive, industrial HMI, point-of-sale, gaming, medical and other specialized uses. Sales are made to order. China represented about 69.6% of 2023 revenue and overseas markets about 30.4%. The company identifies substantial customer concentration: its top 10 customers accounted for 99.7% of revenue, according to the financial-statement notes.
Key financial metrics
| Metric | 2023 | 2022 | Change / context |
|---|---|---|---|
| Revenue | $39.7 million | $37.9 million | Up 4.7% |
| Gross profit / margin | $17.2 million / 43.3% | $14.1 million / 37.0% | Profit up 22.8%; margin up 6.3 percentage points |
| Operating income | $12.7 million | $11.4 million | Up 11.4% |
| Net income | $8.3 million | $8.7 million | Down 4.6% |
| Net cash from operations | $12.7 million | $8.6 million | Improved year over year |
| Capital expenditures | $2.3 million | None reported | Purchases of property, plant and equipment |
| Cash and cash equivalents | $98.0 million | $51.3 million | Includes $40.0 million private-placement proceeds |
| Current assets / current liabilities | $106.8 million / $6.3 million | $62.2 million / $4.0 million | Strong reported working-capital position |
| Total liabilities / equity | $6.7 million / $112.9 million | $4.3 million / $68.8 million | Liabilities include convertible notes and warrant liability |
Revenue growth reflected 2.6% higher unit volume and higher average selling prices in RMB, partly offset by a 5.2% adverse currency-translation effect. Management attributed stronger gross margin to product mix and lower material costs, partly offset by a 9.0% increase in labor costs. Operating expenses rose 73.1%, principally because of underwriting and consulting fees; selling expenses fell 53.8%. Net income declined as higher operating expenses, a swing in warrant fair-value results and higher income-tax expense offset operating improvement.
Accounts receivable were $7.5 million, with no allowance for doubtful accounts recorded; days sales outstanding fell to 75 from 81. The filing reports 2023 interest expense of $252,000. Convertible notes had a $1.24 million carrying value at year-end; the company says the remaining principal and accrued interest were repaid after year-end. Cash from operations was $12.7 million, investing cash use was $2.3 million, and financing cash inflow was $39.9 million.
Material changes and notable items
- In January 2023, the company completed a $40.0 million private placement. The balance sheet reflects a substantial cash increase and share issuance.
- A 1-for-20 reverse stock split took effect in September 2023; share and per-share figures in the filing are retrospectively adjusted.
- In March 2023, the company transferred its former operating subsidiary, Sichuan Wetouch, to a third party for a nominal amount. It reported no gain or loss and states the operating business had already moved to Sichuan Vtouch.
- After year-end, the February 2024 public offering raised approximately $10.8 million gross and $9.2 million net. The filing says proceeds are intended for the new factory and production lines, R&D, repayment of remaining convertible notes, and working capital.
- The company reported a 2023 foreign-currency translation loss of $4.3 million in other comprehensive income.
Outlook, risks and contingencies
- Facilities: The company is operating in leased-back facilities under an agreement extending through October 31, 2024. It is building a replacement facility; the land-use-right certificate was estimated for Q4 2024, and production at the new site is expected to begin in Q3 2025. The filing gives inconsistent construction completion estimates in different sections and cautions that timing and funding are uncertain.
- Customer and receivables concentration: Heavy reliance on a small number of customers and significant receivables expose the company to lost orders and collection risk. Four customers represented 31.7%, 16.2%, 15.8% and 11.5% of year-end receivables.
- China and cash-transfer risks: Operations and most cash are in China. The company says its PRC cash is intended to be indefinitely reinvested; transfers, dividends and foreign-currency conversion may be subject to PRC restrictions. It reported no prior distributions from its PRC subsidiary to the parent.
- Regulatory filing: The company says it submitted CSRC filing materials related to its 2024 offering but withdrew them because the underwriter commitment letter was missing; it planned to resubmit. It warns of potential fines and uncertainty around compliance.
- Controls: Management concluded internal control over financial reporting was not effective, citing inadequate segregation of duties, insufficient formal procedures and inadequate risk assessment. The auditor did not attest to internal controls. Management described remediation steps, but did not conclude the weaknesses were fully remedied.
- Legal matters: Most previously described proceedings were settled or paid. A construction-materials matter involving Chengdu Hongxin had an appeal pending and management said the contingency’s likelihood and amount could not be estimated. Sichuan Vtouch also has joint-and-several liability under a court ruling for a construction-related debt of about RMB1.66 million, plus related amounts; it accrued a court fee.
- Other risks: The filing highlights raw-material availability and pricing, competition and product quality, lack of business interruption and liability insurance, currency movements, tax treatment, construction funding, and U.S.–China regulatory and market risks. The company does not expect to pay dividends in the foreseeable future.
Auditor: BF Borgers CPA PC issued an unqualified opinion on the financial statements. The audit report states that the auditor was not engaged to audit internal control effectiveness.
Investor facts to verify
- Confirm the year-end cash balance, its location and accessibility, and how much is available to fund the parent company and factory project.
- Reconcile customer-concentration disclosures: the filing variously identifies five customers above 10% in one section and six in the notes, with differing individual percentages.
- Check the status and remaining cost of the replacement facility, land-use certificate, construction schedule and planned production start; the filing contains inconsistent construction timing statements.
- Confirm completion of the CSRC filing resubmission and the post-year-end repayment of convertible notes and offering-related fees.
- Review the status and potential exposure of the Chengdu Hongxin appeal and other construction-related claims, including the joint-liability ruling.
- Track remediation of material weaknesses and the company’s ability to maintain reliable financial reporting and timely SEC disclosures.