WETOUCH TECHNOLOGY INC. Forward-Looking Statements
The following management's discussion and analysis should be read in conjunction
with our historical financial statements and the related notes thereto. The
management's discussion and analysis contain forward-looking statements, such as
statements of our plans, objectives, expectations and intentions. Any statements
that are not statements of historical fact are forward-looking statements. When
used, the words "believe," "plan," "intend," "anticipate," "target," "estimate,"
"expect" and the like, and/or future tense or conditional constructions ("will,"
"may," "could," "should," etc.), or similar expressions, identify certain of
these forward-looking statements. These forward-looking statements are subject
to risks and uncertainties, including those under "Risk Factors" in our Annual
Report filed with the SEC on April 15, 2022 , as updated in subsequent filings we
have made with the SEC that could cause actual results or events to differ
materially from those expressed or implied by the forward-looking statements.
Our actual results and the timing of events could differ materially from those
anticipated in these forward-looking statements as a result of several factors.
We do not undertake any obligation to update forward-looking statements to
reflect events or circumstances occurring after the date of this Quarterly
Report.
Basis of Presentation
The following discussion highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on our unaudited financial statements contained in this Quarterly Report, which we have prepared in accordance withUnited States generally accepted accounting principles. You should read the discussion and analysis together with such financial statements and the related notes thereto.
Overview
We were originally incorporated under the laws of the state ofNevada inAugust 1992 . OnOctober 9, 2020 , we entered into a share exchange agreement (the "Share Exchange Agreement") with BVI Wetouch and all the shareholders of BVI Wetouch, to acquire all the issued and outstanding capital stock of BVI Wetouch in exchange for the issuance to such shareholders an aggregate of 28 million shares of our common stock (the "Reverse Merger"). The Reverse Merger closed onOctober 9, 2020 . Immediately after the closing of the Reverse Merger, we had a total of 31,396,394 issued and outstanding shares of common stock. As a result of the Reverse Merger, BVI Wetouch is now our wholly-owned subsidiary. We are engaged in the research, development, manufacturing, sales and servicing of medium to large sized projected capacitive touchscreens, which constitutes our source of revenues through BVI Wetouch, which owns Hong Kong Wetouch, HKWetouch , Sichuan Wetouch and Sichuan Vtouch. We are specialized in large-format touchscreens, which are developed and designed for a wide variety of markets and used in by the financial terminals, automotive, point of sale (POS), gaming, lottery, medical, human machine interface (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. In terms of the structures of touch panels, we offer (i) Glass-Glass ("GG"), primarily used in GPS/car entertainment panels in mid-size and luxury cars, industrial HMI, financial and banking terminals, POS and lottery machines; (ii) Glass-Film-Film ("GFF"), mostly used in high-end GPS and entertainment panels, industrial HMI, financial and banking terminals, lottery and gaming industry; (iii) Plastic-Glass ("PG"), typically adopted by touchscreens in GPS/entertainment panels motor vehicle GPS, smart home, robots and charging stations; and (iv) Glass-Film ("GF"), mostly used in industrial HMI. The following discussion and analysis pertain financial condition and results of operations of our subsidiaries Hong Kong Wetouch, HK Wetouch, Sichuan Wetouch and Sichuan Vtouch for the quarter endedJune 30, 2022 . 5 Effects of COVID-19 The COVID-19 pandemic and resulting global disruptions have affected our businesses, as well as those of our customers and suppliers. To serve our customers while also providing for the safety of our employees and service providers, we have modified numerous aspects of our logistics, transportation, supply chain, purchasing, and after-sale processes. The Company has taken proactive measures to promote products to new customers and entering more regions during the three-month period endedJune 30, 2022 . The extent of the impact of COVID-19 on the Company's results of operations and financial condition will depend on the virus' future developments, including the duration and spread of the outbreak and the impact on the Company's customers, which are still uncertain and cannot be reasonably estimated at this point of time.
Highlights for the three-month period ended
? Revenues were
second quarter of 2021
? Gross profit was
second quarter of 2021
? Gross profit margin was 43.0%, compared to 51.9% in the second quarter of 2021
? Net income was
2021
? Total volume shipped was 566,875 units, a decrease of 20.3% from 711,548 units
in the second quarter of 2021
Results of Operations
The following table sets forth, for the periods indicated, statements of income data:
(in US Dollar millions, Three-Month Period Ended Six-Month Period Ended
except percentage) June 30, Change June 30, Change
2022 2021 % 2022 2021 %
Revenues $ 11.8 $ 15.2 (22.3 )% $ 23.7 $ 25.9 (8.5 )%
Cost of revenues (6.7 ) (7.3 ) (8.2 )% (14.4 ) (12.9 ) 11.6 %
Gross profit 5.1 7.9 (35.4 )% 9.4 13.0 (27.7 )%
Total operating expenses (1.0 ) (1.0 ) 0.0 % (1.9 ) (4.7 ) (59.6 )%
Operating income 4.1 6.9 (40.6 )% 7.5 8.3 (9.6 )%
Gain on asset disposal - - - % - 7.6 0.0 %
Gain on changes of fair values
of Common Stock Purchase Warrant 0.0 - N/A 0.2 - N/A
Income before income taxes 4.1 7.0 (41.4 )% 7.7 16.6 (53.6 )%
Income tax expense (1.2 ) (1.9 ) (36.8 )% (2.2 ) (3.2 ) (32.3 )%
Net income $ 2.9 $ 5.1 (43.1 )% $ 5.5 $ 13.4 (58.9 )%
6
Results of Operations - Three Months Ended
Revenues
We generated revenue of$11.7 million for the three months endedJune 30, 2022 , a decrease of$3.5 million , or 23.0%, compared to$15.2 million in the same period of last year. This was due to a decrease of 20.3% in sales volume and of 3.4% in the average selling price of our products, and 1.6% negative impact from exchange rate due to depreciation of RMB against US dollars, compared with those of the same period of last year. For the Three-Month Ended June 30, 2022 2021 Change Change Amount % Amount % Amount % (in US Dollar millions except percentage) Revenue from sales to customers in PRC$ 8.1 69.2 %$ 9.8 64.5 %$ (1.7 ) (17.3 )% Revenue from sales to customers overseas 3.6 30.8 % 5.4 35.5 % (1.8 ) (33.3 )% Total Revenues$ 11.7 100 %$ 15.2 100 %$ (3.5 ) (23.0 )% For the Three-Month Ended June 30, 2022 2021 Change Change Unit % Unit % Unit % (in UNIT, except percentage)
Units sold to customers in PRC 382,711 67.5 % 435,972 61.3 % (53,261 ) (12.2 )% Units sold to customers overseas 184,164 32.5 % 275,576
38.7 % (91,412 ) (33.2 )% Total Units Sold 566,875 100 % 711,548 100 % (144,673 ) (20.3 )% (i) Domestic market For the three months endedJune 30, 2022 , revenue from domestic market decreased by$1.7 million or 17.3% as a combined result of: (i) a decrease of 12.2% in sales volume and (ii) a decrease of 7.7% in the average RMB selling price of our products, and 1.6% negative impact from exchange rate due to depreciation of RMB against US dollars, compared with those of the same period of last year.
The decrease of 7.7% in the average RMB selling price was mainly due to the
Company's marketing strategy to offer price discount to penetrate into new
markets during the three-month period ended
The weakening in macroeconomic conditions since the outbreak of COVID-19 pandemic continued to exacerbate the touch screen business environment. SinceApril 2022 , the Chinese government imposed a strict virus zero tolerance policy and the Company's business was negatively impacted and has continued to generate lower revenues during the six months endedJune 30, 2022 . Although the Company has taken proactive efforts to market new models such as POS touchscreens and penetrate into new customers in new regions, our sales decreased 27.3% in East China, 19.7% inSouth China , and 7.7% inSouthwest China during the three-month period endedJune 30, 2022 . (ii) Overseas market For the three-month period endedJune 30, 2022 , revenues from overseas market was$3.6 million as compared to$5.4 million of the same period of 2021, decreasing by$1.8 million or 33.3%, mainly due to a decrease of 33.2% in sales volume and a decrease of 3.5% in average selling price. 7 The following table summarizes the breakdown of revenues by categories in US dollars: Revenues
For the Three-Month Ended
2022 2021 Change Change
Amount % Amount % Amount Margin%
(in US Dollars, except percentage)
Product categories by end applications
Automotive Touchscreens $ 2,904,951 24.7 %
2,588,412 17.0 % (244,294 ) (9.4 )%
POS Touchscreens 2,017,900 17.2 % 2,484,880 16.3 % (466,980 ) (18.4 )%
Gaming Touchscreens 1,803,630 15.3 % 2,318,256 15.2 % (514,626 ) (22.2 )%
Medical Touchscreens 1,576,755 14.4 % 2,187,307 14.4 % (610,552 ) (27.9 )% Multi-Functional Printer Touchscreens
1,105,671 9.4 % 1,416,425 9.3 % (310,754 ) (21.9 )%
Others* (91 ) 0.0 % 4,245 0.0 % (4,336 ) (0.0 )%
Total Revenues $ 11,752,934 100.0 % $ 15,234,885 100.0 % $ (3,481,951 ) (23.0 )%
*Others include applications in self-service kiosks, ticket vending machine and financial terminals.
The Company continued to shift production mix from traditional lower-end products such as touchscreens used in automotive and industrial control computer industries to high-end products such as touchscreens used in POS touchscreens, multi-functional printer touchscreens, and medical touchscreens, primarily due to (i) greater growth potential of computer screen models inChina and (ii) the stronger demand and better quality demand from consumers' recognition of higher-end touch screens made with better raw materials.
Gross Profit and Gross Profit Margin
Three-Month Period Ended
June 30 , Change
(in millions, except percentage) 2022 2021 Amount
%
Gross Profit $ 5.1 $ 7.9 $ (2.8 ) (35.4 )%
Gross Profit Margin 43.0 % 51.9 % (8.9 )%
Gross profit was $5.1 million in the second quarter ended June 30, 2022 ,
compared to $7.9 million in the same period of 2021. Our gross profit margin
decreased to 43.0% for the second quarter ended June 30, 2021 as compared to
51.9% for the same period of 2021, primarily due to the decrease of sales by
23.0%, and the increase of cost of materials such as chip costs by 45.0%, and
partially offset by the decrease of labor cost by 22.4% due to the reduced
production volume for the three-month period ended June 30, 2022 .
General and Administrative Expenses
Three-Month Period Ended
June 30 , Change
(in millions, except percentage) 2022 2021 Amount % General and Administrative Expenses$ 1.0 $ 1.0 $ 0.0 0.0 % as a percentage of revenues 8.5 % 6.6 % (1.9 )%
General and administrative (G&A) expenses were stable at
8
Research and Development Expenses
Three-Month Period Ended
June 30 , Change
(in US dollars, except percentage) 2022 2021 Amount % Research and Development Expenses$ 21,713 $ 22,588 $
(875 ) (3.9 )% as a percentage of revenues 0.0 % 0.0 % 0.0 %
Research and development (R&D) expenses were
Operating Income
Total operating income was$4.0 million for the three-month period endedJune 30, 2022 as compared to$7.0 million of the same period of last year, primarily due to the decrease of lower gross profit of$2.0 million , partially offset by the increase of$36,632 in administrative expenses for the three-month period endedJune 30, 2022 .
Gain on changes in fair value of Common Stock Purchase Warrants
Three-Month Period Ended
June 30, Change
(in US$, except percentage) 2022 2021 Amount %
Gain on changes in fair value of
Common Stock Purchase Warrants $ 62,208 $ 0.0 $ 62,208 N/A
as a percentage of revenues 0.0 % 0.0 % 0.0 %
Gain on changes in fair value of common stock purchase warrants was$62,208 for the three-month period endedJune 30, 2022 , as compared to nil in 2021 (See
Note
9 (b)).
Income Taxes
Three-Month Period Ended
June 30 , Change(in millions, except percentage) 2022 2021 Amount
%
Income before Income Taxes $ 4.1 $ 7.0 $ (2.9 ) (41.4 )%
Income Tax (Expense) (1.2 ) (1.9 ) 0.7 (36.8 )%
Effective income tax rate 28.3 % 27.1 % 1.2 %
The effective income tax rates for the three-month periods ended June 30, 2022
and 2021 were 28.3% and 27.1%, respectively. The increase of the effective
income tax rate was partially due to less taxable income and non deductible
expenses of $68,724 resulting from loss of changes in fair value of Common Stock
Purchase Warrants for the three-month periods ended June 30, 2022 , partially
offset by the impact of Sichuan Wetouch's preferential income tax rate for the
same period of the last year, respectively.
9
Net Income
As a result of the above factors, we had a net income of
Results of Operations - Six Months Ended
Revenues We generated revenue of$23.7 million for the six months endedJune 30, 2022 , a decrease of$2.2 million , or 8.5%, compared to$25.9 million in the same period of last year. This decrease was mainly due to a decrease of 9.8% in sales volume and of 16.8% in the average selling price of our products, and 0.3% negative impact from exchange rate due to depreciation of RMB against US dollars, compared with those of the same period of last year. For the Six-Month Ended June 30, 2022 2021 Change Change Amount % Amount % Amount % (in US Dollar millions except percentage) Revenue from sales to customers in PRC$ 16.2 68.5 %$ 16.9 65.3 %$ (0.7 ) (4.1 )% Revenue from sales to customers overseas 7.5 31.5 % 9.0 34.7 % (1.5 ) (16.7 )% Total Revenues$ 23.7 100 %$ 25.9 100 %$ (2.2 ) (8.5 )% For the Six-Month Ended June 30, 2022 2021 Change Change Unit % Unit % Unit % (in UNIT, except percentage)
Units sold to customers in PRC 739,398 55.6 % 753,385
62.2 % (13,987 ) (1.9 )%
Units sold to customers overseas 590,706 44.4 % 457,959
36.4 % 132,747 29.0 %
Total Units Sold 1,330,104 100 % 1,211,344 100 % 118,760 9.8 %
(i) Domestic market
For the six months ended June 30, 2022 , revenue from domestic market decreased
by $0.7 million or 4.1% as a combined result of: (i) a decrease of 1.9% in sales
volume and (ii) a decrease of 2.7% 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.
As for the RMB selling price, the decrease of 2.7% was mainly due to the
Company's marketing strategy to offer price discount to penetrate into new
markets during the six-month period ended
The weakening in macroeconomic conditions since the outbreak of COVID-19 pandemic continued to exacerbate the touch screen business environment. SinceApril 2022 , the Chinese government imposed a strict virus zero tolerance policy and the Company's business was negatively impacted and has continued to generate lower revenues during the six months endedJune 30, 2022 . Although the Company has taken proactive efforts to market new models such as POS touchscreens and penetrate into new customers in new regions, our sales decreased 100.0% inNorth China , 27.3% inSouth China , 1.0% in East China, and 0.9% inSouthwest China during the six-month period endedJune 30, 2022 . (ii) Overseas market
For the six-month period endedJune 30, 2022 , revenues from overseas market was$7.5 million as compared to$9.0 million of the same period of 2021, decreasing by$1.5 million or 16.7% mainly due to an increase of 29.0% in sales volume and partially offset by a decrease of 35.3% in the average selling price of our
products.
10
The following table summarizes the breakdown of revenues by categories in US
dollars:
Revenues
For the Six-Month Ended
2022 2021 Change Change
Amount % Amount % Amount Margin%
(in US Dollars, except percentage)
Product categories by end applications
Automotive Touchscreens $ 5,917,676 24.9 %
4,823,587 18.6 % (181,326 ) (3.8 )%
Gaming Touchscreens 3,974,250 16.8 % 3,892,571 15.0 % 81,679 2.1 %
POS Touchscreens 3,566,699 15.0 % 3,644,686 14.0 % (77,987 ) (2.1 )%
Medical Touchscreens 3,048,846 12.8 % 3,403,889 13.1 % (355,043 ) (10.4 )% Multi-Functional Printer Touchscreens
2,593,846 10.9 % 2,333,457 9.0 % 250,389 11.2 %
Others* 3,903 0.0 % 94,998 0.4 % (91,095 ) (95.9 )%
Total Revenues $ 23,747,481 100.0 % $ 25,948,189 100.0 % $ (2,200,708 ) (8.5 )%
*Others include applications in self-service kiosks, ticket vending machine and financial terminals.
The Company continued to shift production mix from traditional lower-end products such as touchscreens used in automotive and industrial control computer industries to high-end products such as gaming touchscreens, primarily due to (i) greater growth potential of computer screen models inChina and (ii) the stronger demand and better quality demand from consumers' recognition of higher-end touch screens made by better raw materials.
Gross Profit and Gross Profit Margin
Six-Month Period Ended
June 30 , Change
(in millions, except percentage) 2022 2021 Amount
%
Gross Profit $ 9.4 $ 13.0 $ (3.6 ) (27.7 )%
Gross Profit Margin 39.4 % 50.3 % (10.9 )%
Gross profit was $9.4 million during the six-month period ended June 30, 2022 ,
compared to $13.0 million in the same period of 2021. Our gross profit margin
decreased to 39.4% for the six-month period ended June 30, 2022 as compared to
50.3% for the same period of 2021, primarily due to the decrease of sales by
8.5%, and the increase of cost of materials such as chip costs by 14.7%, and
partially offset by the decrease of labor cost by 8.6% due to the reduced
production volume for the six-month period ended June 30, 2022 .
General and Administrative Expenses
Six-Month Period Ended
June 30 , Change
(in millions, except percentage) 2022 2021 Amount % General and Administrative Expenses$ 0.8 $ 1.3 $ (0.5 ) (38.5 )% as a percentage of revenues 3.4 % 5.0 % (1.6 )% General and administrative (G&A) expenses were$0.8 million for the six-month period endedJune 30, 2022 , compared to$1.3 million in the same period in 2021, representing a decrease of 38.5%, or$0.5 million . The decrease was primarily due to$0.4 million loss of VAT input credits due to Sichuan Wetouch ceasing operation and relocation to comply with local PRC government guidelines on local environment issues and the national overall plan during the six-month period endedJune 30, 2021 . (See Note 5). 11
Research and Development Expenses
Six-Month Period Ended
June 30 , Change
(in US dollars, except percentage) 2022 2021 Amount
%
Research and Development Expenses
0.0 % 0.0 % 0.0 %
Research and development (R&D) expenses were
Share-based Compensation
Six-Month Period Ended
June 30 , Change(in millions, except percentage) 2022 2021 Amount
%
Share-based compensation $ 0.0 $ 3.1 $ (3.1 ) 0.0 %
as a percentage of revenues 0.0 % 12.0 % (12.0 )%
Share-based compensation was nil for the six-month period ended June 30, 2022 ,
compared to $3.1 million in the same period in 2021. On January 1, 2021 , the
Board of Directors of the Company authorized the issuance of an aggregate of
310,830 shares and 631,080 warrants to Ascendant Global Advisors, Inc. for
advisory services that had been rendered. The Company recognized relevant
share-based compensation expense of $1,041,281 for the vested shares and
$2,107,825 for the warrants.
Operating Income
Total operating income was$7.5 million for the six-month period endedJune 30, 2022 as compared to$8.3 million of the same period of last year due to lower gross profit and higher selling expenses, offset by the higher G&A expenses and share-based compensation expenses. Gain on Asset Disposal Six-Month Period EndedJune 30 , Change
(in millions, except percentage) 2022 2021 Amount
%
Gain on asset disposal $ - $ 7.6 $ (7.6 ) 0.0 %
as a percentage of revenues 0.0 % 29.3 % (29.3 )%
Gain on asset disposal was nil for the six-month period endedJune 30, 2022 as compared to$7.6 million for the same period of last year. Pursuant to local PRC government guidelines on local environment issues and the national overall plan, Sichuan Wetouch is under the government directed relocation order no later thanDecember 31, 2021 and received compensation accordingly. OnMarch 18, 2021 , pursuant to the agreement with the local government and an appraisal report issued by a mutual agreed appraiser, Sichuan Wetouch received compensation ofRMB115.2 million ($17.8 million ) ("Compensation Funds") for the withdrawal of the right to use of state-owned land and the demolition of all buildings, facilities, equipment and all other appurtenances on the land. During the six-month period endedJune 30, 2021 , the Company recorded a gain of$7,625,165 for the asset disposal. 12
Gain on changes in fair value of Common Stock Purchase Warrants
Six-Month Period Ended
June 30, Change
(in US$ millions, except
percentage) 2022 2021 Amount %
Gain on changes in fair value of
Common Stock Purchase Warrants $ 0.2 $ 0.0 $ 0.2 N/A
as a percentage of revenues 0.8 % 0.0 % 0.8 %
Gain on changes in fair value of common stock purchase warrants was $0.2 million
for the six-month period ended June 30, 2022 , as compared to nil in the same
period of 2021 (See Note 9 (b)).
Income Taxes
Six-Month Period Ended
June 30, Change(in millions, except percentage) 2022 2021 Amount
%
Income before Income Taxes $ 7.7 $ 16.6 $ (8.9 ) (53.6 )%
Income Tax (Expense) (2.2 ) (3.2 ) (2.6 ) (32.3 )%
Effective income tax rate 28.2 % 19.2 % 9.0 %
The effective income tax rates for the six-month periods ended June 30, 2022 and
2021 were 28.2% and 19.4%, respectively. The effective income tax rate for the
three-month periods ended June 30, 2022 and 2021 differs from the PRC statutory
income tax rate of 25% primarily due to non-deductible expenses of $222,651
resulting from gain of changes in fair value of Common Stock Purchase Warrants
for the six-month periods ended June 30, 2022 , and Sichuan Wetouch's
preferential income tax rate for the same period of the last year, respectively.
Our PRC subsidiary Sichuan Vtouch had $45.1 million of cash and cash equivalents
as of June 30, 2022 , which are planned to be indefinitely reinvested in the PRC.
The distributions from our PRC subsidiary are subject to the U.S. federal income
tax at 21%, less any applicable foreign tax credits. Due to our policy of
indefinitely reinvesting our earnings in our PRC business, we have not provided
for deferred income tax liabilities related to PRC withholding income tax on
undistributed earnings of our PRC subsidiaries.
Net Income
As a result of the above factors, we had a net income of$5.5 million in the six-month period endedJune 30, 2022 compared to a net income of$13.4 million in the same period of 2021.
Liquidity and Capital Resources
Historically, our primary uses of cash have been to finance working capital needs. We expect that we will be able to meet our needs to fund operations, capital expenditures and other commitments in the next 12 months primarily with our cash and cash equivalents, operating cash flows and bank borrowings.
13 We may, however, require additional cash resources due to changes in business conditions or other future developments. If these sources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or equity-linked securities could result in additional dilution to stockholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financial covenants that would restrict operations. Financing may not be available in amounts or on terms acceptable to us, or at all. As ofJune 30, 2022 , we had current assets of$62.2 million , consisting of$45.1 million in cash,$15.3 million in accounts receivable,$0.5 million in inventories, and$1.2 million in prepaid expenses and other current assets. Our current liabilities as ofJune 30, 2022 were$6.1 million , which is comprised of$1.1 million in income tax payable,$2.1 in accounts payable,$0.9 million in accrued expenses and other current liabilities and$2.0 million in convertible promissory notes payable. The following is a summary of our cash flows provided by (used in) operating, investing, and financing activities for the six-month period endedJune 30 ,
2022
and 2021:
Six-Month Period Ended
June 30,
(in US Dollar millions) 2022 2021
Net cash provided by (used in) operating activities
- 17.8
Net cash used in financing activities - -
Effect of foreign currency exchange rate changes on cash and cash equivalents
(2.5 ) (0.3 )
Net increase (decrease ) in cash and cash equivalents (1.0 ) 28.6
Cash and cash equivalents at the beginning of period 46.1
24.0
Cash and cash equivalents at the end of period$ 45.1
$ 11.1 Operating Activities Net cash provided by operating activities was$1.5 million for the six-month period endedJune 30, 2022 , as compared to$11.1 million provided by operating activities for the same period of the last year, primarily due to (i) the decrease of$7.9 million net income for the six-month period endedJune 30, 2022 as compared to the same period of 2021, (ii) the increase of$9.0 million of accounts receivable for the six-month period endedJune 30, 2022 , due to slower collection out of the impact of COVID-19 pandemic and Sichuan Wetouch settling customer receivables for the six-month period endedJune 30, 2021 , (iii) the decrease of$3.1 million of share-based compensation for the six-month period endedJune 30, 2021 , partially offset by (iv) the decrease of$7.6 million gain on asset disposal for the six-month period endedJune 30, 2021 , (v) the increase of accounts payable of$1.6 million due to longer payment period, and (vi) the decrease of$0.6 million of deferred income due to Sichuan Wetouch write-off government grant in the operating ceasing process for the six-month period
endedJune 30, 2021 . Investing Activities There were$17.8 million proceeds from asset disposal for Sichuan Wetouch for the six-month period endedJune 30, 2021 . See Note 5 in the interim financial information. Financing Activities
There were nil financing activities for the six-month period ended
As of
14
Days Sales Outstanding ("DSO") remained at 88 days for the six-month period
ended
The following table provides an analysis of the aging of accounts receivable as
of
June 30, 2022 December 31, 2021
-Current $ 4,645,915 $ 1,403,187
-1-3 months past due 7,631,144 2,827,048
-4-6 months past due 3,009,927 3,742,732
7-12 months past due 3,573 18,070
-greater than 1 year past due - -
Total accounts receivable
The majority of the Company's revenues and expenses were denominated primarily
in Renminbi ("RMB"), the currency of the People's Republic of China . There is no
assurance that exchange rates between the RMB and the U.S. Dollar will remain
stable. Inflation has not had a material impact on the Company's business.Based on past performance and current expectations, we believe our cash and cash equivalents provided by operating activities and financing activities will satisfy our working capital needs, capital expenditures and other liquidity requirements associated with our operations for at least the next 12 months.
Off Balance Sheet Arrangements
We have no off balance sheet arrangements.
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