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 theSEC onMarch 24, 2021 , as updated in subsequent filings we have made with theSEC 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. Recent Developments
Hong Kong Wetouch Technology Limited , a limited company organized under the laws ofHong Kong ("HK Wetouch"), an affiliate ofGuangde Cai , our Chairman and Director, was incorporated onDecember 3, 2020 under the laws ofHong Kong . HKWetouch was established to own all the outstanding shares ofSichuan Vtouch Technology Co., Ltd. , which was incorporated onDecember 30, 2020 ("Sichuan Vtouch") inChengdu ,Sichuan , under the laws ofThe People's Republic of China ("PRC"). OnMarch 12, 2021 ,Wetouch Holding Group Limited ("BVI Wetouch"), the Company's wholly owned subsidiary, acquired all the outstanding shares of HK Wetouch from the sole shareholder of HK Wetouch,Guangde Cai , in consideration of the payment ofHK$10,000 pursuant to instruments of transfer in accordance withHong Kong law. As a result of the acquisition, HK Wetouch became a wholly-owned subsidiary of BVI Wetouch. BVI Wetouch owns (i) all the outstanding shares of Hong KongWetouch , which, in turn, owns all the outstanding shares of Sichuan Wetouch and (ii) all of the outstanding shares of HK Wetouch, which owns all the shares ofSichaun Vtouch Technology Co., Ltd. , a company incorporated under the laws
of PRC. OnMarch 16, 2021 , an indirectly wholly-owned operating subsidiary of the Company, Sichuan Wetouch entered into an Agreement of Compensation on Demolition ("Compensation Agreement") withSichuan Renshou Shigao Tianfu Investment Co., Ltd , a limited company owned by the local government (Sichuan Renshou"), for the withdrawal of our right to use of state-owned land and the demolition of all buildings, facilities and equipment on such land where we maintain our executive offices, research and development facilities and factories at No.29,Third Main Avenue ,Shigao Town , Renshou County, Meishan City,Sichuan, China (the "Property"). The Property, all buildings, facilities, equipment and all other appurtenances on the Property are collectively referred to as "Properties". The Compensation Agreement was executed and delivered as a result of guidelines (the "Guidelines") published by the local government of with respect to local environmental issues and a national overall plan onTianfu New District , Meishan City,Sichuan , PRC. In accordance with the Guidelines, a project named "Chaisang River Ecological Wetland Park " is under construction in the areas where the manufacturing facilities and properties of the Company are located. As a result, Sichuan Wetouch must relocate. In consideration for such relocation, the owner of the buildings on the state-owned land will be compensated. In order to minimize the interruption of our business, Sichuan Vtouch entered into a Leaseback Agreement with Sichuan Renshou onMarch 16, 2021 . The Leaseback Agreement entitles us to lease back the Properties commencing fromApril 1, 2021 untilDecember 31, 2021 , at a monthly rent ofRMB300,000 (approximately$46,154 ). OnMarch 18, 2021 , Sichuan Wetouch received a total amount ofRMB115.2 million (approximately$17.7 million ) as the total amount of compensation fromSichuan Renshou, includingRMB100.2 million ($15.4 million ) based upon the appraised value of the Properties plus an extra 15% relocation bonus ofRMB15.0 million ($2.3 million ). 5 We are actively searching for an appropriate parcel in Chengdu Medicine City (Technology Park),Wenjiang District ,Chengdu for the construction of our new production facilities and office buildings. As of the date of this Form 10-Q, we estimate that our capital needs for this acquisition and construction will be approximatelyRMB170.0 million (approximately$26.2 million ), but there is no assurance that the estimated amount is sufficient to achieve our goals. We may need additional financing for our business development. In addition, we expect that this acquisition and construction will be completed prior toDecember 31, 2021 , but there is no assurance and we may need extended time to achieve our business plan. Pursuant to local PRC government guidelines on local environment issues and the national overall plan, Sichuan Wetouch was under the government directed relocation order to relocate no later thanDecember 31, 2021 and was compensated forRMB115.2 million ($17.8 million ) from the local government 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. OnMarch 2, 2021 , HK Wetouch acquired all shares of Hong Kong Wetouch. OnJune 18, 2021 , Hong Kong Wetouch started its dissolution process. In addition, the Company is in the process of dissolving Sichuan Wetouch, and its business and operations are being assumed by Sichuan Vtouch. 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, 2021 . 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. Beginning in Q1 2020, we made numerous process updates across our operations worldwide, and adapted our fulfillment network, to implement employee and customer safety measures, such as enhanced cleaning and physical distancing, personal protective gear, disinfectant spraying, and temperature checks. We will continue to prioritize employee and customer safety and comply with evolving state and local standards as well as to implement standards or processes that we determine to be in the best interests of our employees, customers, and communities. Due to the COVID-19 pandemic, our subsidiary Sichuan Wetouch was temporarily shut down from earlyFebruary 2020 to earlyMarch 2020 in accordance with the requirement of the local governments. Our business was negatively impacted and generated lower revenue and net income in 2020. The Company has taken proactive measures to promote products to new customers and entering more regions during the six-month period endedJune 30, 2021 . 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. 6
Highlights for the three-month period ended
? Revenues were
second quarter of 2020
? Gross profit was
second quarter of 2020
? Gross profit margin was 51.9%, compared to 50.7% in the second quarter of
2020
? Net income was
of 2020
? Total volume shipped was 711,548 units, an increase of 145.6% from 289,668
units in the second quarter of 2020 Results of Operations The following table sets forth, for the periods indicated, statements of income data: Three-Month Six-Month (in US Dollar millions, Period Ended Period Ended except percentage) June 30, Change June 30, Change 2021 2020 % 2021 2020 % Revenues$ 15.2 $ 5.3 186.8 %$ 25.9 $ 8.8 194.3 % Cost of revenues (7.3 ) (2.6 ) 180.8 % (12.9 ) (4.5 ) 186.7 % Gross profit 7.9 2.7 192.6 % 13.0 4.3 202.3 % Total operating expenses (1.0 ) (0.4 ) 150.0 % (4.7 ) (0.6 ) 683.3 % Operating income 6.9 2.3 200.0 % 8.3 3.7 124.3 % Income before income taxes 7.0 2.3 204.3 % 16.6 3.8 336.8 % Income tax expense (1.9 ) (0.3 ) 533.3 % (3.2 ) (0.6 ) 433.3 % Net income$ 5.1 $ 2.0 155.0 %$ 13.4 $ 3.2 318.8 %
Results of Operations - Three Months Ended
Revenues We generated revenue of$15.2 million for the three months endedJune 30, 2021 , an increase of$9.9 million , or 186.8%, compared to$5.3 million in the same period of last year. This was due to an increase of 145.6% in sales volume and of 18.0% in the average selling price of our products, and 9.7% positive impact from exchange rate due to appreciation of RMB against US dollars, compared with those of the same period of last year. For the Three-Month Period Ended June 30, 2021 2020 Change Change Amount % Amount % Amount % (in US Dollar millions except percentage) Revenue from sales to customers in PRC$ 9.8 64.5 %$ 3.2 60.4 %$ 6.6 206.3 % Revenue from sales to customers overseas 5.4 35.5 % 2.1 39.6 % 3.3 157.1 % Total Revenues$ 15.2 100 %$ 5.3 100 %$ 9.9 186.8 % 7 For the Three-Month Period Ended June 30, 2021 2020 Change Change Unit % Unit % Unit % (in UNIT, except percentage)
Units sold to customers in PRC 435,972 61.3 % 181,227 62.6 % 254,745 140.6 % Units sold to customers overseas 275,576 38.7 % 108,441
37.4 % 167,135 154.1 % Total Units Sold 711,548 100 % 289,668 100 % 421,880 145.6 % (i) Domestic market For the three months endedJune 30, 2021 , revenue from domestic market increased by$6.6 million or 206.3% as a combined result of: (i) an increase of 140.5% in sales volume, (ii) an increase of 21.3% in the average RMB selling price of our products, and (iii) a 9.7% positive impact from exchange rate due to appreciation of RMB against US dollars, compared with those of the same period of last year. As for the RMB selling price, the increase of 21.3% was mainly due to the increased sales of new models of higher-end products such as touch screens used in gaming machines with higher selling prices in the domestic market during the three-month period endedJune 30, 2021 . The weakening in macroeconomic conditions since the outbreak of COVID-19 pandemic inJanuary 2020 continued to exacerbate the touch screen business environment. For the three months period endedJune 30, 2020 , the Company's business was negatively impacted and has continued to generate lower revenues. Due to our proactive efforts to market new models such as POS touchscreens and penetrate into new customers and into new regions, our sales increased by 239.2% in East China, 168.6% inSouth China , and 129.8% inSouthwest China for the second quarter endedJune 30, 2021 as compared to that of last year. (ii) Overseas market For the three-month period endedJune 30, 2021 , revenue from overseas market was$5.4 million as compared to$2.1 million of the same period of 2020, increased by$3.3 million or 157.1% mainly due to an increase of 154.1% in sales volume and an increase of 4.8% in average selling price.
The following table summarizes the breakdown of revenues by categories in US dollars:
Revenues For the
Three-Month Period Ended
2021 2020 Change Change Amount % Amount % Amount Margin% (in US Dollars, except percentage) Product categories by end applications Automotive Touchscreens$ 4,235,360 27.8 %$ 1,602,903 30.5 %$ 2,632,457 164.2 % Industrial Control Computer Touchscreens 2,588,412 17.0 % 1,312,501 25.0 % 1,275,911 97.2 % POS Touchscreens 2,484,880 16.3 % 58,124 1.1 % 2,426,756 4,175.1 % Gaming Touchscreens 2,318,256 15.2 % 865,135 16.5 % 1,453,121 168.0 % Medical Touchscreens 2,187,307 14.4 % 630,263 12.0 % 1,557,044 247.0 % Multi-Functional Printer Touchscreens 1,416,425 9.3 % 785,693 14.9 % 630,732 80.3 % Others* 4,245 0.0 % 1,441 0.0 % 2,804 194.6 % Total Revenues$ 15,234,885 100.0 %$ 5,256,060
100.0 %$ 9,978,825 186.8 %
*Others include applications in self-service kiosks, ticket vending machine and financial terminals.
8 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 self-service kiosks, medical touchscreens, ticket vending machine and financial terminals, 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) 2021 2020 Amount % Gross Profit$ 7.9 $ 2.7 $ 5.2 192.6 % Gross Profit Margin 51.9 % 50.7 % 1.2 % Gross profit was$7.9 million in the second quarter endedJune 30, 2021 , compared to$2.7 million in the same period of 2020. Our gross profit margin increased to 51.9% for the second quarter endedJune 30, 2021 as compared to 50.7% for the same period of 2020, primarily due to product mix shift to higher gross profit margin products such as POS touchscreens, gaming touchscreens, industrial control computer touchscreens and medical touchscreens.
General and Administrative Expenses
Three-Month Period EndedJune 30 , Change
(in millions, except percentage) 2021 2020 Amount % General and Administrative Expenses$ 0.8 $ 0.4 $ 0.4 100.0 % as a percentage of revenues 5.3 % 7.5 % (2.2 )%
General and administrative (G&A) expenses were$0.8 million for the quarter endedJune 30, 2021 , compared to$0.4 million in the same period in 2020, representing an increase of 100.0%, or$0.4 million . The increase was primarily due to the increase of$0.4 million loss of VAT input credits due toSichuan Wetouch ceasing operation and relocation to comply with local PRC government guidelines on local environment issues and the national overall plan. See Note 4 to our Condensed Consolidated Financial Statements (unaudited). 9
Research and Development Expenses
Three-Month Period Ended June 30, Change (in US dollars, except percentage) 2021 2020 Amount % Research and Development Expenses$ 22,588 $ 17,957 $
4,631 25.8 % as a percentage of revenues 0.0 % 0.0 % 0.0 %
Research and development (R&D) expenses were
Operating Income
Total operating income was
Income Taxes Three-Month Period EndedJune 30 , Change
(in millions, except percentage) 2021 2020 Amount
% Income before Income Taxes$ 7.0 $ 2.3 $ 4.7 204.3 % Income Tax (Expense) (1.9 ) (0.3 ) (1.6 ) 533.3 % Effective income tax rate 27.1 % 14.9 % 12.2 % The effective income tax rates for the three-month periods endedJune 30, 2021 and 2020 were 27.1% and 14.9%, respectively. The increase of the effective income tax rate was partially due to the increase of$0.6 million income tax clearance for Sichuan Wetouch for the year ended 2020. 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$25.9 million for the six months endedJune 30, 2021 , an increase of$17.1 million , or 194.3%, compared to$8.8 million in the same period of last year. This was due to an increase of 158.1% in sales volume and of 22.7% in the average selling price of our products, and 8.0% positive impact from exchange rate due to appreciation of RMB against US dollars, compared with those of the same period of last year. For the Six-Month Period Ended June 30, 2021 2020 Change Change Amount % Amount % Amount % (in US Dollar millions except percentage) Revenue from sales to customers in PRC$ 16.9 65.3 %$ 5.6 63.6 %$ 11.3 201.8 % Revenue from sales to customers overseas 9.0 34.7 % 3.2 36.4 % 5.8 181.3 % Total Revenues$ 25.9 100 %$ 8.8 100 %$ 17.1 194.3 % 10 For the Six-Month Period Ended June 30, 2021 2020 Change Change Unit % Unit % Unit % (in UNIT, except percentage)
Units sold to customers in PRC 753,385 62.2 % 298,274
63.6 % 455,111 152.6 % Units sold to customers overseas 457,959 37.8 % 170,986
36.4 % 286,973 167.8 % Total Units Sold 1,211344 100 % 469,260 100 % 742,084 158.1 % (i) Domestic market For the six months endedJune 30, 2021 , revenue from domestic market increased by$11.3 million or 201.8% as a combined result of: (i) an increase of 152.6% in sales volume, (ii) an increase of 12.5% in the average RMB selling price of our products, and (iii) an 8.0% positive impact from exchange rate due to appreciation of RMB against US dollars, compared with those of the same period of last year. As for the RMB selling price, the increase of 12.5% was mainly due to the increased sales of new models of higher-end products such as touch screens used in gaming machines with higher selling prices in the domestic market during the six-month period endedJune 30, 2021 . The weakening in macroeconomic conditions since the outbreak of COVID-19 pandemic inJanuary 2020 continued to exacerbate touch screen business environment. The Company's business was negatively impacted and has continued to generate lower revenues during the six months endedJune 30, 2020 . The Company has taken proactive efforts to market new models such as POS touchscreens and penetrate into new customers and into new regions. Our sales increased by 209.0% inSouth China , 187.5% in East China, 164.8% inSouthwest China , and 165.3%
inNorth China . (ii) Overseas market
For the six-month period endedJune 30, 2021 , revenue from overseas market was$9.0 million as compared to$3.2 million of the same period of 2020, increased by$5.8 million or 181.3% mainly due to an increase of 167.8% in sales volume and an increase of 4.0% in the average selling price of our products. The following table summarizes the breakdown of revenues by categories in US dollars: Revenues For the Six-Month Period Ended June 30, 2021 2020 Change Change Amount % Amount % Amount Margin% (in US Dollars, except percentage) Product categories by end applications Automotive Touchscreens$ 7,755,001 29.9 %$ 2,586,470 29.6 %$ 5,168,531 199.9 % Industrial Control Computer Touchscreens 4,823,587 18.6 % 2,115,458 24.1 % 2,708,129 128.0 % Gaming Touchscreens 3,892,571 15.0 % 1,493,507 17.0 % 2,399,064 160.3 % POS Touchscreens 3,644,686 14.0 % 647,176 7.4 % 2,997,510 463.2 % Medical Touchscreens 3,403,889 13.1 % 849,644 9.7 % 2,554,245 300.6 % Multi-Functional Printer Touchscreens 2,333,457 9.0 % 1,064,347 12.1 % 1,269,110 119.2 % Others* 94,998 0.4 % 8,550 0.1 % 86,448 1,011.1 % Total Revenues$ 25,948,189 100.0 %$ 8,765,152
100.0 %$ 17,183,037 194.3 %
*Others include applications in self-service kiosks, ticket vending machine and financial terminals.
11 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 self-service kiosks, medical touchscreens, ticket vending machine and financial terminals, 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
Six-Month Period Ended June 30, Change (in millions, except percentage) 2021 2020 Amount % Gross Profit$ 13.0 $ 4.3 $ 8.7 202.3 % Gross Profit Margin 50.5 % 49.1 % 1.4 % Gross profit was$13.0 million during the six-month period endedJune 30, 2021 , compared to$4.3 million in the same period of 2020. Our gross profit margin increased to 50.5% for the six-month period endedJune 30, 2021 as compared to 49.1% for the same period of 2020, primarily due to product mix shift to higher gross profit margin products such as POS touchscreens, gaming touchscreens, and industrial control computer touchscreens.
General and Administrative Expenses
Six-Month Period Ended June 30, Change (in millions, except percentage) 2021 2020 Amount % General and Administrative Expenses$ 1.3 $ 0.6 $
0.7 116.7 % as a percentage of revenues 5.0 % 6.8 % (1.8 )% General and administrative (G&A) expenses were$1.3 million for the six-month period endedJune 30, 2021 , compared to$0.6 million in the same period in 2020, representing an increase of 116.7%, or$0.7 million . The increase was primarily due to (i) the increase of$0.4 million loss of VAT input credits due toSichuan Wetouch ceasing operation and relocation to comply with local PRC government guidelines on local environment issues and the national overall plan (see Note 4 of our Condensed Consolidated Financial Statements (unaudited)), and (ii) the increase of$0.1 million accelerated amortization expense due to Sichuan Wetouch ceasing operation and relocation to comply with local PRC government guidelines on local environment issues and the national overall plan (see Note 4 of our Condensed Consolidated Financial Statements (unaudited)), and (iii) the increase of$0.1 million in miscellaneous expenses.
Research and Development Expenses
Six-Month Period Ended June 30, Change (in US dollars, except percentage) 2021 2020 Amount % Research and Development Expenses$ 44,768 $ 33,299 $ 11,469 34.4 % as a percentage of revenues 0.0 % 0.0 % 0.0 % Research and development (R&D) expenses were$44,768 for the six-month period endedJune 30, 2021 compared to$33,299 in the same period in 2020, representing an increase of$11,469 mainly due to the increase of salary expenses. Share-based Compensation Six-Month Period Ended June 30, Change
(in millions, except percentage) 2021 2020 Amount
% Share-based compensation$ 3.1 $ 0.0 $ 3.1 0.0 % as a percentage of revenues 12.0 % 0.0 % 12.0 % 12 Share-based compensation was$3.1 million for the six-month period endedJune 30, 2021 compared to nil in the same period in 2020. OnJanuary 1, 2021 , the Board of Directors of the Company authorized the issuance of an aggregate of 310,830 shares and 631,080 warrants toAscendant 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$8.3 million for the six-month period endedJune 30 , 202 as compared to$3.7 million of the same period of last year due to higher gross profit offset by the higher G&A expenses and share-based compensation
expenses. Gain on Asset Disposal Six-Month Period EndedJune 30 , Change
(in millions, except percentage) 2021 2020 Amount
% Gain on asset disposal$ 7.6 $ 0.0 $ 7.6 0.0 % as a percentage of revenues 29.3 % 0.0 % 29.3 %
Gain on asset disposal was$7.6 million for the six-month period endedJune 30, 2021 compared to nil in the same period in 2020. Pursuant to local PRC government guidelines on local environment issues and the national overall plan, Sichuan Wetouch is under the government-directed relocation order to relocate 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$7,625,165 for the asset disposal. Income Taxes Six-Month Period EndedJune 30 , Change
(in millions, except percentage) 2021 2020 Amount
% Income before Income Taxes$ 16.6 $ 3.8 $ 12.8 336.8 % Income Tax (Expense) (3.2 ) (0.6 ) (2.6 ) 433.3 % Effective income tax rate 19.2 % 15.8 % (1.1 )% The effective income tax rates for the six-month periods endedJune 30, 2021 and 2020 were 19.2% and 15.8%, respectively. The effective income tax rate for the six-month period endedJune 30, 2021 differs from the PRC statutory income tax rate of 25% primarily due to Sichuan Wetouch's preferential income tax rate. Our PRC subsidiary Sichuan Vtouch had$52.6 million of cash and cash equivalents as ofJune 30, 2021 , which are planned to be indefinitely reinvested in the PRC. The distributions from our PRC subsidiary are subject to theU.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. 13 Net Income As a result of the above factors, we had a net income of$13.4 million in the six-month period endedJune 30, 2021 compared to a net income of$3.2 million in the same period of 2020.
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.
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, 2021 , we had current assets of$64.6 million , consisting of$52.6 million in cash,$11.6 million in accounts receivable,$0.3 million in inventories, and 28,265 in prepaid expenses other current assets. Our current liabilities as ofJune 30, 2021 , were$3.1 million , which is comprised of$1.8 million in income tax payable,$0.8 in accounts payable, and$0.5 million in accrued expenses and other current liabilities. 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, 2021 and 2020: Six-Month Period Ended June 30, (in US Dollar millions) 2021 2020
Net cash provided by operating activities $ 11.1 $ 5.5 Net cash provided by investing activities 17.8 - Net cash used in financing activities -
(0.4 ) Effect of foreign currency exchange rate changes on cash and cash equivalents
(0.3 ) (0.2 ) Net increase in cash and cash equivalents 28.6
4.9
Cash and cash equivalents at the beginning of period 24.0
14.3
Cash and cash equivalents at the end of period $ 52.6 $ 19.2
Operating Activities Net cash provided by operating activities was$11.1 million for the six-month period endedJune 30, 2021 , as compared to$5.5 million provided by operating activities for the same period of last year, primarily due to (i) the increase of$10.2 million net income for the six-month period endedJune 30, 2021 as compared to the same period of 2020, (ii) the increase of$3.1 million of share-based compensation, (ii) the increase of$2.0 million income tax payable due to income tax clearance for Sichuan Wetouch during 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 decrease of$1.6 million of accounts receivable due to Sichuan Wetouch settling customer receivables for the six-month period endedJune 30, 2021 and (vi) the increase of 0.6 million of deferred income due to Sichuan Wetouch write-off government grant in the operating ceasing process for the six-month period endedJune 30, 2021 , as compared to the same period of 2020. Investing Activities
There were
Financing Activities
There was a
14
As of
Days Sales Outstanding ("DSO") has decreased to 82 days for the six-month period
ended
The following table provides an analysis of the aging of accounts receivable as
of
June 30, 2021 December 31, 2020 -Current$ 1,977,273 $ 3,531,963 -1-3 months past due 8,752,438 8,136,340 -4-6 months past due 860,959 123,581 7-12 months past due - 160,844 -greater than 1 year past due - 49,726 Total accounts receivable$ 11,590,670 $ 12,002,454 The majority of the Company's revenues and expenses were denominated primarily in Renminbi ("RMB"), the currency ofthe People's Republic of China . There is no assurance that exchange rates between the RMB and theU.S. Dollar will remain stable. Inflation has not had a material impact on the Company's business. Our industry typical payment term is 180 days. Accounts receivable are written off against the allowances only after exhaustive collection efforts. There was a stalled collection activities during February andMarch 2020 , during which most businesses except essential services were operated.
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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