-Revenues increased by 202.3% to $10.7 million-
-Net income increased by 563.9% to $8.4 million-
Chengdu, China, May 26, 2021 (GLOBE NEWSWIRE) -- Wetouch Technology Inc. (OTCQB: WETH) ("Wetouch" or "the Company"), a specialty manufacturer of medium to large sized projected capacitive touchscreens today announced its unaudited financial results for the first quarter ended March 31, 2021.
First Quarter 2021 Financial Highlights
- Total net revenues were US$10.7 million, representing a 202.3% increase from US$3.5 million from the same period in 2020.
- Gross profit increased by 197.5% to US$5.1 million from US$1.6 million for the same period in 2020.
- Gross margin was 48.4%, compared with 46.6% for the same period in 2020
- Net income increased by 563.9% to US$8.4 million, including one time gain on asset disposal of $7.6 million, from US$1.3 million from the same period in 2020.
- Basic and diluted EPS. Basic and diluted net income per share were $0.25, compared with $0.04 in the same period of 2020.
- Cash at the end of first quarter of 2021 was US$54.5 million compared to US$24.0 million at the end of fiscal year 2020.
“we are pleased to see continued strong recovery of businesses for the first quarter despite the challenges from a small wave of Covid-19 outbreak. We kicked off 2021 with strong topline growth and significant improvement in almost all key operational metrics, placing us firmly on track to further growth,” Mr. Guangde Cai, Chairman of WETH, commented, “Geographically, sales from PRC increased by 213.0%, complemented by 191.7% increase from overseas. Units sold increased by 178.3% to 499,796 touchscreens in the first quarter of 2021 from 179,592 units in the same period last year. Average selling price of our products also increased by 7.1% thanks to the increased sales of new models of higher-end products of such as touch screens used in gaming machine with higher selling price in domestic market during the three-month period ended March 31, 2021. As one of leading manufacturers of medium to large sized projected capacitive touchscreens in China, we are confident that our exceptional products and services, as well as our constantly improved and expanded product offering, would enable us to gain market share and deliver long-term value for our shareholders."
First Quarter 2021 Financial Results
Total Revenues. We generated revenue of $10.7 million and $3.5 million for the three months ended March 31, 2021 and 2020, respectively, an increase of $7.2 million, or 205.7%, compared to $3.5 million in the same period of last year. This was due to an increase of 178.3% in sales volume and of 9.7% in the average selling price of our products, and 7.1% positive impact from exchange rate due to appreciation of RMB against US dollars, compared with those of the same period of last year.
Gross Profit and Gross Profit Margin. Gross profit was $5.1 million in the first quarter ended March 31, 2021, compared to $1.6 million in the same period of 2020. Our gross profit margin increased to 47.7% for the first quarter ended March 31, 2021 as compared to 45.7% for the same period of 2020, primarily due to product mix shift to higher gross profit margin products such as self-service kiosks, ticket vending machine and financial terminals.
Gain on Asset Disposal. Gain on asset disposal was $7.6 million for the quarter ended March 31, 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 no later than December 31, 2021 and got compensated accordingly. On March 18, 2021, pursuant to the agreement with the local government and an appraisal report issued by a mutual agreed appraiser, Sichuan Wetouch received a compensation of RMB115.2 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 three-month period ended March 31, 2021, the Company recorded a gain of $7,611,646 for the asset disposal.
Income Tax Expenses. Income tax expense was $1.3 million for the three-month periods ended March 31, 2021, as compared to $0.2 million in the same period a year ago. The effective income tax rates for the three-month periods ended March 31, 2021 and 2020 were 13.9% and 15.0%, respectively. The effective income tax rate for the three-month period ended March 31, 2021 differs from the PRC statutory income tax rate of 25% primarily due to Sichuan Wetouch’s preferential income tax rate.
Net Income. We had a net income of $8.4 million in the first quarter of 2021 compared to a net income of $1.3 million in the same quarter of 2020.
Basic and diluted EPS. Basic and diluted net income per share were $0.25, compared with $0.04 in the same period of 2020.
Cash and cash equivalents. As of March 31, 2021, the Company had cash and cash equivalents, of $54.5 million, compared with $24.0 million as of December 31, 2020.
Caution Concerning Forward Looking Statements
The SEC encourages companies to disclose forward-looking information so that investors can better understand a company's future prospects and make informed investment decisions. The information on this website contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often include words such as "anticipates," "estimates," "expects," "projects," "intends," "plans," "believes" and words and terms of similar substance in connection with discussions of future operating or financial performance.
New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
The Company's forward-looking statements are based on management's current expectations and assumptions regarding the Company's business and performance, the economy and other future conditions and forecasts of future events, circumstances and results. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. The Company's actual results may vary materially from those expressed or implied in its forward-looking statements. Important factors that could cause the Company's actual results to differ materially from those in its forward-looking statements include government regulation, economic, strategic, political and social conditions and the risk factors set forth in the Company’s Annual Report for the year ended December 31, 2020 filed with the SEC on March 24, 2021.
About Wetouch Technology Inc
Wetouch, through its indirect wholly-owned subsidiaries, Sichuan Wetouch Technology Co. Ltd and Sichuan Vouch Technology Co., Ltd, is engaged in the manufacturing and sales of medium to large sized projected capacitive touchscreens, ranging from 7.0 inch to 42 inch screens. The Company offers touchscreens for a variety of applications, including GPS/car entertainment panels for automotive industry, industrial human-machine interface (“HMI”), financial and banking terminals, point of sale, lottery and gaming machines, smart home, robots and charging stations. Wetouch sells its products both domestically in China and internationally, covering major areas in China, including but not limited to the eastern, southern, northern and southwest regions of China. Touchscreens produced by the Company not only have long life span and are low maintenance, but also have strong anti-interference, anti-corrosion, multi-touch capability and high light-transmittance ratio and stability. Wetouch has shipped products to South Korea and several European countries such as Spain and Germany and has established a strong and diversified client base. As of September 30, 2020, Wetouch held 10 patents and has passed a number of industry certifications, including ISO9001, ISO14001, TS16949, FCC, CE, ROHS, CCC, ROHS.
Investor Relation Contact:
Sophie Zhang
szhang@ascendantga.com
WETOUCH TECHNOLODY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
| As of March 31, | As of December 31, | |||||||
| 2021 | 2020 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | 54,478,833 | $ | 23,963,861 | ||||
| Accounts receivable, net | 4,502,711 | 11,926,835 | ||||||
| Inventories | 195,057 | 402,050 | ||||||
| Due from related parties | - | 76,619 | ||||||
| Prepaid expenses and other current assets | 16,109 | 228,443 | ||||||
| TOTAL CURRENT ASSETS | 59,192,710 | 36,597,808 | ||||||
| Property, plant and equipment, net | - | 9,491,195 | ||||||
| Intangible assets, net | - | 974,696 | ||||||
| TOTAL ASSETS | $ | 59,192,710 | $ | 47,063,699 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | 2,008,034 | $ | 891,848 | ||||
| Amount due to related parties | 628,604 | 529,060 | ||||||
| Income tax payable | 783,098 | 107,137 | ||||||
| Accrued expenses and other current liabilities | 186,036 | 503,455 | ||||||
| Deferred grants | - | 245,211 | ||||||
| TOTAL CURRENT LIABILITIES | 3,605,772 | 2,276,711 | ||||||
| Deferred grants-non current | - | 433,206 | ||||||
| TOTAL LIABILITIES | $ | 3,605,772 | $ | 2,709,917 | ||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Common stock, $0.001 par value, 300,000,000 shares authorized, 31,811,523 and 31,500,693 issued and outstanding as of March 31, 2021 and December 31, 2020, respectively | $ | 31,812 | $ | 31,501 | ||||
| Additional paid in capital | 4,221,727 | 1,072,932 | ||||||
| Statutory reserve | 3,062,159 | 3,062,159 | ||||||
| Retained earnings | 47,590,531 | 39,229,282 | ||||||
| Accumulated other comprehensive income | 680,709 | 957,908 | ||||||
| TOTAL STOCKHOLDERS’ EQUITY | 55,586,938 | 44,353,782 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 59,192,710 | $ | 47,063,699 | ||||
WETOUCH TECHNOLODY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
| For the three months ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| REVENUES | ||||||||
| Revenues from customers | $ | 10,615,924 | $ | 3,509,092 | ||||
| Revenues from related parties | 97,380 | - | ||||||
| TOTAL REVENUES | 10,713,304 | 3,509,092 | ||||||
| COST OF REVENUES | (5,571,806 | ) | (1,872,783 | ) | ||||
| GROSS PROFIT | 5,141,498 | 1,636,309 | ||||||
| OPERATING EXPENSES | ||||||||
| Selling expenses | (87,823 | ) | (18,705 | ) | ||||
| General and administrative expenses | (494,897 | ) | (208,277 | ) | ||||
| Research and development expenses | (22,180 | ) | (15,342 | ) | ||||
| Share-based compensation | (3,149,106 | ) | - | |||||
| Total operating expenses | (3,754,006 | ) | (242,324 | ) | ||||
| INCOME FROM OPERATIONS | 1,387,492 | 1,393,985 | ||||||
| OTHER INCOME (EXPENSES) | ||||||||
| Interest income | 22,015 | 19,617 | ||||||
| Interest expense | (4 | ) | (2,969 | ) | ||||
| Government grant | 691,713 | 71,648 | ||||||
| Gain on asset disposal | 7,611,646 | - | ||||||
| TOTAL OTHER INCOME , NET | 8,325,370 | 88,296 | ||||||
| INCOME BEFORE INCOME TAX EXPENSE | 9,712,862 | 1,482,281 | ||||||
| INCOME TAX EXPENSE | (1,351,613 | ) | (222,787 | ) | ||||
| NET INCOME | $ | 8,361,249 | $ | 1,259,494 | ||||
| OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||
| Foreign currency translation adjustment | (277,199 | ) | (550,418 | ) | ||||
| COMPREHENSIVE INCOME | $ | 8,084,050 | $ | 709,076 | ||||
| EARNINGS PER COMMON SHARE | ||||||||
| Basic | $ | 0.25 | $ | 0.04 | ||||
| Diluted | $ | 0.25 | $ | 0.04 | ||||
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING* | ||||||||
| Basic | 31,810,834 | 28,000,000 | ||||||
| Diluted | 32,652,474 | 28,000,000 | ||||||
*Retrospectively restated for effect of recapitalization, see Note 1
WETOUCH TECHNOLODY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the three-months ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 8,361,249 | $ | 1,259,494 | ||||
| Adjustments to reconcile net income to cash provided by operating activities | ||||||||
| Bad debts reversal | (76,124 | ) | - | |||||
| Depreciation and amortization | 374,303 | 256,926 | ||||||
| Share-based compensation | 3,149,106 | - | ||||||
| Gain on asset disposal | (7,611,646 | ) | - | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 8,279,581 | 180,907 | ||||||
| Amounts due from related parties | 83,354 | (15,656 | ) | |||||
| Inventories | 232,797 | (22,140 | ) | |||||
| Prepaid expenses and other current assets | 228,021 | (50,807 | ) | |||||
| Accounts payable | 1,075,994 | 1,142,323 | ||||||
| Amounts due to related parties | 69,615 | 211,486 | ||||||
| Income tax payable | 676,997 | (415,867 | ) | |||||
| Accrued expenses and other current liabilities | (350,360 | ) | (136,540 | ) | ||||
| Deferred grants | (725,518 | ) | (57,318 | ) | ||||
| Net cash provided by operating activities | 13,767,369 | 2,352,808 | ||||||
| Cash flows from investing activities | ||||||||
| Proceeds from assets disposal | 17,773,202 | - | ||||||
| Net cash provided by investing activities | 17,773,202 | - | ||||||
| Cash flows from financing activities | ||||||||
| Net cash used in financing activities | - | - | ||||||
| Effect of changes of foreign exchange rates on cash | (1,025,599 | ) | (273,935 | ) | ||||
| Net increase in cash | 30,514,972 | 2,078,873 | ||||||
| Cash, beginning of period | 23,963,861 | 14,279,797 | ||||||
| Cash, end of period | $ | 54,478,833 | $ | 16,358,670 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest expense | $ | - | $ | - | ||||
| Cash paid for income tax | $ | 667,895 | $ | 638,654 | ||||