Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The discussion should be read in conjunction with the Company's consolidated financial statements and the notes presented herein. In addition to historical information, the following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Actual results could differ significantly from those expressed, implied or anticipated in these forward-looking statements as a result of certain factors discussed herein and any other periodic reports filed and to be filed with the Securities and Exchange Commission. See "Cautionary Note Regarding Forward Looking Statement."

Overview

The Company is a Nevada holding company with no material operations of its own. We conduct substantially all of our operations through our subsidiary in mainland China, which we control through BVI Wetouch. See "Item 1. Business - Corporate History and Structure" for more details.

Because our operations are primarily in China, we are subject to complex and evolving PRC laws and regulations. These include restrictions on capital flows, dividend payments, currency conversion, cybersecurity and data privacy, and governmental discretion over overseas securities offerings. These risks could materially affect our ability to transfer funds, conduct offerings, or continue operations in their current form. See "Item 1A. Risk Factors-Risks Related to Doing Business in China."

As of June 30, 2025, the Company has contributed RMB 348.0 million (US$47.7 million) to its PRC subsidiary through intermediate holding companies, which were accounted for as long-term investments. These funds have been used by our PRC subsidiary in its operations. To date, no dividends or other distributions have been made by our PRC subsidiary to the Company. We may rely on future distributions from our PRC subsidiary to fund our holding company obligations, subject to PRC law and restrictions. For more details, see "Item 1A. Risk Factors-Risks Related to Doing Business in China-As a holding company, we conduct our operations primarily through our PRC subsidiary and face risks and uncertainties associated with this structure."

Under current PRC law, dividend payments by our PRC subsidiary are limited to accumulated profits determined in accordance with PRC accounting standards and are subject to statutory reserve requirements. Dividends to the Company are also subject to withholding tax, generally 10%, but reduced to 5% if treaty conditions are met. There is no assurance that the reduced rate will apply. For more details, see "Item 1A. Risk Factors-Risks Related to Doing Business in China-Uncertainties with respect to the PRC legal system, including the enforcement of laws and changes in laws and regulations, could adversely affect us and limit the legal protections available."

We currently do not have cash management policies dictating how funds are transferred between the Company and its subsidiaries. Most of our cash is maintained in Renminbi in mainland China and may be subject to PRC restrictions on outbound transfers. For details, see "Item 1A. Risk Factors - Risks Related to Doing Business in China - Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment."

Through our wholly owned subsidiaries, BVI Wetouch, HK Wetouch, and Sichuan Vtouch, we are engaged in the research, development, manufacturing, sales and servicing of medium- to large-sized projected capacitive touchscreens. We are specialized in large-format touchscreens, which are developed and designed for a wide variety of markets and used in the financial terminals, automotive, POS, gaming, lottery, medical, 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.

We generate revenues through sales of our various touchscreen products. We sell our touchscreen products both domestically in China and internationally, covering major areas in Mainland China, including but not limited to the eastern, southern, northern and southwest regions of Mainland China, Taiwan, South Korea, and Germany. We believe that we have established a strong and diversified client base.For the three months ended June 30, 2025 and 2024, our domestic sales accounted for approximately 67.7% and 64.8%, respectively, of our revenues, and our international sales accounted for approximately 32.3% and 35.2%, respectively, of our revenues. For the six months ended June 30, 2025 and 2024, our domestic sales accounted for approximately 66.7% and 63.4%, respectively, of our revenues, and our international sales accounted for approximately 33.3% and 36.6%, respectively, of our revenues.

Since our incorporation, we have effected two reverse stock splits of our common stock, including a 1-for-70 reverse split in 2020 and a 1-for-20 reverse split in 2023, and all share and per share information in this Quarterly Report has been retroactively adjusted to reflect these actions. For more details, see "Item 1. Business - Corporate History and Structure - Reverse Stock Splits" of the 2024 Form 10-K.

Construction of our new facility

We have been actively engaged in the construction of our new production facilities and office buildings in Chengdu Medicine City (Technology Park), Wenjiang District, Chengdu, Sichuan Province, People's Republic of China since the summer of 2023. The Company has planned to increase the scope of facility construction by adding a touch machine construction area, to be completed by the end of 2025.

As of the date of this Quarterly Report, we estimate to finish the building construction by the end of 2025 and commence production in the second quarter of 2026. In consideration of the capital requirements for the new facility construction, we plan to fund the project primarily with our existing cash on hand, which totaled approximately $106.4 million as of June30, 2025, and cash flows generated from operations, and we may seek additional financing if needed to support the timely completion of the project.

Highlights for the three months ended June 30, 2025 include:

●

Revenues were $12.4 million, an increase of 1.6% from $ 12.2 million in the second quarter of 2024

●

Gross profit was $4.1 million, a decrease of 14.5% from $ 4.9 million in the second quarter of 2024

●

Gross profit margin was 33.1% as compared to 39.7% in the second quarter of 2024

●

Net income was $2.2 million, a decrease of 18.5% from $ 2.7 million in the second quarter of 2024

●

Total volume shipped was 615,742 units, an increase of 5.1% from 585,705 units in the second quarter of 2024

Results of Operations

The following table sets forth, for the periods indicated, statements of income data:

		For the Three Months Ended June 30,								Change				For the Six Months Ended June 30,								Change
(in US Dollar millions, except percentage)		2025				2024				%				2025				2024				%
Revenues		$	12.4			$	12.2				1.6	%		$	27.7			$	27.1				2.2	%
Cost of revenues			(8.3	)			(7.4	)			12.2	%			(18.0	)			(18.9	)			(4.8	)%
Gross profit			4.1				4.8				(14.5	)%			9.7				8.2				18.3	%
Total operating expenses			(1.0	)			(1.1	)			(9.1	)%			(2.7	)			(2.2	)			22.7	%
Operating income			3.1				3.7				(16.2	)%			7.0				6.0				16.7	%
Total Other income (expenses)			0.0				0.0				N/A				0.0				(1.0	)			(100.0	)%
Interest expense			0.0				0.0				N/A				0.0				(1.2	)			(100.0	)%
Income before income taxes			3.1				3.8				(18.4	)%			7.1				5.0				42.0	%
Income tax expense			(0.9	)			(1.1	)			(18.2	)%			(2.3	)			(1.7	)			35.3	%
Net income		$	2.2			$	2.7				(18.5	)%		$	4.8			$	3.3				45.5	%

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

Revenues

We generated revenue of $12.4 million for the three months ended June 30, 2025, an increase of $0.2 million, or 1.6%, compared to $12.2 million in the same period of last year. This was due to an increase of 5.1% in sales volume, 0.2% positive impact from exchange rate due to appreciation of RMB against US dollars, partially offset by a decrease of 3.6% in the average selling price of our products, compared with that of the same period of last year.

		For the Three Months Ended June 30,
		2025								2024								Change				Change
		Amount				%				Amount				%				Amount				%
		(in US Dollar millions except percentage)
Revenue from sales to customers in Mainland China		$	8.4				67.7	%		$	7.9				64.8	%		$	0.5				6.3	%
Revenue from sales to customers overseas			4.0				32.3	%			4.3				35.2	%			(0.3	)			(7.0	)%
Total Revenues		$	12.4				100	%		$	12.2				100	%		$	0.2				1.6	%

		For the Three Months Ended June 30,
		2025								2024								Change				Change
		Unit				%				Unit				%				Unit				%
		(in UNIT, except percentage)
Units sold to customers in Mainland China			411,353				66.8	%			371,130				63.4	%			40,223				10.8	%
Units sold to customers overseas			204,389				33.2	%			214,575				36.6	%			(10,186	)			(4.7	)%
Total Units Sold			615,742				100	%			585,705				100	%			30,037				5.1	%

(i) PRC market

For the three months ended June 30, 2025, revenue from domestic market increased by $0.5 million or 6.3% as a combined result of: (i) an increase of 10.8% in sales volume due to higher sales volume of automotive touchscreens, industrial control computer touchscreens, and multi-functional printer touchscreens, (ii) 0.2% positive impact from exchange rate due to appreciation of RMB against US dollars, partially offset by a decrease of 3.6% in the average RMB selling price of our products, compared with those of the same period of last year.

As for the RMB selling price, the decrease of 3.6% was mainly due to due to the lower demand of higher selling priced products of touchscreen machines in the PRC domestic market, including the decreased average RMB selling price of 12.7% in medical touchscreens and 2.0% in industrial control computer touchscreens and 1.3% in automotive touchscreens during the three months ended June 30, 2025.

The Company has taken proactive efforts to market new models and efforts to obtain new customers and penetrate into new regions, our sales increased by 8.6% in South China, and 7.3% in East China, and 5.3% in Southwest China during the three months ended June 30, 2025.

(ii) Overseas market

For the three months ended June 30, 2025, revenues from the overseas market were $4.0 million as compared to $4.3 million of the same period of 2024, representing a decrease by $0.3 million, or 7.0%, mainly due to i) a decrease of 4.7% in sales volume including decreased sales of 8.6% in gaming touchscreens and 15.4% in automotive touchscreens, ii) a decrease of 4.1% in average selling price in RMB due to the lower demand on touchscreen machines in medical touchscreens, industrial control computer touchscreens, and automotive touchscreens, partially offset by iii) the 0.2% positive impact from exchange rate due to appreciation of RMB against US dollars, compared with those of the same period of last year.

The following table summarizes the breakdown of revenues by categories in US dollars:

		Revenues For the Three Months Ended June 30,
		2025								2024								Change				Change
		Amount				%				Amount				%				Amount				Margin%
		(in US Dollars, except percentage)
Product categories by end applications
Automotive Touchscreens		$	3,122,908				25.1	%		$	3,391,048				27.7	%		$	(268,140	)			(7.9	)%
Industrial Control Computer Touchscreens			2,729,429				22.0	%			2,367,638				19.3	%			361,791				15.3	%
POS Touchscreens			1,950,702				15.7	%			1,768,458				14.5	%			182,244				10.3	%
Gaming Touchscreens			1,800,926				14.5	%			1,956,141				16.0	%			(155,215	)			(7.9	)%
Medical Touchscreens			1,665,089				13.4	%			1,728,928				14.1	%			(63,839	)			(3.7	)%
Multi-Functional Printer Touchscreens			1,150,401				9.3	%			1,022,362				8.4	%			128,039				12.5	%
Total Revenues		$	12,419,455				100.0	%		$	12,234,575				100.0	%		$	184,880				1.6	%

The Company continued to shift production mix from traditional lower-end products to high-end products such as POS touchscreens and industrial control computer touchscreens, primarily due to (i) greater growth potential of computer screen models in China and overseas market, and (ii) the stronger demand on higher-end touch screens made with better materials and better quality.

Gross Profit and Gross Profit Margin

		For the Three Months Ended June 30,								Change
(in millions, except percentage)		2025				2024				Amount				%
Gross Profit		$	4.1			$	4.8			$	(0.7	)			(14.5	)%
Gross Profit Margin			33.1	%			39.7	%							(6.6	)%

Gross profit was $4.1 million in the second quarter ended June 30, 2025, compared to $4.8 million in the same period of 2024. Our gross profit margin decreased to 33.1% for the second quarter ended June 30, 2025, as compared to 39.7% for the same period of 2024, primarily due to the increase of cost of goods sold by 12.8% resulting from the increase of 13.5% in costs of raw materials, and 3.3% in labor cost, partially offset by the increased sales of 1.6% during the three months ended June 30, 2025.

Selling Expenses

		For the Three Months Ended June 30,								Change
(in millions, except percentage)		2025				2024				Amount				%
Selling Expenses		$	0.1			$	0.3			$	(0.2	)			(66.7	)%
as a percentage of revenues			0.8	%			2.4	%							(1.6	)%

Selling expenses were $0.1 million for the three months ended June 30, 2025, compared to $0.3 million in the same period in 2024, representing a decrease of $0.2 million, or 66.7%. The decrease was primarily due to the decrease of $0.2 million traveling expenses due to using online communication to market our products during the three months ended June 30,2025.

General and Administrative Expenses

		For the Three Months Ended June 30,								Change
(in millions, except percentage)		2025				2024				Amount				%
General and Administrative Expenses		$	0.9			$	0.8			$	0.1				12.5	%
as a percentage of revenues			7.3	%			6.6	%							0.7	%

General and administrative expenses were $0.9 for the three months ended June 30, 2025, compared to $0.8 million in the same period in 2024, representing an increase of $0.1 million, or 12.5%. The increase was primarily due to $0.1 million professional fees during the three months ended June 30, 2025.

Research and Development Expenses

		For the Three Months Ended June 30,								Change
(in US dollars, except percentage)		2025				2024				Amount				%
Research and Development Expenses		$	-			$	43,211			$	43,211				(100.0	%
as a percentage of revenues			0.0	%			0.3	%							(0.3	)%

Research and development expenses were nil and $43,211 for three months ended June 30, 2025 and 2024, respectively.

Operating Income

Total operating income was $3.1 million for the three months ended June 30, 2025 as compared to $3.7 million of the same period of last year, primarily due to lower gross margin and higher, general and administrative expenses, partially offset by the lower selling expenses and research & development expenses for the three months ended June 30, 2025.

Gain on Changes in Fair Value of Common Stock Purchase Warrants

		For the Three Months Ended June 30,								Change
(in US dollars, except percentage)		2025				2024				Amount				%
Gain on changes in fair value of common stock purchase warrants		$	-			$	37,751			$	(37,751	)			(100.0	)%
as a percentage of revenues			0.0	%			0.3	%							(0.3	)%

Gain on changes in fair value of common stock purchase warrants for the three months ended June 30, 2024 was $37,751 (See Note 10 (b) of the accompanying financial statements).

Income Taxes

		For the Three Months Ended June 30,								Change
(in millions, except percentage)		2025				2024				Amount				%
Income before Income Taxes		$	3.1			$	3.8			$	(0.7	)			(18.4	)%
Income Tax (Expense)			(0.9	)			(1.1	)			(0.8	)			18.2	%
Effective income tax rate			28.1	%			28.9	%							(0.8	)%

The effective income tax rates for the three months ended June 30, 2025 and 2021 were 28.1% and 28.9%, respectively.

Net Income

As a result of the above factors, we had a net income of $2.2 million in the second quarter of 2025 compared to a net income of $2.7 million in the same quarter of 2024.

Results of Operations - Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

Revenues

We generated revenue of $27.1 million for the six months ended June 30, 2024, an increase of $0.9 million, or 3.4%, compared to $26.2 million in the same period of last year. This was mainly due to an increase of 3.4% in sales volume, and an increase of 4.2% in the average RMB selling price of our products, partially offset by 4.1% 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 Months Ended June 30,
		2025								2024								Change				Change
		Amount				%				Amount				%				Amount				%
		(in US Dollar millions except percentage)
Revenue from sales to customers in PRC		$	18.7				67.5	%		$	17.2				63.5	%		$	1.5				8.7	%
Revenue from sales to customers overseas			9.0				32.5	%			9.9				36.5	%			(0.9	)			(9.1	)%
Total Revenues		$	27.7				100	%		$	27.1				100	%		$	0.6				2.2	%

		For the Six Months Ended June 30,
		2025								2024								Change				Change
		Unit				%				Unit				%				Unit				%
		(in UNIT, except percentage)
Units sold to customers in PRC			920,003				66.7	%			803,180				63.4	%			116,823				14.5	%
Units sold to customers overseas			458,284				33.3	%			463,895				36.6	%			(5,611	)			(1.2	)%
Total Units Sold			1,378,287				100	%			1,267,075				100	%			111,212				8.9	%

(i) PRC market

For the six months ended June 30, 2025, revenue from PRC market increased by $1.5 million or 8.7% as a combined result of (i) an increase of 8.7% in sales volume, particularly in industrial control computer touchscreens, automotive touchscreens, and multi-functional printer touchscreens, partially offset by (ii) a decrease of 4.6% in the average RMB selling price of our products, and (iii) 0.5% 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 4.6% was mainly due to the lower demand of higher selling priced products of touchscreen machines in the PRC domestic market, including the decreased average RMB selling price of 25.6% in medical touchscreens and 1.6% in industrial control computer touchscreens during the six-month period ended June 30, 2025.

The Company has taken proactive efforts to market new models and efforts to obtain new customers and penetrate into new regions, our sales increased by 14.5% in South China, and 13.2% in East China, and 1.5% in Southwest China during the six-month period ended June 30, 2025.

(ii) Overseas market

For the six months ended June 30, 2025, revenues from the overseas market were $9.0 million as compared to $9.9 million of the same period of 2024, representing a decrease by $0.9 million, or 9.1%, mainly due to a decrease of 7.3% in average selling price in RMB due to the lower demand on touchscreen machines in medical touchscreens, industrial control computer touchscreens, and automotive touchscreens, and 0.5% negative impact from exchange rate due to depreciation of RMB against US dollars, and the decrease of 1.2% in sales volume due to decreased sales in medical touchscreens, industrial control computer touchscreens and gaming touchscreens,

The following table summarizes the breakdown of revenues by categories in US dollars:

		Revenues For the Six Months Ended June 30,
		2025								2024								Change				Change
		Amount				%				Amount				%				Amount				Margin%
		(in US Dollars, except percentage)
Product categories by end applications
Automotive Touchscreens		$	7,083,405				25.6	%		$	7,576,318				27.9	%		$	(492,913	)			(6.5	)%
Industrial Control Computer Touchscreens			5,964,502				21.5	%			5,215,298				19.3	%			749,204				14.4	%
POS Touchscreens			4,361,733				15.7	%			3,882,557				14.3	%			479,176				12.3	%
Gaming Touchscreens			4,121,519				14.9	%			4,128,616				15.2	%			(7,097	)			(0.2	)%
Medical Touchscreens			3,614,745				13.0	%			4,143,888				15.3	%			(529,143	)			(12.8	)%
Multi-Functional Printer Touchscreens			2,563,129				9.3	%			2,165,157				8.0	%			397,973				18.4	%
Total Revenues		$	27,709,033				100.0	%		$	27,111,834				100.0	%		$	597,199				2.2	%

The Company continued to shift production mix from traditional lower-end products such as touchscreens used in industrial control computer industries to high-end products such as industrial control computer touchscreens and POS touchscreens, primarily due to (i) greater growth potential of computer screen models in China, (ii) the stronger demand on higher-end touch screens made with better materials and better quality.

Gross Profit and Gross Profit Margin

		For the Six Months Ended June 30,								Change
(in millions, except percentage)		2025				2024				Amount				%
Gross Profit		$	9.7			$	8.2			$	1.5				18.3	%
Gross Profit Margin			35.2	%			30.2	%							5.0	%

Gross profit was $9.7 million during the six months ended June 30, 2025, compared to $8.2 million in the same period of 2024. Our gross profit margin increased to 35.2% for the six months ended June 30, 2025, as compared to 30.2% for the same period of 2024, primarily due to the increase of revenues by 2.2%, particularly high-end products such as POS touchscreens, industrial control computer touchscreens, partially offset by the increase in cost of goods sold by 4.1% for the six months ended June 30, 2025.

Selling Expenses

		For the Six Months Ended June 30,								Change
(in millions, except percentage)		2025				2024				Amount				%
Selling Expenses		$	0.2			$	0.7			$	(0.5	)			(71.4	)%
as a percentage of revenues			0.7	%			2.6	%							(1.9	)%

Selling expenses were $0.2 million for the six-month period ended June 30, 2025, compared to $0.7 million in the same period in 2024, representing a decrease of $0.5 million, or 71.4%. The decrease was primarily due to the less traveling expenses as the selling team using online communications to market the products during the six-month period ended June 30, 2025

General and Administrative Expenses

		For the Six Months Ended June 30,								Change
(in millions, except percentage)		2025				2024				Amount				%
General and Administrative Expenses		$	2.5			$	1.3			$	1.2				92.3	%
as a percentage of revenues			9.0	%			4.8	%							4.2	%

General and administrative (G&A) expenses were $2.5 million for the six months ended June 30, 2025, compared to $1.3 million in the same period in 2024, representing an increase of $1.2 million, or 92.3%. The increase was primarily due to the increase of $0.4 million professional fees and $0.9 million of amortization of prepaid marketing research fees (see Note 3 of the accompanying financial statements), partially offset by the decrease of $0.1 million of miscellaneous expenses including $91,252 reversal of provision for obsolete inventory.

Research and Development Expenses

		For the Six Months Ended June 30,								Change
(in US dollars, except percentage)		2025				2024				Amount				%
Research and Development Expenses		$	-			$	85,949			$	(85,949	)			(100.0	)%
as a percentage of revenues			0.0	%			0.3	%							(0.3	)%

Research and development expenses were nil and $42,738 for the six months ended June 30, 2025 and 2024, respectively.

Operating Income

Total operating income was $7.0 million for the six months ended June 30, 2025 as compared to $10.4 million of the same period of last year due to higher gross profit, lower selling expenses and research and development expenses, partially offset by higher general and administration expenses.

Gain on changes in fair value of Common Stock Purchase Warrants

		For the Six Months Ended June 30,								Change
(in US dollars, except percentage)		2025				2024				Amount				%
Gain on changes in fair value of Common Stock Purchase Warrants		$	-			$	45,572			$	(45,572	)			(100.0	)%
as a percentage of revenues			0.0	%			0.2	%							(0.2	)%

Gain on changes in fair value of common stock purchase warrants was $45,572 for the six months ended June 30, 2024. (See Note 10 (b)).

Interest Expenses

		For the Six Months Ended June 30,								Change
(in millions, except percentage)		2025				2024				Amount				%
Interest Expenses		$	-			$	1.2			$	(1.2	)			(100.0	)%
as a percentage of revenues			0.0	%			4.4	%							(4.4	)%

For the six months ended June 30, 2024, the Company recognized interest expenses of convertible promissory notes in the amount of $1,169,974 (mainly the default interest charges of $1,145,995 upon the repayment of the notes payable) and $71,507, respectively. (See Note 9 (a) of the accompanying financial statements).

Income Taxes

		For the Six Months Ended June 30,								Change
(in millions, except percentage)		2025				2024				Amount				%
Income before Income Taxes		$	7.1			$	5.0			$	2.1				42.0	%
Income Tax (Expense)			(2.3	)			(1.7	)							35.3	%
Effective income tax rate			32.8	%			35.1	%							(2.3	)%

The effective income tax rates for the six months ended June 30, 2025 and 2024 were 32.8% and 35.1%, respectively.

Net Income

As a result of the above factors, we had a net income of $4.8 million in the six months ended June 30, 2025 as compared to $3.3 million of the same period of last year

Liquidity and Capital Resources

Historically, our primary uses of cash have been to finance working capital needs. We expect to be able to meet our needs to fund operations, capital expenditures,and other commitments over the next 12 months primarily with our cash and cash equivalents, operating cash flows and bank borrowings.

However, we may require additional cash resources due to changes in business conditions or other future developments. If these sources prove insufficient to meet our cash requirements, we may seek to raise additional funds through the sale of equity or debt securities or by obtaining a credit facility. Any issuance of additional equity or equity-linked securities could dilute the ownership interests of existing shareholders, while the incurrence of additional indebtedness would increase our debt service obligations and could subject us to operating and financial covenants that may restrict our business activities. There can be no assurance that financing will be available in the necessary amounts, on terms acceptable to us, or at all.

As of June 30, 2025, we had current assets of $123.2 million, consisting of $110.5 million in cash, $10.7 million in accounts receivable, $0.1 million in inventories, and $1.8 million in prepaid expenses and other current assets Our current liabilities as of June 30, 2025 were $5.0 million, which is comprised of $1.5 million in accounts payable, $0.6 million in amounts due to a related party, $0.9 million in income tax payable, $1.4 million in accrued expenses and other current liabilities. and $0.6 million in operating lease liabilities, current portion. We also had $0.2 million in operating lease liabilities, non- current as of June 30, 2025.

The following is a summary of our cash flows provided by (used in) operating, investing, and financing activities for the six months ended June 30, 2025 and 2024:

		For the Six Months Ended June 30,
(in US Dollar millions)		2025				2024
Net cash provided by (used in) operating activities		$	4.7			$	(5.3	)
Net cash used in investing activities			(0.0	)			(0.1	)
Net cash provided by financing activities			0.0				7.8
Effect of foreign currency exchange rate changes on cash and cash equivalents			2.0				(2.1	)
Net increase in cash and cash equivalents			6.7				0.4
Cash and cash equivalents at the beginning of period			103.7				98.0
Cash and cash equivalents at the end of period		$	110.5			$	98.4

Operating Activities

Net cash provided by operating activities was $4.7 million for the six months ended June 30, 2025 as compared to net cash used in operating activities of $9.2 million for the same period of the last year.

The positive cash flow for the six months ended June 30, 2025 was primarily due to i) $4.8 million net income, ii) $0.3 million of amortization of operating right-of-use assets, iii) the decrease of $0.9 million in prepaid expenses and current assets, iii) the increase of in $0.2 million accounts payable, $0.5 million due to related parties, $0.9 million in tax payable and $0.4 million in accrued expenses and current liabilities, partially offset by iv) the increase of $3.0 million in accounts receivable and v) the decrease of $0.3 million in operating lease liabilities.

The negative cash flow for the six months ended June 30, 2024 was primarily due to i) increase of $3.6 million in accounts receivable, $3.4 million in prepaid expenses and current assets, ii) the decrease of $3.4 million in accrued expenses and current liabilities, partially offset by iii) net income of $0.6 million and iv) the increase of $0.6 million in income tax payable.

Investing Activities

There was no cash flow in investing activities for the six months ended June 30, 2025.

Net cash used in investing activities for the six months ended June 30, 2024 was $0.1 million for the purchase of property, plant and equipment.

Financing Activities

There was no cash flow in financing activities for the six months ended June 30, 2025.

Net cash provided by financing activities for the six months ended June 30, 2024 was $7.8 million, including $9.0 million in net proceeds from the 2024 Public Offering and $0.3 million in proceeds from interest-free advances from a related party, partially offset by $1.4 million repayment of convertible promissory notes, and $82,864 repayment of interest-free advances to a third party.

As of June 30, 2025, our cash and cash equivalents were $110.5 million, as compared to $103.7 million at December 31, 2024.

Days Sales Outstanding ("DSO") has increased to 89 days for the six months ended June 30, 2025 from 64 days for the year ended December 31, 2024.

The majority of the Company's revenues and expenses were denominated 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.

The majority of the Company's revenues and expenses were denominated 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.

Holding Company Structure

There have been no changes to the Company's holding company structure during the six months ended June 30, 2025. For more details, refer to the Company's holding company structure disclosures set forth in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations- Holding Company Structure" of the 2024 Form 10-K.

Cash and Other Assets Transfers between the Holding Company and Its Subsidiaries

Please see "ITEM 7- Management's Discussion and Analysis of Financial Condition and Results of Operations- Cash and Other Assets Transfers between the Holding Company and Its Subsidiaries" of the 2024 Form 10-K for more details.

Capital Expenditure Commitment

As of June 30, 2025, the Company had commitment of RMB5.0 million (equivalent to $0.7 million) for construction in progress.

Off-Balance Sheet Arrangements

We had no off-balancesheet arrangements as of June 30, 2025.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with GAAP and the Company's discussion and analysis of its financial condition and operating results require the Company's management to make judgments, assumptions and estimates that affect the amounts reported. Note 2, "SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES" of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of the 2024 Form 10-K describe the significant accounting policies and methods used in the preparation of the Company's condensed consolidated financial statements. There have been no material changes to the Company's critical accounting estimates since the 2024 Form 10-K.