# Wetouch Technology Inc.: Form 10-Q for the period ended Mar 31, 2023

- Company: [Wetouch Technology Inc.](/companies/weth.md) (CIK 1826660)
- Form: 10-Q
- Filed: 2023-05-22
- Accepted by EDGAR: May 22, 2023, 12:12 ET
- Period: 2023-03-31
- Accession: 0001493152-23-018484
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1826660/000149315223018484/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1826660/000149315223018484/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $13.4m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2023-01-01 to 2023-03-31 | $7.4m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-01-01 to 2023-03-31 | $6.0m | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-01-01 to 2023-03-31 | $20.9k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | $4.3m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-01-01 to 2023-03-31 | $33.4k | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-01-01 to 2023-03-31 | $1.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | $2.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-01 to 2023-03-31 | $0.02 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-01 to 2023-03-31 | $0.02 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 162,059,750 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | $2.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2023-03-31 | $93.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-03-31 | $107.7m | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-31 | $118.6m | us-gaap:Assets |
| Current liabilities | at 2023-03-31 | $7.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-03-31 | $7.7m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-03-31 | $110.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 23,048 characters.

### 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 17, 2023, 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 with United 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 of Nevada in August 1992. On October 9, 2020, we entered into a share exchange agreement (the “Share Exchange Agreement”) with Wetouch Holding Group Limited, a British Virgin Islands (“BVI”) company incorporated on August 14, 2020 under the laws of the British Virgin Islands (“BVI Wetouch”), and all the shareholders of BVI Wetouch (each a “Shareholder” and collectively the “Shareholders”), to acquire all the issued and outstanding capital stock of BVI Wetouch in exchange for the issuance to the Shareholders an aggregate of 28 million shares of our common stock (the “Reverse Merger”). The Reverse Merger closed on October 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.

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, which constitutes our source of revenues. 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, 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. 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 for the three-month period ended March 31, 2023 and 2022, respectively.

### 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 early February 2020 to early March 2020 in accordance with the requirement of the local governments. Our business was negatively impacted and generated lower revenue and net income in 2020.

Commencing in the spring of 2021, China began to experience an increase in COVID-19 cases, and to some extent, local governments and the national government began to take more restrictive measures to stem the spread of the virus, particularly from October 2021 to December 2021 and various periods in 2022. The Company experienced several shutdowns until the period ended March 31, 2023.

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 ended March 31, 2023. 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 March 31, 2023 include:

- Revenues were $13.4 million, an increase of 11.7% from $12.0 million in the first quarter of 2022
- Gross profit was $6.0 million, an increase of 39.5% from $4.3 million in the first quarter of 2022
- Gross profit margin was 45.0%, compared to 35.9% in the first quarter of 2022
- Net income was $2.8 million, compared to $2.5 million in the first quarter of 2022
- Total volume shipped was 635,276 units, an increase of 13.5% from 559,958 units in the first quarter of 2022

### Results of Operations

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

| (in US Dollar millions, except percentage) | Three-Month Period Ended March 31, | Change |
| --- | ---: | ---: |
|  | **2023** | **2022%** |
| Revenues | $13.4 | $12.0 11.7% |
| Cost of revenues | (7.4) | (7.7) (3.9)% |
| Gross profit | 6.0 | 4.3 39.5% |
| Total operating expenses | (1.7) | (0.9) 88.9% |
| Operating income | 4.3 | 3.4 26.5% |
| Total other income (expenses) | (0.1) | 0.1 (200.0)% |
| Changes in FV of Common Stock Purchase Warrants ( gain+/loss-) | (0.1) | 0.2 (150.0)% |
| Income before income taxes | 4.2 | 3.5 20.0% |
| Income tax expense | (1.4) | (1.0) 40.0% |
| Net income | $2.8 | $2.5 12.0% |

6

### Results of Operations - Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

### Revenues

We generated revenue of $13.4 million for the three months ended March 31, 2023, an increase of $1.4 million, or 11.7%, compared to $12.0 million in the same period of last year. This was due to an increase of 13.5% in sales volume, an increase of 5.4% in the average selling price of our products, and partially offset by 7.8% 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 March 31, 2023 Amount% (in US Dollar millions except percentage) |  | 2022 Amount% |  | Change Amount% | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue from sales to customers in PRC | $9.3 | 69.4% | $8.2 | 68.3% | $1.1 | 13.4% |
| Revenue from sales to customers overseas | 4.1 | 30.6% | 3.8 | 31.7% | 0.3 | 7.9% |
| **Total Revenues** | **$13.4** | **100%** | **$12.0** | **100%** | **$1.4** | 11.7% |

|  | For the Three-Month Ended March 31, 2023 Unit% (in UNIT, except percentage) |  | 2022 Unit% |  | Change Unit% | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Units sold to customers in PRC | 414.518 | 65.3% | 356,687 | 63.7% | 57,831 | 16.2% |
| Units sold to customers overseas | 220,758 | 34.7% | 203,271 | 36.3% | 17,487 | 8.6% |
| **Total Units Sold** | **635,276** | **100%** | **559,958** | **100%** | **75,318** | **13.5%** |

(i) Domestic market

For the three months ended March 31, 2023, revenue from the domestic market increased by $1.1 million or 13.4% as a combined result of: (i) an increase of 16.2% in sales volume and (ii) an increase of 5.4% in the average RMB selling price of our products, and partially offset by 7.8% 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 increase of 5.4% was mainly due to the increased sales of new models of higher-end products such as POS touchscreens, industrial control computer touchscreens and gaming touch screens with higher selling prices in the domestic market during the three-month period ended March 31, 2023.

The weakening in macroeconomic conditions since the outbreak of COVID-19 pandemic in January 2020 continued to exacerbate the touch screen business environment. Due to our proactive efforts to market new models such as POS touchscreens, medical touchscreens, and industrial control computer touchscreens, and efforts to obtain new customers and penetrate into new regions, we had sales increases of 49.2% in Southwest China, 13.8% in Eastern China, and 9.0% in Southern China during the first quarter ended March 31, 2023 as compared to that of last year.

(ii) Overseas market

For the three-month period ended March 31, 2023, revenues from the overseas market was $4.1 million as compared to $3.8 million of the same period of 2022, representing an increase by $0.3 million or 7.9% mainly due to an increase of 8.6% in sales volume due to increased sales in gaming touchscreens, automotive touchscreens and industrial control computer touchscreens, partially offset by a decrease of 0.2% in average selling price.

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

| Product categories by end applications | Revenues For the Three-Month Ended March 31 2023 Amount% (in US Dollars, except percentage) |  | 2022 Amount% |  | Change Amount | Change Margin% |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Automotive Touchscreens | $3,234,836 | 24.1% | $3,012,725 | 25.1% | $222,111 | 7.4% |
| Industrial Control Computer Touchscreens | 2,672,250 | 19.9% | 2,298,142 | 19.2% | 374,108 | 16.3% |
| POS Touchscreens | 2,066,774 | 15.4% | 1,956,350 | 16.3% | 110,424 | 5.6% |
| Gaming Touchscreens | 1,911,297 | 14.2% | 1,763,069 | 14.7% | 148,228 | 8.4% |
| Medical Touchscreens | 2,094,242 | 15.6% | 1,472,091 | 12.3% | 622,151 | 42.3% |
| Multi-Functional Printer Touchscreens | 1,454,062 | 10.8% | 1,488,175 | 12.4% | (34,113) | (2.3)% |
| Others\* | - | 0.0% | 3,995 | 0.0% | (3,995) | (100.0)% |
| **Total Revenues** | **$13,433,461** | **100.0%** | **$11,994,547** | **100.0%** | **$1,438,914** | **11.7%** |

\*Others include applications in self-service kiosks, ticket vending machines and financial terminals.

The Company continued to shift production mix from traditional lower-end products such as touchscreens used in automotive to high-end products such as touchscreens used in POS touchscreens, medical touchscreens and industrial control computer touchscreens, primarily due to (i) greater growth potential of computer screen models in China, 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

*(in millions, except percentage)*

|  | Three-Month Period Ended March 31, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Gross Profit | $6.0 | $4.3 | $1.7 | 39.5% |
| Gross Profit Margin | 45.0% | 35.9% |  | 9.1% |

Gross profit was $6.0 million in the first quarter ended March 31, 2023, compared to $4.3 million in the same period of 2022. Our gross profit margin increased to 45.0% for the first quarter ended March 31, 2023, as compared to 35.9% for the same period of 2022, primarily due to the increase in sales of 11.7%, particularly high-end products such as POS touchscreens, medical touchscreens, and industrial control computer touchscreens, for the quarter ended March 31, 2023, partially offset by the increase in cost of goods sold by 3.9% including increase of cost of materials such as chip cost by 3.8%, for the three-month period ended March 31, 2023.

### General and Administrative Expenses

*(in millions, except percentage)*

|  | Three-Month Period Ended March 31, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| General and Administrative Expenses | $1.7 | $0.4 | $1.3 | 325.0% |
| as a percentage of revenues | 12.7% | 3.3% |  | 9.4% |

General and administrative (G&A) expenses were $1.7 million for the three-month period ended March 31, 2023, compared to $0.4 million in the same period in 2022, representing an increase of $1.3 million or 325.0%. The increase was primarily due to the increase of accrued $1.2 million underwriting fees in connection with a private placement. On March 18, 2023, the Company entered into a consent agreement with representatives related to the private placement on the fees of US$1.2 million, payable only on the completion of an underwritten offering (see Note 8).

### Research and Development Expenses

| (in US dollars, except percentage) | Three-Month Period Ended March 31, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Research and Development Expenses | $20,885 | $22,857 | $(1,972) | (8.6)% |
| as a percentage of revenues | 0.0% | 0.0% |  | 0.0% |

Research and development (R&D) expenses were $20,885 for three-month period ended March 31, 2023 compared to $22,857 in the same period in 2022, representing a decrease of $1,972 of material consumption.

### Operating Income

Total operating income was $4.3 million for the three-month period ended March 31, 2023 as compared to $3.4 million of the same period of last year, primarily due to higher gross margin and lower selling expenses, partially offset by higher administrative expenses for the three-month period ended March 31, 2023.

### Gain (loss) on changes in fair value of Common Stock Purchase Warrants

*(in millions, except percentage)*

|  | Three-Month Period Ended March 31, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Gain (loss) on changes in fair value of common stock purchase warrants | $(0.1) | $0.2 | $(0.3) | (150,0)% |
| as a percentage of revenues | 0.7% | 1.7% |  | (1.0)% |

Loss on changes in fair value of common stock purchase warrants was $97,602 for the three-month period ended March 31, 2023, as compared to gain of $160,443 on changes in fair value of common stock purchase warrants in 2022 (See Note 9 (b)).

### Income Taxes

*(in millions, except percentage)*

|  | Three-Month Period Ended March 31, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Income before Income Taxes | $4.2 | $3.5 | $0.7 | 20.0% |
| Income Tax (Expense) | (1.4) | (1.0) | (0.4) | 40.0% |
| Effective income tax rate | 33.5% | 28.1% |  | 5.4% |

The effective income tax rates for the three-month periods ended March 31, 2023 and 2022 were 33.5% and 28.1%, respectively.

### Net Income

As a result of the above factors, we had a net income of $2.8 million in the first quarter of 2023 compared to a net income of $2.5 million in the same quarter of 2022.

### 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 of March 31, 2023, we had current assets of $107.7 million, consisting of $93.3 million in cash including $40.0 million from the stock issuance of a private placement, $13.1 million in accounts receivable, $0.2 million in inventories, and $1.1 million in prepaid expenses and other current assets. Our current liabilities as of March 31, 2023, were $7.3 million, which is comprised of $2.1 million in accounts payable, $1.4 million in income tax payable, $2.1 million in accrued expenses and other current liabilities, $0.5 million from a third-party loan, and $1.2 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 three-month periods ended March 31, 2023 and 2022:

| (in US Dollar millions) | Three-Month Period Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash provided by (used in) operating activities | $2.7 | $(1.4) |
| Net cash provided by investing activities | - | - |
| Net cash provided by financing activities | 40.0 | - |
| Effect of foreign currency exchange rate changes on cash and cash equivalents | (0,7) | 0.0 |
| Net increase (decrease) in cash and cash equivalents | 42.0 | (1.4) |
| Cash and cash equivalents at the beginning of period | 51.3 | 46.2 |
| Cash and cash equivalents at the end of period | $93.3 | $44.8 |

10

### Operating Activities

Net cash provided by operating activities was $2.7 million for the three-month period ended March 31, 2023, as compared to $1.4 million used in operating activities for the same period of the last year, primarily due to (i) the increase of $0.2 million net income for the three-month period ended March 31, 2023 as compared to the same period of 2022, (ii) the increase of $0.3 million loss on changes of FV of common stock purchase warrants for the three-month period ended March 31, 2023; (iii) the decrease of $2.3 million of accounts receivable for the three-month period ended March 31, 2023 due to faster collection of receivables, (iv) the decrease of $0.3 million in inventories, (v) the decrease of $0.4 million in accounts payable, (vi) the increase of $0.5 million in income tax payable, and (vii) the decrease of $0.7 million of accrued expenses and other current liabilities for the three-month period ended March 31, 2023.

### Investing Activities

There was nil investing activities for the three-month periods ended March 31, 2023 and 2022.

### Financing Activities

Net cash provided by financing activities for the three-month period ended March 31, 2023 were $40.0 million, due to the $40.0 million proceeds from stock issuance in a private placement.

There were nil financing activities for the three-month period ended March 31, 2022.

As of March 31, 2023, our cash and cash equivalents were $93.3 million, as compared to $51.3 million at December 31, 2022.

Days Sales Outstanding (“DSO”) has decreased to 74 days for the three-month period ended March 31, 2023 from 81 days for the year ended December 31, 2022.

The following table provides an analysis of the aging of accounts receivable as of March 31, 2023 and December 31, 2022:

|  | March 31, 2023 | December 31 2022 |
| --- | ---: | ---: |
| -Current | $8,668,782 | $1,252,152 |
| -1-3 months past due | 4,186,053 | 4,998,596 |
| -4-6 months past due | 232,156 | 2,806,973 |
| 7-12 months past due | - | 20 |
| -greater than 1 year past due | - | - |
| **Total accounts receivable** | $13,086,991 | $9,057,741 |

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.

### COMMITMENTS AND CONTINGENCIES

### Legal Proceedings

From time to time, the Company and its affiliates are parties to various legal actions arising in the ordinary course of business. As of the date of this report, we know of no material, active, pending or threatened proceeding against us or our subsidiaries, nor are we, or any subsidiary, involved as a plaintiff or defendant in any material proceeding or pending litigation.

### Capital expenditure commitment

On December 20, 2021, the Company entered into a contract with Shenzhen Municipal Haoyutuo Decoration & Cleaning Engineering Company Limited to purchase a facility decoration contract of RMB20.0 million (equivalent to US$3.1 million). As of March 31, 2023, the Company has prepaid RMB15.0 million (equivalent to US$2.2 million) and recorded as construction in progress (see Note 5) and had a remaining balance of RMB5.0 million (equivalent to US$0.7 million) to be paid by the end of 2023.

## Controls and procedures

As filed, 2,530 characters.

### Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation and subject to the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of March 31, 2023 due to the material weaknesses in internal control over financial reporting described below. Because of our limited operations, we have a limited number of employees which prohibits a segregation of duties. In addition, we lack a formal audit committee with a financial expert. As we grow and expand our operations we will engage additional employees and experts as needed. However, there can be no assurance that our operations will expand.

### Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Filed May 22, 2023.
Source: SEC EDGAR, the filing index for accession 0001493152-23-018484. Last ingested by Listed: Nov 5, 2026, 19:57 ET. No prices; not investment advice.