NASDAQ: WETH

We generate revenues through
sales of our various touchscreen products. For the years ended December 31, 2025 and 2024, we recognized approximately $45.1 million and
$42.3 million, respectively, in revenues.

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, Germany and other countries. We believe that we have established
a strong and diversified client base. For the years ended December 31, 2025 and 2024, our domestic sales accounted for approximately 68.5%
and 64.7%, respectively, of our revenues, and our international sales accounted for approximately 31.5% and 35.3%, respectively, of our
revenues.

Corporate History and Structure

We were originally incorporated
under the laws of the state of Nevada on August 31, 1992 as Gulf West Investment Properties, Inc, and were dormant and had no operations
for many years.

On February 26, 2019, the
Eighth Judicial District Court in and for Clark County, Nevada, Case No. A-19-787151-B, appointed Custodian Ventures LLC, an affiliate
of David Lazar, as custodian of the Company (the “Custodian”). Mr. Lazar was appointed as the sole officer and director of
the Company. On March 11, 2019, 85,715 shares of common stock of the Company were issued to the Custodian in consideration for the payment
of cash and the issuance of a promissory note by the Custodian to the Company. Effective as of June 11, 2019, the court discharged the
Custodian’s duties.

1

On June 18, 2020, we consummated
the transactions contemplated by a Stock Purchase Agreement among the Company, the Custodian, Qixun
Technology (Samoa) Limited (“Qixun Samoa”) and Qihong Technology (Samoa) Limited
(“Qihong Samoa”, Qixun Samoa and Qixun Samoa are referred to as the “Buyers”). Pursuant to the Stock Purchase
Agreement, the Buyers acquired all of the 85,715 shares of the Company owned by the Custodian, representing 50.47% of the issued and outstanding
shares of the Company. The Custodian and the Company agreed to indemnify the Buyers from any liabilities of the Company occurring prior
to June 18, 2020, and the promissory note issued by the Custodian to the Company was canceled. Immediately following the closing, David
Lazar resigned as the sole officer and director of the Company and Jiaying Cai was appointed as president, secretary and treasurer of
the Company and as the sole director.

Name Change

Effective September 30, 2020,
we changed our name from Gulf West Investment Properties, Inc. to Wetouch Technology Inc. by filing an Amended and Restated Articles of
Incorporation with the Nevada Secretary of State to give effect to a name change. As a result of the name change, we changed our trading
symbol from “GLFW” to “WETH,” effective November 3, 2020.

Reverse Merger

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

BVI Wetouch was formed to
acquire Hong Kong Wetouch Electronics Technology Limited (“Hong Kong Wetouch”), which it acquired on September 11, 2020. As
a result, Hong Kong Wetouch became a wholly owned subsidiary of BVI Wetouch.

Hong Kong Wetouch was incorporated
on May 5, 2016 and, on July 19, 2016, acquired all the shares of Sichuan Wetouch Technology Co., Ltd., a PRC company established on May
6, 2011 (“Sichuan Wetouch”). As a result, Sichuan Wetouch became a wholly owned subsidiary of Hong Kong Wetouch.

Through BVI Wetouch’s
ownership of Hong Kong Wetouch (later dissolved) and Sichuan Wetouch, we indirectly owned the business of Sichuan Wetouch. Following the
Reverse Merger, Sichuan Wetouch became our indirect wholly owned subsidiary.

2

Acquisition of HK Wetouch

Hong Kong Wetouch Technology
Limited, a limited company organized under the laws of Hong Kong (“HK Wetouch”), was incorporated on December 3, 2020 to hold
all the shares of Sichuan Vtouch Technology Co., Ltd., which was incorporated on December 30, 2020 in Chengdu, Sichuan, under the laws
of The People’s Republic of China (“China,” or the “PRC”).

On March 12, 2021, BVI Wetouch,
our wholly owned subsidiary, acquired all the shares of HK Wetouch from its sole shareholder, Guangde Cai (our former Chairman and Director).
As a result, HK Wetouch became a wholly-owned subsidiary of BVI Wetouch. Immediately following the acquisition of HK Wetouch, BVI Wetouch
owned (i) all the outstanding shares of Hong Kong Wetouch, which, in turn, owned all the outstanding shares of Sichuan Wetouch and (ii)
all of the outstanding shares of HK Wetouch, which owned all the shares of Sichuan Vtouch.

On March 2, 2021, HK Wetouch
acquired all shares of Hong Kong Wetouch. Hong Kong Wetouch was dissolved on March 18, 2022. In addition, as of March 31, 2021, Sichuan
Wetouch’s business and operations were assumed by Sichuan Vtouch.

On March 30, 2023, an independent
third party acquired all the shares of Sichuan Wetouch for a nominal amount.

Corporate Structure

The diagram below sets forth
our corporate structure as of the date of this Annual Report.

3

Private Placement

On
January 19, 2023, we entered into a securities purchase agreement with certain investors, pursuant to which we sold an aggregate of 160,000,000
shares of common stock of the Company for an aggregate purchase price of $40,000,000, or $0.25 per share. The net proceeds of the offering
(after deducting legal and accounting fees and expenses) were used by the Company for working capital and general corporate purposes and
the repayment of debt. The issuance of the shares in the private placement was exempted from registration pursuant to Section 4(a)(2)
and/or Regulation S as promulgated by the U.S. Securities and Exchange Commission under the Securities Act. The securities are subject
to transfer restrictions, and the certificates evidencing the shares will contain an appropriate legend stating that such securities have
not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom.

Private Placement
Consent Agreement

On
March 18, 2023, the Company entered into a private placement consent agreement with a third-party investment bank firm (see Note 12) on
the agent fees of US$1.2 million, payable only on the completion of a private placement. If the private placement is not completed by
November 1, 2023, the representatives under the agreement reserve their rights to pursue any and all claims, actions or remedies available
to them under the engagement between the Company and the private placement representatives. The Company made the full payment in February
2024.

Reverse Stock Splits

Since
our incorporation, we have effected two reverse stock splits of our common stock.

2020
Reverse Stock Split:

Effective
September 30, 2020, in connection with our name change from Gulf West Investment Properties, Inc. to Wetouch Technology Inc., we effected
a 1-for-70 reverse stock split of our common stock. As a result, every 70 shares of outstanding common stock were exchanged for one share
of new common stock. Our issued and outstanding shares decreased from 11,887,103 to 169,820, while the authorized common stock was adjusted
to 300,000,000 shares and preferred stock to 10,000,000 shares, all with a par value of $0.001 per share.

2023
Reverse Stock Split:

On
February 17, 2023, our board of directors (the “Board”) authorized a reverse stock split of our common stock at a ratio of
not less than one to five (1:5) and not more than one to eighty (1:80), with the exact ratio and the timing of the reverse stock split
to be determined by the Chairman of the Board. Upon effectiveness of such reverse stock split, the number of authorized shares of common
stock of the Company will also be decreased in the same ratio.

On
July 16, 2023, the Company’s board of directors approved the reverse stock split of the Company’s common stock at a ratio
of 1-for-20. On July 16, 2023, the Company filed a certificate of change (with an effective date of July 16, 2023) with the Nevada Secretary
of State pursuant to Section 78.209 of the Nevada Revised Statutes to effectuate a 1-for-20 reverse stock split of its common stock. On
September 11, 2023, the reverse stock split was approved by the Financial Industry Regulatory Authority and took effect on September 12,
2023. All share information included in this annual report has been retroactively adjusted as if the reverse stock split had occurred
as of the earliest period presented.

4

2024 Uplisting Offering

On
February 20, 2024, we entered into an underwriting agreement with WestPark Capital, Inc. and Craft Capital Management LLC, as representatives
(the “2024 Uplisting Offering Representatives”) of the underwriters listed in the underwriting agreement (the “Underwriters”),
pursuant to which we agreed to sell to the Underwriters in a firm commitment underwritten public offering (the “2024 Uplisting Offering”)
of an aggregate of 2,160,000 shares of our common stock, par value $0.001 per share, at a public offering price of $5.00 per share. The
2024 Uplisting Offering was conducted pursuant to a Registration Statement on Form S-1, as amended (SEC filed No. 333-270726), which was
declared effective on February 14, 2024. In connection with the 2024 Uplisting Offering, our common stock began trading on the Nasdaq
Capital Market under the symbol WETH on February 21, 2024. The 2024 Uplisting Offering closed on February 23, 2024 and generated gross
proceeds of $10.8 million. We paid a total of approximately $0.8 million in underwriting discounts and commissions, and approximately
$0.8 million for other costs and expenses related to the 2024 Uplisting Offering. Our net proceeds from the 2024 Uplisting Offering, after
deducting the underwriting discount, the Underwriters’ fees and expenses, and our 2024 Uplisting Offering expenses, was approximately
$9.2 million. We also issued the Representatives’ Warrants (the “2024 Uplisting Offering Representatives’ Warrants”)
to the 2024 Uplisting Offering Representatives to purchase 43,200 shares of common stock at an exercise price equal to 125.0% of the public
offering price.

Recent Development

Since
December 31, 2024, the Company has reported several material events in Current Reports on Form 8-K, including changes to the management
of the Company; correspondence from Nasdaq regarding late periodic filings and the acceptance of our plan to regain compliance; a notice
of deficiency with the $1.00 minimum bid price requirement; and a change in our independent registered public accounting firm. The Company
submitted compliance plans to Nasdaq as requested and is working diligently to rectify the deficiencies as promptly as practicable to
regain compliance with the Listing Rule.

The
brief summaries that follow are qualified in their entirety by, and should be read together with, the Company’s Current Reports
on Form 8-K filed since December 31, 2024.

Nasdaq
compliance - late filings. On May 27, 2025, Nasdaq notified the Company that it was not in compliance with Listing Rule 5250(c)(1)
due to the delayed Form 10-K for the year ended December 31, 2025 and Form 10-Q for the quarter ended March 31, 2025. On June 26, 2025,
Nasdaq accepted the Company’s plan of compliance and granted an exception through October 13, 2025 to file the outstanding Form
10-K (FY 2024) and Form 10-Qs for the quarters ended March 31 and June 30, 2025.

On
October 10, 2025, the Company received a letter from Nasdaq, notifying the company that the Staff has determined that it has regained
compliance with Nasdaq Listing Rule 5250(c)(1) because the Company filed its 1st Form 10-Q on October 8, 2025, and its 2nd Form 10-Q on
October 9, 2025, thereby becoming current in its periodic filing requirements with the Securities and Exchange Commission.

Auditor
changes. On June 27, 2025, the Audit Committee dismissed Enrome LLP as the Company’s independent registered public accounting
firm. The Company disclosed there were no disagreements or reportable events within the meaning of Item 304. On June 27, 2025, the Company
appointed ST & Partners PLT as its independent registered public accounting firm.

Nasdaq
compliance - bid-price notice. On July 15, 2025, Nasdaq notified the Company that it was not in compliance with the $1.00 minimum
bid price requirement and provided a 180-day compliance period ending January 12, 2026.

On
September 15, 2025, the Company received a letter from Nasdaq notifying the Company that the Staff had determined that the closing price
of the Company’s common stock was $1.00 or greater for the requisite period of time and that the Company had regained compliance
with Listing Rule 5550(a)(2) and that the matter was now closed. The Company is now in full compliance with all continued listing standards
of the Nasdaq Global Market.

For
additional details, see the Company’s Current Reports on Form 8-K filed May 2, 2025; May 30, 2025; June 26, 2025; June 30, 2025;
July 15, 2025, September 15, 2025 and October 14, 2025.

Amendments
to Articles of Incorporation. On January 7, 2026, the company filed with the Secretary
of State of the State of Nevada an amendment to the Company’s Articles of Incorporation, as amended (the “Amendment”),
which became effective on that date. In connection with the Amendment, the Company also filed its Second Amended and Restated Articles
of Incorporation (the “Restated AOI”). The Amendment was approved by the Company’s stockholders at the annual meeting
held on December 26, 2025, and increased the number of authorized shares of the Company’s common stock from 15,000,000 to 65,000,000.

5

Our Products

We
offer medium- to large-sized projected capacitive touchscreens, which can be categorized as set forth below:

Product Type

Description

Application

Product type GG

This is a double glass layer product, with a solid clear adhesive (SCA) between a layer of conductive glass and a layer of tempered glass. This type of touchscreen has the advantage of being able to be easily manufactured, with relatively low cost. However, products of this type in large sizes will require a greater degree of signal penetration and long distance transmission technology which will be more technically challenging to achieve.

Medium and high end GPS/car entertainment, finance, POS and lottery machines.

Product type GFF

This product uses a double layer of conductive films, with an optically clear adhesive (OCA) between a layer of tempered glass. The product’s functionality comes from the interaction between the multiple layers of conductive film and glass, which does not require extensive coating, lithography and etching. This type of product is anti- explosive and has relatively low manufacturing cost. However, products of this type in large sizes will require greater degree of signal penetration and long distance transmission technology which will be more technically challenging to achieve.

Financial, gaming and lottery, and medical industries

Product type PG

This product uses a layer of conductive glass, with an optically clear adhesive (OCA) between a layer of surface intensify PMMA (Poly Methyl methacrylate acid). The product’s functionality relies on the interaction between the layers of conductive glass. Like the GFF type, this product does not require extensive coating, lithography and etching and has relatively low manufacturing cost.

Motor vehicle GPS, smart home, robots and charging stations

Product type GF

This product uses a layer of conductive film, with an optically clear adhesive (OCa) between a layer of tempered glass. The product’s functionality relies on the interaction between the layers of conductive glass. Like the GFF type, this product does not require extensive coating, lithography and etching and has relatively low manufacturing cost.

Industrial HMI

As
of December 31, 2025, product types GFF and GG constitute our main stream products, accounting for approximately an average of 42.0% and
52.0%, respectively, of our total revenues, with product types GF and PG accounting for 2.0% and 4.0%, respectively, of our total revenues.

As
of December 31, 2024, product types GFF and GG constitute our main stream products, accounting for approximately an average of 40.7% and
52.9%, respectively, of our total revenues, with product types GF and PG accounting for 1.9%, 4.4% and 0.1%%, respectively, of our total
revenues.

6

Applications of the Company’s Products

Our products are used and
applied in the production of a variety of products in a wide range of industries. Our products’ areas of common application are
set out below.

Point of Sale (“POS”) Machines

POS machines are used in a variety of retailers, including in department stores, supermarkets, convenience stores, boutiques, restaurants, hotels, banks, logistics, telecommunication and other service industries. Due to the frequent use of touchscreens on POS machines, Wetouch has adopted the use of high-end materials which give its products’ a competitive advantage through their anti-scratch, high temperature resistance and long use life qualities.

Car Navigators and Entertainment Systems

Touchscreen products for car navigation and entertainment systems take advantage of the popularity of touchscreen consoles in motor vehicles. Wetouch touchscreens are particularly suitable for motor vehicles GPS and entertainment systems, due to their resistance to temperature variation. These touchscreens may be used in both inbuilt and external car systems.

ATM Machines and Other Financial Machines

ATMs and other similar machines use touchscreens or have a touchscreen function. The touchscreens need to have high-endurance capacities as they are used by the general public and are often located outdoors, such that these screens must withstand weathering. Our products are particularly suited to use in these machines as they are highly durable.

Industrial Equipment

Touchscreens in the industrial sector have broad application, and play an important role in industrial HMI. Industrial HMI systems and equipment often require touchscreen functions. These touchscreens must be resistant to interference, stable and have good touch sensitivity. Our products fully meet these requirements, being temperature variation resistant, dustproof and waterproof.

7

Gaming Machines

The new generation of gambling machines are commonly adopting a touchscreen function. Gaming machines with a touchscreen function provide an enhanced experience for uses via multi-touch sensory touch systems. Our products are therefore popular amongst gambling machine manufacturers.

Lottery Machines

The self-service lottery ticket vending machine is provided with an operator-oriented touch display device, an input device, a modem, a cash register, printer and security authentication function. The touchscreen display facilitates easy and user-friendly operation of the lottery machine.

Ticket Machines and Kiosks

Self-service ticket machines and kiosks contain touchscreen interfaces which are durable and have a long use life. These self-service machines are used in daily lives, and as such there is a continuous demand for high quality and effective touchscreens. Our products are widely used in these ticketing machines and kiosks.

For the year ended December
31, 2025, we had approximately $11.6 million in revenues generated from the sales of automotive touchscreens, accounting for 25.7% of
our total revenues, with industrial HMI touchscreens accounting for 20.5%, POS touchscreens for 15.6%, medical touchscreens for 15.6%,
gaming touchscreens accounting for 13.4%, and multi-functional printer touchscreens for 9.2%, respectively, of our total revenues.

For the year ended December
31, 2024, we had approximately $11.5 million in revenues generated from the sales of automotive touchscreens, accounting for 27.2% of
our total revenues, with industrial HMI touchscreens accounting for 19.4%, gaming touchscreens for 15.3%, medical touchscreens for 14.9%,
POS touchscreens for 14.8%, and multi-functional printer touchscreens for 8.4%, respectively, of our total revenues.

Our Customers

A
sound customer base is critical to our success. We had five and five customers, each accounting for more than 10% of our revenues, for
the years ended December 31, 2025 and 2024, respectively.

For the year ended
December 31, 2025, each of our top five customers accounted for approximately 24.3%, 17.3%, 15.6%, 13.3% and 11.1% of our total
revenues, representing 81.7% in the aggregate.

8

For the year ended December
31, 2024, each of our top five customers accounted for approximately 22.0%, 19.1%, 15.3%, 14.5% and 11.5%of our total revenues, representing
82.4% in the aggregate.

As Sichuan Wetouch’s business and operations have been assumed
by Sichuan Vtouch, Sichuan Vtouch entered into sales framework agreements, which were entered into by Sichuan Wetouch previously with
our top customers on December 31, 2021. These agreements were renewed on December 31, 2025 for an additional four-year term. The material
terms of the sales framework agreements with our top customers provide:

●
The term of each sales framework agreement is four years, which may be renewed by a separate agreement upon expiration.

●
The customer shall purchase an annual minimum purchase amount for period from January 1 to December 31 each year as specified in the agreement. If the customer fails to purchase the minimum purchase amount in the applicable agreement, the customer will be deprived of the most favorable price treatment for the following year and rebate rewards for the current year.

●
We will send the price list to the customers at the beginning of each year. The specific execution price is subject to the order signed by the parties.

●
We have the right to adjust the price due to the market or other factors. When there is any adjustment, we shall send a written notice of such adjustment with 30 days in advance. Upon receipt of this notice, the customer may choose to accept the price adjustment or terminate the sales frame agreement.

●
For the first year, we grant the customers a credit limit of $1.5 million and a credit term of 3 months. During supply, the portion of payment that exceeds the credit line shall be paid before goods are delivered. In the next year, the credit will be increased according to the sales of the previous year, which shall be subject to the negotiation of both parties.

●
The customers shall make payment in full and on time according to the payment method and time of the purchase order and shall not delay or refuse to pay. If the customers fail to make payment within the agreed period of the purchase order and still fail to make payment after being urged by us, we may stop the supply and have the right to demand payment of a late fee of 0.3% of the contract amount per day from the customers; If the customers still refuse to make payment after 30 days of notice from us, we have the right to file a lawsuit with the court. The customers shall bear the litigation costs, lawyer’s fees, and other debt recovery costs.

●
We are required to provide products to customers pursuant to the delivery date and quantity, requirements included in the purchase orders and shall negotiate with customers if we are unable to so provide.

●
The customers are entitled to compensation of losses due to our failure to provide after-sale services.

●
Any violation of the terms of the agreements may result in the termination of the agreements and the breaching party shall be responsible for all business and economic losses and legal liabilities arising therefrom.

We do not typically enter into
sales framework agreements with other customers but sell products to them through purchase orders.

9

The key terms of our purchase order typically include
the following:

●
The product name, specification, quantity, price, order amount and delivery date are specified in each order.

●
Delivery method and packaging requirements are specified in each order

●
Payment terms are specified in each order.

●
Breach of order terms by customers in some orders.

●
Guaranty terms in some orders.

Sichuan Vtouch is obligated
to provide 1) products per the specific requirements of the orders, and 2) unconditional defect warranty for our products generally for
a term of one year. Any violation of the order terms may result in termination of the orders or replacement of our products.

For the years ended December
31, 2025 and 2024, we did not provide any extended payment terms to any of our customers. Our customers are usually required to make full
payment within three to six months from the delivery date.

Sales and Marketing

We source our customers through
multiple channels: (i) our own research through Search Engine Optimization (“SEO”) and outreach, (ii) referrals from our existing
customers, (iii) our websites, which provide product information for sale, as well as telephone and email contact information; and (iv)
industry exhibitions/expos.

Our main target markets are
economically developed countries and regions, including Eastern, Southern, Northern and Southwest Mainland China, Taiwan, South Korea,
and Germany. We believe that we have established a strong client base, including globally well-known institutional customers. Overseas
sales were approximately $14.2 million in 2025 as compared to $14.9 million in 2024.

We target these overseas customers
mainly via our online marketing efforts. In order to market our products, increase our market share, and secure more quality customers,
we frequently participate in, and promote our products at, specific touchscreen technology exhibitions held internationally.

Our products are produced
to order and are marketed directly by our own sales personnel. We do not rely on distributors to sell our products.

10

For the year ended December
31, 2025, the revenue from our domestic customers accounted for approximately 68.5% of our total revenues, with overseas customers accounting
for approximately 31.5%of our total revenues.

For the year ended December
31, 2024, the revenue generated from our domestic customers accounted for approximately 64.7% of our total revenues, with overseas customers
accounting for approximately 35.3% of our total revenues.

Our Suppliers

Sichuan Vtouch does not typically
enter into supply agreements with suppliers. We can utilize any supplier we choose, and there are no minimum purchase requirements for
orders.

We place purchase orders with
suppliers of raw materials for the production of our products. The general terms of the purchase order include specifications for product
name, quantity, price, order amount, and delivery date, as well as delivery methods, packaging, inspection procedures, breach terms, and
dispute resolution, all tailored to each order. Payment terms are also specified in each order. Additionally, all products must meet nationally
or industry-prescribed quality standards, with each order requiring a supplier’s quality certification. The supplier must unconditionally
accept returns and either refund the purchase price in full or provide replacements if the products do not meet the required quality standards,
are damaged, or significantly differ from what was ordered.

We do not consider any of
our suppliers to be material to our business, and we can utilize any supplier we choose at our sole discretion. Although we can utilize
any supplier, we believe that we have established healthy and stable relationships with our significant suppliers.

We purchase our raw materials
through various suppliers. For the year ended December 31, 2025, our top four suppliers, from whom our purchases individually exceeded
10% of our total raw material purchases, accounted for approximately 14.9%, 10.6%, 10.5% and 10.1%, respectively. For the year ended December
31, 2024, our top three suppliers, from whom our purchases individually exceeded 10% of our total raw material purchases, accounted for
approximately 15.4%, 12.2% and 11.5%, respectively.

The general terms of the purchase
order include specifications for product name, quantity, price, order amount, and delivery date, as well as delivery methods, packaging,
inspection procedures, breach terms, and dispute resolution, all tailored to each order. Payment terms are also specified in each order.
Additionally, all products must meet nationally or industry-mandated quality standards, with each order requiring a supplier’s quality
certification. The supplier must unconditionally accept returns and either refund the purchase price in full or provide replacements if
the products do not meet the required quality standards, are damaged, or significantly differ from what was ordered.

11

Production and Quality Control

The Company has adopted a
made-to-order production model as follows:

This process is subject to
continuous review and monitoring by the management team in consultation with engineers, electricians and other technical experts to ensure
that finished products are of the highest quality and meet customer requirements and ISO9001 Quality Management Systems (QMS) standards.

In order to maintain product
safety and a high standard of product quality, the Company implements a strict set of quality control policies and inspection protocols.
These policies and protocols are enforced by the Company’s senior management and officers through every stage of the production
to post-production process. Their management guidelines along with key company quality policies are set out below:

The Company has strict production
standards in place that govern what constitutes acceptable quality for its products. This ensures that the Company’s products meet
product certification standards. The production team adheres to the following criteria when assessing product standards:

Item

Industry Standards

Our Standards

Reaction time

Less than or equal to 5 milliseconds

Less than or equal to 5 milliseconds

Surface hardness

6H

7H~9H

Operational temperature

0~70 degrees Celsius

-30~80 degrees Celsius

EsD requirement

6~12KV

8~15KV

Transparency

86%

88%

Touch conditions

Normal touch and ordinary conditions

Waterproof and anti-saline solution and anti-corrosion and Anti interference

12

The products are inspected
before they are delivered to our customers. All products must pass the following inspections:

●
Cosmetic inspection: conducted under optimum temperatures (20-22 degrees Celsius) and white fluorescent lighting. The product is observed by the naked eye to detect any defects, scratches and cracks, panel discoloration, opacity, foreign fibers and spots. The Company maintains quantitative standards with respect to each of these areas to determine the level of cosmetic acceptability.

●
Function tests: all products undergo functionality testing. Touchscreen products are connected electronically via standard cabling systems to computers, to measure functionality and identify abnormalities.

●
Stress testing: all products undergo stress testing for humidity, temperature, and corrosion resistance The products are tested for functionality in high- and low-humidity environments as well as extreme temperatures to determine whether exposure causes damage or physical change.

●
Hazardous substances testing: internal teams conduct independent testing for hazardous substances and for corrosive resistance to saline solutions.

Seasonality

There is no significant seasonality
in our business.

Research and Development (“R&D”)

We are committed to both internal R&D projects and collaborative
initiatives to continuously upgrade our touchscreen technology. As of the date of this Annual Report, we have 9 employees in our R&D
department, all of whom obtained at least a bachelor’s degree, with average R&D work experience
of at least three years.

Environmental Matters

Our business in Mainland China
is subject to various pollution control regulations in Mainland China with respect to noise, water and air pollution and the disposal
of waste. Specifically, the major environmental regulations applicable to us include the PRC Environmental Protection Law, the PRC Law
on the Prevention and Control of Water Pollution, the PRC Law on the Prevention and Control of Air Pollution, the PRC Law on the Prevention
and Control of Solid Waste Pollution, and the PRC Law on the Prevention and Control of Noise Pollution.

Pursuant to a Statement on
Change of Pollutant Discharge Permit to Stationary Pollution Source Registration Form dated September 1, 2020, the environmental protection
system in Renshou County, Sichuan, was changed from permission to registration due to local administrative division change. Sichuan Vtouch
is currently registered under the new system and holds the Stationary Pollution Source Registration Form as of the date of this Annual
Report.

13

The Company is not aware of
any investigations, prosecutions, disputes, claims or other proceedings relating to environmental protection, nor has the Company been
punished or foresees any punishment from any environmental administration authorities of the PRC.

Competition

The
markets for touchscreen products are highly competitive and subject to rapid technological change. The Company believes that the principal
competitive factors in its markets are product characteristics such as touch performance, durability, optical clarity and price, as well
as supplier characteristics such as quality, service, delivery time and reputation. The Company believes that it competes favorably with
respect to these factors, although there can be no assurance that the Company will be able to continue to compete successfully in the
future.

Despite touchscreen products
being highly competitive as a whole, we face fewer competitors, because we produce medium- to large-sized touchscreens specially tailored
to certain industries, such as industrial HMI, gaming, financial services, lottery, automotive, medical, and POS, among others, and that
require more stable supply and longer guaranty and life span, compared with small size touchscreens, which are characterized by shorter
life cycles and guaranty but more demand in quantity.

We believe the following companies
may be our competitors:

●
Apex Material Technology Corp., founded in 1998, is committed to the development and innovation of resistive and projected capacitive (PCI or PCAP) total touch solutions. With its headquarters in Keelung, Taiwan and a subsidiary located in Milwaukee, Wisconsin, it designs and manufactures advanced high-performance touch products for industrial and medical applications. Compared with us, although it has a longer history and geographical advantages, it mainly focuses on resistive touch panels and recently started production of capacitive touchscreens primarily for the industrial HMI and medical industries, while our products are more widely used in a variety of industries.

●
Elo Touch Systems Inc., based and headquartered in the United States, has a history of over 40 years in the production of touchscreens. Its product portfolio includes a broad selection of interactive touchscreen displays from 10-70 inches, all-in-one touchscreen computers, OEM touchscreens and touchscreen controllers and touchscreen monitors. Compared with us, although it has a longer history and geographical advantages in competing for U.S. customers and other international customers, it recently started the production of capacitive touchscreens primarily for POS and inquiry machines, while our products are more widely used in a variety of industries.

●
AbonTouch System Inc, established in 2005, mainly focuses on manufacturing and sales of mid to large size (7“~86”) “Projective Capacitive Sensors,” (7“~21.5”) “Five-Wire Resistive Zero-Bezel Touch Panels” and (5“~21.5”) “Five-Wire Resistive Touch Panels.” Compared with us, although it has a longer history and geographical advantages, it mainly focuses on resistive touch panels and recently started production of capacitive touchscreens primarily for POS, inquiry machines and industrial HMI, while our products are more widely used in a variety of industries.

Industry

Since inception, we have
positioned ourselves in the professional touchscreen display industry. A touchscreen is an input and output device and layered on top
of an electronic visual display of an information processing system, allowing individuals to access information and interact with the
device simply by touching the device’s screen with a finger or a specialized tool. Accordingly, the ease of use offered by touchscreen-based
systems makes them well suited for both applications for the general public and for specialized applications for institutional users and
trained computer users.

Although touchscreens have
become mainstream only over the last decade, the concept of a touch-sensitive computer display was developed as early as 1965. Since the
introduction of Apple’s iPhone in 2007, touchscreen technology has made rapid inroads into various electronics markets, with a number
of other significant companies also incorporating this technology into their products (as opposed to using a mouse, keyboard, keypad or
trackball). Viewed today as the most important tool to facilitate interaction between individuals and machines, touchscreen technology
is now an integral part of a wide range of computing products.

14

Regulations

Overview

We operate our business in
Mainland China under a legal regime consisting of the National People’s Congress, which is the country’s highest legislative
body, the State Council, which is the highest authority of the executive branch of the PRC central government, and several ministries
and agencies under its authority, including the Ministry of Industry and Information Technology, the State Administration for Market Regulation
(“SAMR”) and their respective local offices.

This section sets forth a
summary of the most significant rules and regulations that affect our business activities in Mainland China.

Regulations Relating to Foreign Investment
in Mainland China

On March 15, 2019, the National
People’s Congress promulgated the Foreign Investment Law, which came into effect on January 1, 2020 and replaced three existing
laws on foreign investments in China, namely, the PRC Equity Joint Venture Law, the PRC Cooperative Joint Venture Law, and the Wholly
Foreign-Owned Enterprise Law, together with their implementation rules and ancillary regulations. The Foreign Investment Law embodies
an expected Mainland China regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international
practice and the legislative efforts to unify the corporate legal requirements for both foreign- and domestic-invested enterprises in
Mainland China. The Foreign Investment Law establishes the basic framework for the access to, and the promotion, protection, and administration
of foreign investments in view of investment protection and fair competition.

Pursuant to the Foreign Investment
Law, “foreign investment” refers to investment activities directly or indirectly conducted by one or more natural persons,
business entities, or otherwise organizations of a foreign country within Mainland China, or foreign investors, and the investment activities
include the following situations: (i) a foreign investor, individually or collectively with other investors, establishes an Foreign Investment
Entity (“FIE”) in Mainland China; (ii) a foreign investor acquires stock shares, equity shares, shares in assets, or other
similar rights and interests of an enterprise within Mainland China; (iii) a foreign investor, individually or collectively with other
investors, invests in a new project in Mainland China; and (iv) investments in other means as provided by laws, administrative regulations,
or the State Council.

Investment activities in Mainland
China by foreign investors are principally governed by the Guidance Catalogue of Industries for Foreign Investment, or the Catalogue,
which was promulgated and is amended from time to time by the Ministry of Commerce, or the MOFCOM, and the National Development and Reform
Commission, or the NDRC. Restricted and prohibited industries are listed in the Catalogue. The Catalogue sets out a unified basis for
the special administrative measures for foreign investment access. Fields not mentioned in the list for foreign investment access, including
touchscreen manufacturing, are administered under the principle of equal treatment for domestic and foreign capital.

Industries not listed in the
Catalogue are generally deemed as constituting a “permitted” category. According to the Catalogue, touchscreen manufacturing
is classified as industry where foreign investments are permitted.

Furthermore, the Foreign Investment
Law provides that FIEs established according to the existing laws regulating foreign investment may maintain their structure and corporate
governance within five years after the implementation of the Foreign Investment Law.

15

In addition, the Foreign Investment
Law also provides several protective rules and principles for foreign investors and their investments in Mainland China, including, among
others, that local governments must abide by their commitments to the foreign investors; FIEs are allowed to issue stocks and corporate
bonds; expropriation or requisition of the investment of foreign investors is prohibited except for special circumstances, in which case
statutory procedures must be followed and fair and reasonable compensation must be made in a timely manner; mandatory technology transfer
is prohibited; and the capital contributions, profits, capital gains, proceeds out of asset disposal, licensing fees of intellectual property
rights, indemnity or compensation legally obtained, or proceeds received upon settlement by foreign investors in Mainland China may be
freely remitted inward and outward in Renminbi or foreign currencies. Also, foreign investors or FIEs should be imposed legal liabilities
for failing to report investment information in accordance with the requirements.

On December 26, 2019, the
PRC State Council approved the Implementation Rules of Foreign Investment Law, which came into effect on January 1, 2020. The Implementation
Rules of Foreign Investment Law restates certain principles of the Foreign Investment Law and further provides that, among others, (i)
if the legal form or the governing structure of an FIE established prior to the effective date of the Foreign Investment Law does not
comply with the compulsory provisions of the PRC Company Law or the PRC Partnership Enterprises Law, such FIE should complete amendment
registration accordingly no later than January 1, 2025; if it fails to do so, the enterprise registration authority will not process other
registration matters of the FIE and may publicize such non-compliance; and (ii) the provisions regarding transfer of equity interests,
distribution of profits and remaining assets as stipulated in the joint venture contracts of an existing FIE may survive the Foreign Investment
Law during its joint venture term.

Regulations
on Environmental Protection

Environmental Protection
Law

The Environmental Protection
Law of the PRC, or the Environmental Protection Law, was promulgated and effective on December 26, 1989, and most recently amended
on April 24, 2014, which amendments became effective January 1, 2015. This Environmental Protection Law has been formulated for the purpose
of protecting and improving both the living environment and the ecological environment, preventing and controlling pollution, other public
hazards and safeguarding people’s health.

According to the provisions
of the Environmental Protection Law, in addition to other relevant laws and regulations of the PRC, the Ministry of Environmental
Protection and its local counterparts take charge of administering and supervising said environmental protection matters. Pursuant to
the Environmental Protection Law, the environmental impact statement on any construction project must assess the pollution that
the project is likely to produce and its impact on the environment, and stipulate preventive and curative measures; the statement shall
be submitted to the competent administrative department of environmental protection for approval. Installations for the prevention and
control of pollution in construction projects must be designed, built and commissioned together with the principal part of the project.

Permission to commence production
at or utilize any construction project shall not be granted until its installations for the prevention and control of pollution have been
examined and confirmed to meet applicable standards by the appropriate administrative department of environmental protection that examined
and approved the environmental impact statement. Installations for the prevention and control of pollution shall not be dismantled or
left idle without authorization. Where it is absolutely necessary to dismantle any such installation or leave it idle, prior approval
shall be obtained from the competent local administrative department of environmental protection.

The Environmental Protection
Law makes it clear that the legal liabilities of any violation of said law include warning, fine, rectification within a time limit,
compulsory cease operation, compulsory reinstallation of dismantled installations of the prevention and control of pollution or compulsory
reinstallation of those left idle, compulsory shutout or closedown, or even criminal punishment.

16

Order on Ecosystem by
The Ministry of Ecology and Environment 2019 Classification-based Management on Fixed Pollutant Source

Pursuant to the Order on Ecosystem
by The Ministry of Ecology and Environment, which was issued on July 28, 2017 and most recently amended on December 20, 2019, The Ministry
of Ecology and Environment implements a classification-based management on the environmental impact assessment, or EIA, of pollutants
according to pollutant amount and the impact of the pollutants on the environment as below

●
For those pollutant discharge units with large amount of pollutants and significant environmental impacts, the key management on a pollutant discharge permit is required;

●
For those pollutant discharge units with small amount of pollutants and small environmental impacts, the simplified management on a pollutant discharge permit is required; and

●
For those pollutant discharge units with very small amount of pollutants and very small environmental impacts, the pollutant discharge registration form is required.

The touchscreen manufacturing
is classified as to fill in a Registration Form. Pursuant to a Statement on Change of Pollutant Discharge Permit to Stationary Pollution
Source Registration Form by the local government dated September 1, 2020, the environmental protection system in Renshou County, Sichuan,
was changed from permission to registration due to local administrative division change. Therefore, upon submission of all required documentation,
we are registered under the new system by filling in Stationary Pollution Source Registration Form.

Regulations on Consumer Rights Protection

Our business is subject to
a variety of consumer protection laws, including the PRC Consumer Rights and Interests Protection Law, which was amended in 2013 and became
effective on March 15, 2014. It imposes stringent requirements and obligations on business operators. Failure to comply with these consumer
protection laws could subject us to administrative sanctions, such as the issuance of a warning, confiscation of illegal income, imposition
of fines, an order to cease business operations, revocation of business licenses, and potential civil or criminal liabilities.

As of the date of this Annual
Report, we are not aware of any warning, investigations, prosecutions, disputes, claims or other proceedings in respect of customer rights
protection, nor have we been punished or can foresee any punishment to be made by any government authorities of the PRC.

Regulations on Intellectual Property Rights

Regulations on Trademark

Trademarks are protected by
the PRC Trademark Law adopted in 1982 and subsequently amended as well as the Implementation Regulations for the Trademark Law of the
PRC in 2002 and subsequently amended in 2014 and 2019. The Trademark Office of the SAMR is responsible for the registration and administration
of trademarks and the Trademark Review and Adjudication Committee established by the SAMR is responsible for resolving trademark disputes
in Mainland China. Registered trademarks are valid for ten years from the date the registration is approved. A registrant may apply to
renew a registration within twelve months before the expiration date of the registration. If the registrant fails to apply in a timely
manner, a grace period of six additional months may be granted. If the registrant fails to apply before the grace period expires, the
registered trademark shall be deregistered. Renewed registrations are valid for ten years. In April 2014, the State Council issued the
revised Implementation of the Trademark Law, which specified the requirements of applying for trademark registration and review. As of
the date of this Annual Report, we had 1 registered trademark in Mainland China.

Regulations on Patent
Law

According to the PRC Patent
Law, which was issued by the Standing Committee of the National People’s Congress in 1984 and last amended on October 17, 2020,
effective on June 1, 2021, and Implementation Rules of the Patent Law of the People’s Republic of China, which were promulgated
by the State Council in 2001 and last amended on January 9, 2010. Draft amendments to the Implementation Rules of the Patent Law are currently
under review. The Patent Law and its implementation rules provide for three types of patents: “invention,” “utility
model” and “design.” “Invention” refers to any new technical solution relating to a product, a process or
improvement thereof; “utility model” refers to any new technical solution relating to the shape, structure, or their combination,
of a product, which is suitable for practical use; and “design” refers to any new design of the whole or partial shape, pattern,
color or the combination of any two of them, of a product, that creates an aesthetical feeling and is suitable for industrial application.
Invention patents are valid for 20 years, while design patents and utility model patents are valid for 15 years and 10 years, respectively,
each calculated from the date of application. To be patentable, invention or utility models must meet three criteria: novelty, inventiveness
and practicability. Except under certain specific circumstances provided by law, any third-party user must obtain consent or a proper
license from the patent owner to use the patent. Otherwise, the use constitutes an infringement of the patent rights. As of the date of
this Annual Report, we had five pending patent applications.

17

Regulations on Foreign Exchange

General Administration
of Foreign Exchange

Under the PRC Foreign Currency
Administration Rules promulgated on January 29, 1996 and most recently amended on August 5, 2008 and various regulations issued by the
SAFE, and other relevant PRC government authorities, Renminbi is convertible into other currencies for current account items, such as
trade-related receipts and payments and payment of interest and dividends. The conversion of Renminbi into other currencies and remittance
of the converted foreign currency outside Mainland China for capital account items, such as direct equity investments, loans, and repatriation
of investment, requires the prior approval from the SAFE or its local office.

Payments for transactions
that take place in Mainland China must be made in Renminbi. Unless otherwise approved, Mainland China companies may not repatriate foreign
currency payments received from abroad or retain the same abroad. FIEs may retain foreign exchange in accounts with designated foreign
exchange banks under the current account items subject to a cap set by the SAFE or its local branch. Foreign exchange proceeds under the
current accounts may be either retained or sold to a financial institution engaged in settlement and sale of foreign exchange pursuant
to relevant SAFE rules and regulations. For foreign exchange proceeds under the capital accounts, approval from the SAFE is generally
required for the retention or sale of such proceeds to a financial institution engaged in settlement and sale of foreign exchange.

Pursuant to the Circular of
the SAFE on Notice of State Administration of Foreign Exchange on Further Improvements and Adjustments to Foreign Exchange Control Policies
for Direct Investment, which was promulgated on November 19, 2012, became effective on December 17, 2012, and was further amended on May
4, 2015, October 10, 2018, and December 30, 2019, approval of the SAFE is not required for opening a foreign exchange account and depositing
foreign exchange into the accounts relating to the direct investments. This circular also simplifies foreign exchange-related registration
required for foreign investors to acquire equity interests of PRC companies and further improve the administration on foreign exchange
settlement for FIEs.

The Notice of the State Administration
of Foreign Exchange on Further Simplifying and Improving the Foreign Exchange Management Policies for Direct Investment, or SAFE Circular
13, which became effective on June 1, 2015 and was amended on December 30, 2019, cancels the administrative approvals of foreign exchange
registration of direct domestic investment and direct overseas investment and simplifies the procedure of foreign exchange-related registration.
Pursuant to SAFE Circular 13, investors should register with banks for direct domestic investment and direct overseas investment.

The Notice of the State Administration
of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign-invested Enterprises, which was
promulgated on March 30, 2015, became effective on June 1, 2015, and was amended on December 30, 2019, provides that an FIE may, according
to its actual business needs, settle with a bank the portion of the foreign exchange capital in its capital account for which the relevant
foreign exchange administration has confirmed monetary capital contribution rights and interests (or for which the bank has registered
the injection of the monetary capital contribution into the account). Pursuant to this circular, for the time being, FIEs are allowed
to settle 100% of their foreign exchange capital on a discretionary basis; an FIE should truthfully use its capital for its own operational
purposes within the scope of its business; where an ordinary FIE makes domestic equity investment with the amount of foreign exchanges
settled, the FIE must first go through domestic re-investment registration and open a corresponding account for foreign exchange settlement
pending payment with the foreign exchange administration or the bank at the place where it is registered.

The Notice of the State Administration
of Foreign Exchange on Policies for Reforming and Regulating the Control over Foreign Exchange Settlement under the Capital Account, which
was promulgated and became effective on June 9, 2016, provides that enterprises registered in Mainland China may also convert their foreign
debts from foreign currency into Renminbi on a self-discretionary basis. This circular also provides an integrated standard for conversion
of foreign exchange under capital account items (including, but not limited to, foreign currency capital and foreign debts) on a self-discretionary
basis, which applies to all enterprises registered in Mainland China.

18

On January 26, 2017, SAFE
promulgated the Notice of State Administration of Foreign Exchange on Improving the Check of Authenticity and Compliance to further Promote
Foreign Exchange Control, which stipulates several capital control measures with respect to the outbound remittance of profit from domestic
entities to offshore entities, including: (i) banks should check board resolutions regarding profit distribution, the original version
of tax filing records, and audited financial statements pursuant to the principle of genuine transactions; and (ii) domestic entities
should hold income to account for previous years’ losses before remitting the profits. Moreover, pursuant to this circular, domestic
entities should make detailed explanations of the sources of capital and utilization arrangements, and provide board resolutions, contracts,
and other proof when completing the registration procedures in connection with an outbound investment.

On October 25, 2019, the SAFE
promulgated the Notice of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border Trade and
Investment, which, among other things, allows all FIEs to use Renminbi converted from foreign currency-denominated capital for equity
investments in Mainland China, as long as the equity investment is genuine, does not violate applicable laws, and complies with the negative
list on foreign investment. However, since this circular is newly promulgated, it is unclear how the SAFE and competent banks will carry
it out in practice.

According to the Regulations
of the PRC on Administration of Company Registration, which were promulgated by the State Council on June 24, 1994, became effective on
July 1, 1994, and were amended on February 6, 2016, and other laws and regulations governing FIEs and company registrations, the establishment
of an FIE and any capital increase and other major changes in an FIE should be registered with the State Administration for Market Regulation
or its local counterparts and filed via the enterprise registration system.

Pursuant to SAFE Circular
13 and other laws and regulations relating to foreign exchange, when setting up a new FIE, the enterprise should register with the bank
located at its registered place after obtaining the business license, and if there is any change in capital or other changes relating
to the basic information of the FIE, including, without limitation, any increase in its registered capital or total investment, the FIE
must register such changes with the bank located at its registered place after obtaining approval from or completing the filing with relevant
authorities. Pursuant to the relevant foreign exchange laws and regulations, such foreign exchange registration with the banks will typically
take less than four weeks upon the acceptance of the registration application.

Based on the foregoing, if
we intend to provide funding to our wholly foreign-owned subsidiaries through capital injection at or after their establishment, we must
register the establishment of and any follow-on capital increase in our wholly foreign-owned subsidiaries with the State Administration
for Market Regulation or its local counterparts, file such via the enterprise registration system, and register such with the local banks
for the foreign exchange related matters.

Regulations on Offshore Financing

Under the Circular of the
SAFE on Issues Concerning the Foreign Exchange Administration over the Overseas Investment and Financing and Round-Trip Investment by
Domestic Residents via Special Purpose Vehicles, or SAFE Circular 37, effective on July 4, 2014, Mainland China residents are required
to register with the local SAFE branch prior to the establishment or control of an offshore special purpose vehicle, which is defined
as an offshore enterprise directly established or indirectly controlled by Mainland China residents for investment and financing purposes,
with the enterprise assets or interests Mainland China residents hold in Mainland China or overseas. The term “control” means
to obtain the operation rights, right to proceeds, or decision-making power of a special purpose vehicle through acquisition, trust, holding
shares on behalf of others, voting rights, repurchase, convertible bonds, or other means. At the same time, the SAFE has issued the Operation
Guidance for the Issues Concerning Foreign Exchange Administration over Round-Trip Investment regarding the procedures for SAFE registration
under SAFE Circular 37, which became effective on July 4, 2014 as an attachment of SAFE Circular 37.

19

The Mainland China residents
are also required to amend the registration or filing with the local SAFE branch any material change in the offshore company, such as
any change of basic information (including change of such Mainland China residents, name and operation term), increase or decreases in
investment amount, transfers or exchanges of shares, or merger or divisions. On February 28, 2015, SAFE promulgated the Notice on Further
Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13, which became effective on June
1, 2015. Pursuant to SAFE Notice 13, instead of applying for approvals regarding foreign exchange registrations of foreign direct investment
and overseas direct investment from SAFE as required under current laws, entities and individuals will be required to apply for such foreign
exchange registrations, including those required under the SAFE Circular 37, from qualified banks. The qualified banks, under the supervision
of SAFE, will directly examine the applications and conduct the registration.

Failure to comply with the
registration procedures set forth in the SAFE Circular 37, or making misrepresentation on or failure to disclose controllers of foreign-invested
enterprise that is established through round-trip investment, may result in restrictions being imposed on the foreign exchange activities
of the relevant onshore company, including the increase of its registered capital, the payment of dividends and other distributions to
its offshore parent or affiliate and the capital inflow from the offshore entities, and may also subject relevant Mainland China residents
to penalties under Mainland China foreign exchange administration regulations. Mainland China residents who directly or indirectly hold
any shares in our company from time to time are required to register with SAFE in connection with their investments in us. We have requested
Mainland China residents holding direct or indirect interest in our company to our knowledge to make the necessary applications, filings
and amendments as required under the SAFE Circular 37 and other related rules.

As of the date of this Annual
Report, the Mainland China residents have either not completed, or have not applied for, foreign exchange registration under the SAFE
Circular 37 and other related rules. Although they are either in the process of making foreign exchange registration or plan to make foreign
exchange registrations, they may still be faced with the above possible fines in accordance with the PRC Laws.

Regulations on Dividend Distribution

The principal laws and regulations
regulating the distribution of dividends by FIEs in Mainland China include the PRC Company Law, as amended in 2004, 2005, 2013, and 2018,
and the 2019 PRC Foreign Investment Law and its Implementation Rules. Under the current regulatory regime in Mainland China, FIEs in Mainland
China may pay dividends only out of their retained earnings, if any, determined in accordance with Mainland China accounting standards
and regulations. A Mainland China company is required to set aside as statutory reserve funds at least 10% of its after-tax profit, until
the cumulative amount of such reserve funds reaches 50% of its registered capital unless laws regarding foreign investment provide otherwise.
A Mainland China company cannot distribute any profits until any losses from prior fiscal years have been offset. Profits retained from
prior fiscal years may be distributed together with distributable profits from the current fiscal year.

We currently intend to retain
most, if not all, of our available funds and any future earnings to fund the development and growth of our business. As a result, we do
not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our common stock as
a source for any future dividend income.

Regulations on M&A and Overseas Listing

In August 2006, six PRC governmental
agencies jointly promulgated the Provisions on Foreign-funded Mergers and Acquisitions of Domestic Enterprises, or the M&A Rule, as
most recently amended in 2009. The M&A Rule requires offshore special purpose vehicles formed to pursue overseas listing of equity
interests in Mainland China companies and controlled directly or indirectly by Mainland China companies or individuals to obtain the approval
of the China Securities Regulatory Commission (“CSRC”) prior to the listing and trading of such special purpose vehicle’s
securities on any stock exchange overseas.

The
M&A Rule further requires that the Ministry of Commerce, or MOFCOM, be notified in advance of any change-of-control transaction in
which a foreign investor acquires control of a Mainland China domestic enterprise or a foreign company with substantial Mainland China
operations, if certain thresholds under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, issued
by the State Council, are triggered. Moreover, the Anti-Monopoly Law promulgated by the Standing Committee of the NPC requires that transactions
which are deemed concentrations and involve parties with specified turnover thresholds be cleared by the MOFCOM before they can be completed.

20

On February 17, 2023, with
the approval of the State Council, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by
Domestic Companies, or the Trial Administrative Measures, and five supporting guidelines, which came into effect on March 31, 2023. According
to the Trial Administrative Measures, (1) domestic companies that seek to offer or list securities overseas, both directly and indirectly,
should fulfill the filing procedure and report relevant information to the CSRC; (2) if the issuer meets both of the following conditions,
the overseas offering and listing shall be determined as an indirect overseas offering and listing by a domestic company: (i) any of the
total assets, net assets, revenues or profits of the domestic operating entities of the issuer in the most recent accounting year accounts
for more than 50% of the corresponding figure in the issuer’s audited consolidated financial statements for the same period; (ii)
its major operational activities are carried out in Mainland China or its main places of business are located in Mainland China, or the
senior managers in charge of operation and management of the issuer are mostly Chinese citizens or are domiciled in Mainland China; and
(3) where a domestic company seeks to indirectly offer and list securities in an overseas market, the issuer shall designate a major domestic
operating entity responsible for all filing procedures with the CSRC, and where an issuer makes an application for initial public offering
and listing in an overseas market, the issuer shall submit filings with the CSRC within three business days after such application is
submitted. According to the relevant provisions of the Trial Administrative Measures and its supporting guidelines, the Company is required
to fulfill the filing procedures with the CSRC within three days of the closing of the 2024 Uplisting Offering. According to the Trial
Administrative Measures, the Company has submitted the filing materials to the CSRC, but the materials were not complete due to lack of
a commitment letter from the Company’s lead underwriter for the 2024 Uplisting Offering, and the Company withdrew the filing from
the CSRC. The Company will submit the filing materials again when the materials are ready. However, given that the Trial Administrative
Measures were recently promulgated, there remain substantial uncertainties as to their interpretation, application, and enforcement and
there is no guarantee that the relevant PRC government agencies, including the CSRC, would reach the same conclusion that we and our PRC
counsel have reached. If the CSRC has determined that we have failed to comply with the post-offering filing obligations imposed by the
Trial Administrative Measures or make a misrepresentation, misleading statement or material omission in the materials we submit to the
CSRC, the CSRC would have the right to order rectification, issue a warning and impose a fine on us of between RMB 1 million and RMB 10
million and issuing a warning to the parties responsible for such failure, misrepresentation or material omission and impose a fine on
each of such individuals ranging from RMB 500,000 to RMB 5 million.

On February 17, 2023, the
CSRC held a press conference for the release of the Trial Administrative Measures and issued the Notice on Administration for the Filing
of Overseas Offering and Listing by Domestic Companies, which, among others, clarifies that (1) a six-month transition period will be
granted to domestic companies which, prior to the effective date of the Trial Administrative Measures, have already obtained the approval
from overseas regulatory authorities or stock exchanges, such as completion of registration in the market of the United States, but have
not completed the indirect overseas listing; and (2) domestic companies that have already submitted valid applications for overseas offering
and listing but have not obtained approval from overseas regulatory authorities or stock exchanges on or prior to the effective date of
the Trial Administrative Measures, may reasonably arrange the timing for submitting their filing applications with the CSRC, and shall
complete the filing before the completion of their overseas offering and listing.

Regulations on Taxation

Enterprise Income Tax

On March 16, 2007, the National
People’s Congress promulgated the PRC Enterprise Income Tax Law, which was amended on February 24, 2017 and December 29, 2018. On
December 6, 2007, the State Council enacted the Regulations for the Implementation of the Enterprise Income Tax Law, which became effective
on January 1, 2008 and amended on April 23, 2019. Under the Enterprise Income Tax Law and the relevant implementation regulations, both
resident enterprises and non-resident enterprises are subject to tax in Mainland China. Resident enterprises are defined as enterprises
that are established in Mainland China in accordance with PRC laws, or that are established in accordance with the laws of foreign countries
but are actually or in effect controlled from within Mainland China. Non-resident enterprises are defined as enterprises that are organized
under the laws of foreign countries and whose actual management is conducted outside Mainland China, but have established institutions
or premises in Mainland China, or have no such established institutions or premises but have income generated from inside Mainland China.
Under the Enterprise Income Tax Law and relevant implementing regulations, a uniform corporate income tax rate of 25% is applied. However,
if non-resident enterprises have not formed permanent establishments or premises in Mainland China, or if they have formed permanent establishment
or premises in Mainland China but there is no actual relationship between the relevant income derived in Mainland China and the established
institutions or premises set up by them, enterprise income tax is set at the rate of 10% with respect to their income sourced from inside
Mainland China.

21

Value-Added Tax

The PRC Provisional Regulations
on Value-Added Tax were promulgated by the State Council on December 13, 1993, which became effective on January 1, 1994 and were subsequently
amended from time to time. The Detailed Rules for the Implementation of the PRC Provisional Regulations on Value-Added Tax (2011 Revision)
was promulgated by the Ministry of Finance on December 25, 1993 and subsequently amended on December 15, 2008 and October 28, 2011. On
November 19, 2017, the State Council promulgated the Decisions on Abolishing the PRC Provisional Regulations on Business Tax and Amending
the PRC Provisional Regulations on Value-Added Tax. Pursuant to these regulations, rules and decisions, all enterprises and individuals
engaged in sale of goods, provision of processing, repair, and replacement services, sales of services, intangible assets, real property,
and the importation of goods within Mainland China territory are VAT taxpayers. On March 21, 2019, the Ministry of Finance, the SAT, and
the General Administration of Customs jointly issued the Announcement on Relevant Policies on Deepen the Reform of Value-Added Tax. Sales
revenue represents the invoiced value of goods, net of VAT. The VAT is based on gross sales price and VAT rates range up to 17%, starting
from May 1, 2018, VAT rate was lowered to 16%, and starting from April 1, 2019, VAT rate was further lowered to 13%.

Dividend Withholding
Tax

The Enterprise Income Tax
Law provides that since January 1, 2008, an income tax rate of 10% will normally be applicable to dividends declared to non-Mainland China
resident investors that do not have an establishment or place of business in Mainland China, or that have such establishment or place
of business but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends
are derived from sources within Mainland China.

Pursuant to the Arrangement
Between the Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of
Fiscal Evasion with Respect to Taxes on Income and Capital, and other applicable PRC laws, if a Hong Kong resident enterprise is determined
by the competent Mainland China tax authority to have met the relevant conditions and requirements under this arrangement and other applicable
laws, the 10% withholding tax on the dividends the Hong Kong resident enterprise receives from a Mainland China resident enterprise may
be reduced to 5%. However, based on the Circular on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties
issued on February 20, 2009, if the relevant Mainland China tax authorities determine, in their discretions, that a company benefits from
such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such Mainland China tax authorities may adjust
the preferential tax treatment. Pursuant to the Circular on Several Questions regarding the “Beneficial Owner” in Tax Treaties,
which was issued on February 3, 2018 by the SAT and became effective on April 1, 2018, when determining the applicant’s status as
the “beneficial owner” regarding tax treatments in connection with dividends, interests, or royalties in the tax treaties,
several factors, including, without limitation, whether the applicant is obligated to pay more than 50% of his or her income in twelve
months to residents in third country or region, whether the business operated by the applicant constitutes the actual business activities,
and whether the counterparty country or region to the tax treaties does not levy any tax or grant any tax exemption on relevant incomes
or levy tax at an extremely low rate, will be taken into account, and such factors will be analyzed according to the actual circumstances
of the specific cases. This circular further provides that an applicant who intends to prove his or her status as the “beneficial
owner” must submit the relevant documents to the relevant tax bureau pursuant to the Announcement on Issuing the Measures for the
Administration of Non-Resident Taxpayers’ Enjoyment of the Treatment under Tax Agreements.

22

Regulations on Employment Laws

In accordance with the PRC
National Labor Law, which became effective in January 1995 and amended from time to time, and the PRC Labor Contract Law, which became
effective in January 2008, as amended subsequently, employers must execute written labor contracts with full-time employees in order to
establish an employment relationship. All employers must compensate their employees equal to at least the local minimum wage standards.
All employers are required to establish a system for labor safety and sanitation, strictly abide by state rules and standards and provide
employees with appropriate workplace safety training. In addition, employers in Mainland China are obliged to pay contributions to the
social insurance plan and the housing fund plan for employees.

On
December 28, 2021, the Measures for Cybersecurity Review (2021 version) were promulgated and became effective on February 15, 2022 (the
“Measures”), which iterates that any “online platform operators” controlling personal information of more than
one million users that seeks to list on a foreign stock exchange shall also be subject to cybersecurity review. As we are neither an “operator
of critical information infrastructure” nor a “data processor” carrying out data processing activities that affect or
may affect national security, we believe that the Measures are not applicable to us even after they take effect in current form. The PRC
government is increasingly focused on data security, recently launching cybersecurity review against a number of mobile apps operated
by several US-listed Chinese companies and prohibiting these apps from registering new users during the review period. There are great
uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations regarding data and privacy security. We
may be required to change our data and other business practices and be subject to regulatory investigations, penalties, and increased
cost of operations as a result of these laws and policies.

Employees

As of the date of this Annual
Report, we had 152 employees. We have no part time employees or independent contractors.

As required by regulations
in China, Sichuan Vtouch participates in various employee social security plans that are organized by local governments, including pension,
unemployment insurance, childbirth insurance, work-related injury insurance, medical insurance and housing insurance. Sichuan Vtouch is
required under Chinese law to make contributions to employee benefit plans at specified percentages of the salaries, bonuses and certain
allowances of our employees, up to a maximum amount specified by the local government from time to time.

Our employees are not represented
by a labor organization or covered by a collective bargaining agreement. We believe that we maintain a good working relationship with
our employees and to date, we have not experienced any significant labor disputes.

23