Wetouch Technology (WETH) risk factors, FY2024 10-K

Other

1. 01Summary of Risks Affecting Our Company

Risks Related to Our Business and Industry

1. 02COVID-19 as well as other epidemics, natural disasters, terrorist activities, political unrest, and other outbreaks could disrupt our delivery and operations, which could materially and adversely affect our business, financial condition, and results of operations
2. 03The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management report on such company’s internal controls over financial reporting, which contains management’s assessment of the effectiveness of internal controls over financial reporting
3. 04Continue to cooperate with operation teams to ensure control environment in place, and monitor the effectiveness of operations on existing controls and procedures
4. 05We are heavily dependent on our top customers, each of which accounted for 10% or more of our revenues. We currently sell our products primarily to customers in the PRC and to a lesser extent, to overseas customers in Europe and East Asia, including South Korea and Taiwan
5. 06Our operating history may not be indicative of our future growth or financial results and we may not be able to sustain our historical growth rates
6. 07We are subject to risks related to construction of our factory in Sichuan Province, China
7. 08Economic recessions could have a significant, adverse impact on our business
8. 09We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations
9. 10We have a significant amount of accounts receivable, which could become uncollectible
10. 11Our industry is cyclical, with recurring periods of capacity increases. As a result, price fluctuations in response to supply and demand imbalances could harm our results of operations
11. 12Failure to maintain the quality and safety of our products could have a material and adverse effect on our reputation, financial condition and results of operations
12. 13We face intense competition in the touchscreen display industry in general. If we fail to compete effectively, we may lose market share and customers, and our business, financial condition and results of operations may be materially and adversely affected
13. 14If we do not obtain substantial additional financing, our ability to execute our business plan may be impaired
14. 15Any adjustment of related party transaction pricing could lead to additional taxes, and therefore substantially reduce our consolidated net income and the value of your investment
15. 16If our preferential tax treatments and government subsidies are revoked or become unavailable or if the calculation of our tax liability is successfully challenged by the PRC tax authorities, we may be required to pay tax, interest and penalties in excess of our tax provisions
16. 17A significant interruption in the operations of our third-party suppliers could potentially disrupt our operations
17. 18We face the risk of fluctuations in the cost, availability and quality of our raw materials, which could adversely affect our results of operations
18. 19We are dependent upon key executives and highly qualified managers and we cannot assure their retention
19. 20We do not have long-term contracts with our suppliers and they can reduce order quantities or terminate their sales to us at any time
20. 21If we fail to adopt new technologies to evolving customer needs or emerging industry standards, our business may be materially and adversely affected
21. 22We may experience significant liability claims or complaints from customers, or adverse publicity involving our products and our services
22. 23Frequent new product introductions in the technology industry can result in a decline in the selling prices of our products and the obsolescence of our existing inventory. This can result in a decrease in the stated value of our inventory, which we value at the lower of cost or net realizable value
23. 24We have no business liability or disruption insurance, which could expose us to significant costs and business disruption
24. 25We may incur liabilities that are not covered by insurance
25. 26We may not be able to adequately protect and maintain our intellectual property
26. 27Our introduction of new technologies and products may increase the likelihood that third parties will assert claims that our products infringe upon their proprietary rights

Risks Related to Doing Business in China

1. 28We may be subject to substantial fine if the CSRC has determined that we have failed to comply with the post-offering filing obligations imposed by the Trial Administrative Measure
2. 29Changes in U.S. and international trade policies, particularly with regard to China, may adversely impact our business and operating results
3. 30Labor laws in the PRC may adversely affect our results of operations
4. 31We may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption law
5. 32Our business may be materially and adversely affected if our PRC subsidiary declares bankruptcy or becomes subject to a dissolution or liquidation proceeding
6. 33The Chinese government also exercises significant control over China’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies
7. 34Uncertainties with respect to the PRC legal system, including uncertainties regarding the enforcement of laws and sudden and unexpected changes in laws and regulations in China, could adversely affect us and limit the legal protections available to you and us
8. 35You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or our management based on foreign laws
9. 36Government control of currency conversion may affect the value of your investment
10. 37Fluctuations in exchange rates could have a material and adverse effect on our results of operations and the value of your investment
11. 38Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment
12. 39The Chinese government exerts substantial influence over the manner in which we must conduct our business activities and may intervene or influence our operations at any time, which could result in a material change in our operations and/or the value of our common stock
13. 40If we are classified as a PRC resident enterprise for PRC enterprise income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders and the common stockholders

Risks Related to Our Common Stock

1. 41The price of our common stock may be volatile or may decline regardless of our operating performance and you may not be able to resell your shares at or above the purchase price
2. 42Since our By-laws provide that the courts in the State of Nevada are the sole and exclusive forum for substantially all disputes between us and our shareholders, this could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our directors or officers, or employees
3. 43These exclusive-forum provisions may limit a shareholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees
4. 44Short sellers of our stock may be manipulative and may drive down the market price of our common stock
5. 45The sale or availability for sale of substantial amounts of our common stock could adversely affect their market price
6. 46Because we do not expect to pay dividends in the foreseeable future, you must rely on a price appreciation of our common stock for return on your investment
7. 47If relations between the United States and China worsen, our stock price may decrease and could lead to our loss of access or increased difficulty in accessing U.S. capital markets
8. 48We may be subject to delisting from Nasdaq if we fail to timely file periodic reports with the SEC or to maintain Nasdaq’s minimum bid price, which could materially and adversely affect the liquidity and value of our common stock