What changed in this filing

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Item 1A. Risk Factors

2020-03-23 compared with 2019-03-07 · 706 added, 688 removed, 26 unchanged (98% of the section changed)

Relating to our Business

the past, our ability to continue as a going concern was in doubt.

Although we do not currently doubt our ability to continue

as a going concern, our liquidity position poses risk to our operations, especially our capacity expansion projects.

of December 31, 2018, we had current assets of approximately $24.16 million and current liabilities of approximately $29.63 million,

resulting in a working capital deficiency of approximately $5.47 million.

We are currently seeking to restructure the term of

our liabilities by raising funds through long-term loans to pay off liabilities with shorter terms.

In the event that we fail

to raise funds or negotiate terms of the current liabilities sufficient to meet our liquidity needs, we may be forced to substantially

curtail our operations or otherwise take measures that would materially and adversely affect our business, results of operations

and business prospects.

addition, from time to time, we investigate financing opportunities with banks and other financial institutions and investors

both inside and outside of China, and we may seek long-term financings to pay off liabilities with shorter terms.

additional funds through public and private financing, including equity and debt offering.

As of the date of this report, we have

not entered into any material binding agreement for additional long-term financing.

There can be no assurance that we will be

able to secure such financing either from banks or through debt or equity investments from investors.

we are unable to obtain sufficient banking facilities or generate sufficient operating cash flow internally, the progress of the

construction or renovation may slow down.

We may also have to curtail the scope of the capital expenditure projects or to shelf

some components of the projects (for example, delay the installation of PM9 until additional capital resources are available).

order to comply with PRC regulatory requirements, we operate our businesses through companies with which we have contractual relationships

but in which we do not have controlling ownership.

do not have direct or indirect equity ownership of Dongfang Paper which operates a majority of our business.

Although we have

entered into contractual arrangements with Dongfang Paper and its individual owners pursuant to which we receive an economic interest

in Dongfang Paper, and exert a controlling influence over Dongfang Paper, in a manner substantially similar to a controlling equity

interest, these contractual arrangements are not as effective in providing control over Dongfang Paper as direct ownership.

example, Dongfang Paper may be unwilling or unable to perform their contractual obligations under our commercial agreements, including

payment of consulting fees under the Exclusive Technical Service and Business Consulting Agreement as they become due.

were to occur, we would not be able to conduct our operations in the manner currently planned.

In addition, we may not succeed

in enforcing our rights under the contractual arrangements insofar as our contractual rights and legal remedies under Chinese

law may be inadequate.

Risks Relating to our Business

In order to comply with PRC regulatory

requirements, we operate our businesses through companies with which we have contractual relationships but in which we do not have

controlling ownership.

We do not have direct

or indirect equity ownership of Dongfang Paper which operates a majority of our business.

Although we have entered into contractual

arrangements with Dongfang Paper and its individual owners pursuant to which we receive an economic interest in Dongfang Paper,

and exert a controlling influence over Dongfang Paper, in a manner substantially similar to a controlling equity interest, these

contractual arrangements are not as effective in providing control over Dongfang Paper as direct ownership.

For example, Dongfang

Paper may be unwilling or unable to perform their contractual obligations under our commercial agreements, including payment of

consulting fees under the Exclusive Technical Service and Business Consulting Agreement as they become due.

If that were to occur,

we would not be able to conduct our operations in the manner currently planned.

In addition, we may not succeed in enforcing our

rights under the contractual arrangements insofar as our contractual rights and legal remedies under Chinese law may be inadequate.

Furthermore, Dongfang Paper may seek to renew their agreements on terms that are disadvantageous to us.

If we are unable to renew these agreements on favorable terms when these agreements expire, or to enter into similar agreements

with other parties, we will lose control of Dongfang Paper.

we rely on the consulting services agreement with Dongfang Paper for essentially all of our revenue and cash flows, any difficulty

for Dongfang Paper to pay consulting fees to Baoding Shengde under the consulting agreement may have a material adverse effect

on our operations.

are a holding company and currently conduct business through Dongfang Paper.

As a result, we rely on payments from the consulting

services agreement which forms a part of the contractual arrangements between Baoding Shengde and Dongfang Paper.

Since Baoding

Shengde is not a legal shareholder of Dongfang Paper under PRC statutes, the arrangement for Dongfang Paper to pay a substantial

portion of its net income to Baoding Shengde may be challenged by the PRC government, which could prevent us from receiving required

funds or making required payments to some of our service providers.

the PRC government determines that our agreements with these companies are not in compliance with applicable regulations, our

business in the PRC could be materially adversely affected.

we believe the restructuring transaction and our current business operations are in compliance with the current laws in China,

we cannot be sure that the PRC government would share the same view.

If we are determined not to be in compliance, the PRC government

could levy fines, revoke our business and operating licenses, require us to discontinue or restrict our operations, restrict our

right to collect revenues, require us to restructure our business, corporate structure or operations, impose additional conditions

or requirements with which we may not be able to comply, impose restrictions on our business operations or on our customers, or

take other regulatory or enforcement actions against us that could be harmful to our business.

As a result, our business in the

PRC could be materially adversely affected.

shareholders of Dongfang Paper may have potential conflicts of interests with us, which may adversely affect our business.

operate most of our businesses through Dongfang Paper.

Our Chairman, Chief Executive Officer and 24.93% shareholder, Zhenyong

Liu, owns 93.39% of the equity interest in Dongfang Paper.

Conflicts of interests between his duties to us and to Dongfang Paper

We cannot assure you that when conflicts of interest arise, he will act in the best interests of our Company or that

any conflict of interest will be resolved in our favor.

These conflicts may result in management decisions that could negatively

affect our operations and potentially result in the loss of opportunities.

arrangements with Dongfang Paper and its shareholders may be subject to a transfer pricing adjustment by the PRC tax authorities

which could have an adverse effect on our income and expenses.

could face material and adverse tax consequences if the PRC tax authorities determine that our contracts with Dongfang Paper and

its shareholders were not entered into based on arm’s length negotiations.

If the PRC tax authorities determine that these

contracts were not entered into on an arm’s length basis, they may adjust our income and expenses for PRC tax purposes in

the form of a transfer pricing adjustment.

Such an adjustment may require that we pay additional PRC taxes plus applicable penalties

and interest, if any.

exercise of our option to purchase part or all of the equity interests in Dongfang Paper under the Call Option Agreement might

be subject to approval by the PRC government.

Our failure to obtain this approval may impair our ability to substantially control

Dongfang Paper and could result in actions by Dongfang Paper that conflict with our interests.

Call Option Agreement with Dongfang Paper and its shareholders gives our Chinese subsidiary, Baoding Shengde or its designated

entity or natural person, the option to purchase all or part of the equity interests in Dongfang Paper.

The option may not be

exercised by Baoding Shengde if the exercise would violate any applicable laws and regulations in China or cause any license or

permit held by, and necessary for the operation of Dongfang Paper, to be cancelled or invalidated.

Under the laws of China, if

a foreign entity, through a foreign investment company that it invests in, acquires a domestic related company, China’s

regulations regarding mergers and acquisitions may technically apply to the transaction.

If these regulations apply, an examination

and approval of the transaction by China’s Ministry of Commerce (“MOFCOM”), or its local counterparts would

In addition, an appraisal of the equity interest or the assets to be acquired would also be mandatory.

scope of business activities (making of cultural paper products) as defined in the business license of Baoding Shengde does not

involve the MOFCOM approval and monitoring, we do not believe at this time that an approval or an appraisal is required for Baoding

Shengde to exercise its option to acquire Dongfang Paper.

In light of the different views on this issue, however, it is possible

that the central MOFCOM office in Beijing will issue a standardized opinion imposing the approval and appraisal requirement.

we are not able to purchase the equity of Dongfang Paper, then we will lose a substantial portion of our ability to control Dongfang

Paper and our ability to ensure that Dongfang Paper will act in our interests.

anticipate to incur significant capital expenditures in 2019.

expect to incur significant capital expenditures in the tissue paper production line project in 2019 and possibly beyond.

substantially increased our debt leverage to fund these projects.

As of December 31, 2018, we had approximately $2 million in

capital expenditure commitments that were mainly related to improvement of Industrial Buildings.

If we cannot fund or effectively

manage our capital expenditures or if our capital expenditures do not lead to the results we anticipate, our business, financial

position and operating performance may be materially and adversely affected.

An increased debt burden may also materially and

adversely affect our liquidity, financial condition and our business.

If we are unable to obtain sufficient funding through banking

borrowings or generate sufficient operating cash flow internally, the progress of the construction or renovation may be slowed

We may also have to curtail the scope of the capital expenditure projects or to shelf some components of the projects (for

example, delay the installation of PM9 until additional capital resources are available).

operating history may not serve as an adequate basis to judge our future prospects and results of operations.

Paper commenced its current line of business operations in 1996 and received its initial Pollution Discharge Permit in September

1996, which must be renewed every year for Dongfang Paper to stay in business.

Although we have never had problem renewing the

Pollution Discharge Permit, we cannot guarantee automatic renewal every year.

In addition, Baoding Shengde commenced its current

line of business operations in 2009.

Therefore, our operating history may not provide a more meaningful basis on which to evaluate

its business.

We cannot assure you that Dongfang Paper or Baoding Shengde we will not incur net losses in the future.

that operating expenses of Dongfang Paper and Baoding Shengde will increase as they expand.

Any significant failure to realize

anticipated revenue growth could result in significant operating losses.

We will continue to encounter risks and difficulties

frequently experienced by companies at a similar stage of development, including our potential failure to:

adequate capital for expansion and operations;

our business model and strategy and adapt and modify them as needed;

awareness of our brand name, protect our reputation and develop customer loyalty;

our expanding operations and service offerings, including the integration of any future acquisitions;

adequate control of our expenses;

and adapt to changing conditions in paper markets in which we operate as well as the impact of any changes in government regulations,

mergers and acquisitions involving our competitors, technological developments and other significant competitive and market

we are not successful in addressing any or all of these risks, our business may be materially and adversely affected.

Paper and Baoding Shengde’s failure to compete effectively may adversely affect our ability to generate revenue.

Dongfang Paper and Baoding Shengde, we compete in a highly developed market with companies that have significantly greater experience

and history in our industry.

If we do not compete effectively, we could lose market share and experience reduced selling prices,

adversely affecting our financial results.

Our competitors will expand in the key markets and implement new technologies making

them more competitive.

There is also the possibility that competitors will be able to offer additional products, services, lower

prices, or other incentives that we cannot or will not offer or that will make our products less profitable.

We cannot assure

you that we will be able to compete effectively with current or future competitors or that the competitive pressures we face will

not harm our business.

might be negatively affected by the industry capacity elimination mandated by the government.

described under the heading “Industry Consolidation”

in “Business”

section, the government has been requiring

outdated paper facilities to close since 2010 and is expected to continue to strictly reinforce the mandatory closure of outdated

capacity in the next few years.

We have continued to focus on updating our production facilities to improve the operating and

energy efficiency and reduce pollution.

Based on our consultations with the regulators, we believe that none of our production

facilities are currently targeted for mandatory capacity reduction.

Based on information currently available to us, we do not

expect that we would be ordered to reduce or shut down our production capacities.

However, the Chinese government has broad discretion

in determining the facilities subject to its production elimination mandate, and we cannot assure you that the government would

not require us to shut down some or all of our production capacities.

If we were forced to shut down one or more of our production

facilities, our business, prospectus, financial condition and results of operations may materially and adversely affected.

on the scope of the government capacity elimination order, we could be forced to cease some or all of our operations.

Dongfang Paper fails to comply with covenants in its loan agreements, its lenders may allege a breach of a covenant and seek to

accelerate the loan or exercise other remedies, which could strain our cash flow and harm our business, liquidity and financial

Paper received loans from commercial banks to fund its operations.

Typically, these loans are made pursuant to customary loan

agreements which contain representations and warranties about its business, financial covenants to which Dongfang Paper must adhere

and other negative covenants in respect of its operations.

Under some of these agreements, Dongfang Paper may be required to obtain

the consent of its lenders prior to entering into its contractual arrangement with us but Dongfang Paper did not receive such

prior consent.

To date, our lenders have not given us any notice of default or otherwise objected to our contractual arrangements

with Dongfang Paper.

If any lender raises any concern in this regard, we intend to secure a waiver from our lenders, but cannot

assure you that we will successfully do so.

If we cannot obtain such a wavier and Dongfang Paper’s lenders declare it to

be in default under the loan agreements, they may accelerate Dongfang Paper’s indebtedness to them which would negatively

affect our cash flows and business operations.

may not be able to effectively control and manage our growth.

our business and markets grow and develop, it will be necessary for us to finance and manage expansion in an orderly fashion.

An expansion would increase demands on existing management, workforce and facilities.

Failure to satisfy such increased demands

could interrupt or adversely affect our operations and cause delay in production and delivery of our paper products, as well as

administrative inefficiencies.

through our subsidiaries, may engage in future acquisitions that could dilute the ownership interests of our stockholders and

cause us to incur debt and assume contingent liabilities.

through our subsidiaries, may review acquisition and strategic investment prospects that we believe would complement the current

product offerings of Dongfang Paper, augment its market coverage or enhance its technical capabilities, or otherwise offer growth

opportunities.

From time to time we review investments in new businesses and we, through our subsidiaries, expect to make investments

in, and to acquire, businesses, products, or technologies in the future.

We expect that when we raise funds from investors for

any of these purposes we will be either the issuer or the primary obligor while the proceeds will be forwarded to Dongfang Paper.

In the event of any future acquisitions, we could:

securities which would dilute current stockholders’

If we are unable to renew

these agreements on favorable terms when these agreements expire, or to enter into similar agreements with other parties, we will

lose control of Dongfang Paper.

Because we rely on the consulting

services agreement with Dongfang Paper for essentially all of our revenue and cash flows, any difficulty for Dongfang Paper to

pay consulting fees to Baoding Shengde under the consulting agreement may have a material adverse effect on our operations.

We are a holding company

and currently conduct business through Dongfang Paper.

As a result, we rely on payments from the consulting services agreement

which forms a part of the contractual arrangements between Baoding Shengde and Dongfang Paper.

Since Baoding Shengde is not a legal

shareholder of Dongfang Paper under PRC statutes, the arrangement for Dongfang Paper to pay a substantial portion of its net income

to Baoding Shengde may be challenged by the PRC government, which could prevent us from receiving required funds or making required

payments to some of our service providers.

If the PRC government determines

that our agreements with these companies are not in compliance with applicable regulations, our business in the PRC could be materially

adversely affected.

Although we believe

the restructuring transaction and our current business operations are in compliance with the current laws in China, we cannot be

sure that the PRC government would share the same view.

If we are determined not to be in compliance, the PRC government could

levy fines, revoke our business and operating licenses, require us to discontinue or restrict our operations, restrict our right

to collect revenues, require us to restructure our business, corporate structure or operations, impose additional conditions or

requirements with which we may not be able to comply, impose restrictions on our business operations or on our customers, or take

other regulatory or enforcement actions against us that could be harmful to our business.

As a result, our business in the PRC

could be materially adversely affected.

The shareholders of Dongfang Paper

may have potential conflicts of interests with us, which may adversely affect our business.

We operate most of

our businesses through Dongfang Paper.

Our Chairman, Chief Executive Officer and 24.93% shareholder, Zhenyong Liu, owns 93.39%

of the equity interest in Dongfang Paper.

Conflicts of interests between his duties to us and to Dongfang Paper may arise.

assure you that when conflicts of interest arise, he will act in the best interests of our Company or that any conflict of interest

will be resolved in our favor.

These conflicts may result in management decisions that could negatively affect our operations and

potentially result in the loss of opportunities.

Our arrangements with Dongfang Paper

and its shareholders may be subject to a transfer pricing adjustment by the PRC tax authorities which could have an adverse effect

on our income and expenses.

We could face material

and adverse tax consequences if the PRC tax authorities determine that our contracts with Dongfang Paper and its shareholders were

not entered into based on arm’s length negotiations.

If the PRC tax authorities determine that these contracts were not entered

into on an arm’s length basis, they may adjust our income and expenses for PRC tax purposes in the form of a transfer pricing

Such an adjustment may require that we pay additional PRC taxes plus applicable penalties and interest, if any.

The exercise of our option to purchase

part or all of the equity interests in Dongfang Paper under the Call Option Agreement might be subject to approval by the PRC government.

Our failure to obtain this approval may impair our ability to substantially control Dongfang Paper and could result in actions

by Dongfang Paper that conflict with our interests.

Our Call Option Agreement

with Dongfang Paper and its shareholders gives our Chinese subsidiary, Baoding Shengde or its designated entity or natural person,

the option to purchase all or part of the equity interests in Dongfang Paper.

The option may not be exercised by Baoding Shengde

if the exercise would violate any applicable laws and regulations in China or cause any license or permit held by, and necessary

for the operation of Dongfang Paper, to be cancelled or invalidated.

Under the laws of China, if a foreign entity, through a foreign

investment company that it invests in, acquires a domestic related company, China’s regulations regarding mergers and acquisitions

may technically apply to the transaction.

If these regulations apply, an examination and approval of the transaction by China’s

Ministry of Commerce (“MOFCOM”), or its local counterparts would be required.

In addition, an appraisal of the equity

interest or the assets to be acquired would also be mandatory.

Since the scope of business activities (making of cultural paper

products) as defined in the business license of Baoding Shengde does not involve the MOFCOM approval and monitoring, we do not

believe at this time that an approval or an appraisal is required for Baoding Shengde to exercise its option to acquire Dongfang

In light of the different views on this issue, however, it is possible that the central MOFCOM office in Beijing will issue

a standardized opinion imposing the approval and appraisal requirement.

If we are not able to purchase the equity of Dongfang

Paper, then we will lose a substantial portion of our ability to control Dongfang Paper and our ability to ensure that Dongfang

Paper will act in our interests.

Our operating history may not serve

as an adequate basis to judge our future prospects and results of operations.

Dongfang Paper commenced

its current line of business operations in 1996 and received its initial Pollution Discharge Permit in September 1996, which must

be renewed every year for Dongfang Paper to stay in business.

Although we have never had problem renewing the Pollution Discharge

Permit, we cannot guarantee automatic renewal every year.

In addition, Baoding Shengde commenced its current line of business operations

Therefore, our operating history may not provide a more meaningful basis on which to evaluate its business.

assure you that Dongfang Paper or Baoding Shengde will not incur net losses in the future.

We expect that operating expenses of

Dongfang Paper and Baoding Shengde will increase as they expand.

Any significant failure to realize anticipated revenue growth

could result in significant operating losses.

We will continue to encounter risks and difficulties frequently experienced by companies

at a similar stage of development, including our potential failure to:

● raise adequate capital for expansion and operations;

● implement our business model and strategy and adapt

and modify them as needed;

● increase awareness of our brand name, protect our reputation

and develop customer loyalty;

● manage our expanding operations and service offerings,

including the integration of any future acquisitions;

● maintain adequate control of our expenses;

● anticipate and adapt to changing conditions in paper

markets in which we operate as well as the impact of any changes in government regulations, mergers and acquisitions involving

our competitors, technological developments and other significant competitive and market dynamics.

If we are not successful

in addressing any or all of these risks, our business may be materially and adversely affected.

Dongfang Paper and Baoding Shengde’s

failure to compete effectively may adversely affect our ability to generate revenue.

Through Dongfang Paper

and Baoding Shengde, we compete in a highly developed market with companies that have significantly greater experience and history

in our industry.

If we do not compete effectively, we could lose market share and experience reduced selling prices, adversely

affecting our financial results.

Our competitors will expand in the key markets and implement new technologies making them more

There is also the possibility that competitors will be able to offer additional products, services, lower prices,

or other incentives that we cannot or will not offer or that will make our products less profitable.

We cannot assure you that

we will be able to compete effectively with current or future competitors or that the competitive pressures we face will not harm

our business.

If Dongfang Paper fails to comply

with covenants in its loan agreements, its lenders may allege a breach of a covenant and seek to accelerate the loan or exercise

other remedies, which could strain our cash flow and harm our business, liquidity and financial condition.

Dongfang Paper received

loans from commercial banks to fund its operations.

Typically, these loans are made pursuant to customary loan agreements which

contain representations and warranties about its business, financial covenants to which Dongfang Paper must adhere and other negative

covenants in respect of its operations.

Under some of these agreements, Dongfang Paper may be required to obtain the consent of

its lenders prior to entering into its contractual arrangement with us but Dongfang Paper did not receive such prior consent.

date, our lenders have not given us any notice of default or otherwise objected to our contractual arrangements with Dongfang Paper.

If any lender raises any concern in this regard, we intend to secure a waiver from our lenders, but cannot assure you that we will

successfully do so.

If we cannot obtain such a wavier and Dongfang Paper’s lenders declare it to be in default under the

loan agreements, they may accelerate Dongfang Paper’s indebtedness to them which would negatively affect our cash flows and

business operations.

We may not be able to effectively control and manage our

If our business and

markets grow and develop, it will be necessary for us to finance and manage expansion in an orderly fashion.

An expansion would

increase demands on existing management, workforce and facilities.

Failure to satisfy such increased demands could interrupt or

adversely affect our operations and cause delay in production and delivery of our paper products, as well as administrative inefficiencies.

We, through our subsidiaries, may

engage in future acquisitions that could dilute the ownership interests of our stockholders and cause us to incur debt and assume

contingent liabilities.

We, through our subsidiaries,

may review acquisition and strategic investment prospects that we believe would complement the current product offerings of Dongfang

Paper, augment its market coverage or enhance its technical capabilities, or otherwise offer growth opportunities.

time we review investments in new businesses and we, through our subsidiaries, expect to make investments in, and to acquire, businesses,

products, or technologies in the future.

We expect that when we raise funds from investors for any of these purposes we will be

either the issuer or the primary obligor while the proceeds will be forwarded to Dongfang Paper.

In the event of any future acquisitions,

● issue equity securities which would dilute current

stockholders’

percentage ownership;

incur substantial

assume contingent

expend significant

actions could have a material adverse effect on our operating results or the price of our common stock.

Moreover, even if we do

obtain benefits in the form of increased sales and earnings, there may be a lag between the time when the expenses associated

with an acquisition are incurred and the time when we recognize such benefits.

Acquisitions and investment activities also entail

numerous risks, including:

in the assimilation of acquired operations, technologies and/or products;

unanticipated

costs associated with the acquisition or investment transaction;

diversion of management’s attention from other business concerns;

effects on existing business relationships with suppliers and customers;

associated with entering markets in which Dongfang Paper has no or limited prior experience;

potential loss of key employees of acquired organizations;

charges for the amortization of certain purchased intangible assets, deferred stock compensation or similar items.

cannot ensure that we will be able to successfully integrate any businesses, products, technology, or personnel that we might

acquire in the future and our failure to do so could have a material adverse effect on our and/or Dongfang Paper’s business,

operating results and financial condition.

are responsible for the indemnification of our officers and directors.

Articles of Incorporation provides for the indemnification and/or exculpation of our directors, officers, employees, agents and

other entities which deal with us to the maximum extent provided, and under the terms provided, by the laws and decisions of the

courts of the state of Nevada.

Although we do maintain professional error and omission insurance for the officers and directors,

due to limitations of the insurance coverage these indemnification provisions could still result in substantial expenditures which

we may be unable to recoup through the insurance and could adversely affect our business and financial conditions.

Zhenyong Liu,

our Chairman of the Board and Chief Executive Officer, Jing Hao, our Chief Financial Officer, Dahong Zhou, our Secretary, and

Marco Ku Hon Wai, Wenbing Christopher Wang, Lusha Niu, and Fuzeng Liu, our directors, are key personnel with rights to indemnification

under our Articles of Incorporation.

are dependent on certain key personnel and loss of these key personnel could have a material adverse effect on our business, financial

condition and results of operations.

success is, to a certain extent, attributable to the management, sales and marketing, and paper factory operational expertise

of key personnel.

Zhenyong Liu, our Chief Executive Officer and Chairman of the Board, Jing Hao, our Chief Financial Officer,

Dahong Zhou, our Secretary, and Shuting Liang, Dongfang Paper’s General Engineer, Gengqi Yang, Dongfang Paper’s Vice

President of Sales and Marketing, Xuetao Chen, Dongfang Paper’s Vice President of Environmental Protection and Xiaodong

Liu, Baoding Shengde’s General Manager, perform key functions in the operation of our business.

There can be no assurance

that IT Tech Packaging or Dongfang Paper or Baoding Shengde will be able to retain these officers after the term of their employment

contracts expire.

The loss of these officers could have a material adverse effect upon our business, financial condition, and

results of operations.

We do not carry key man life insurance for any of our key personnel or personnel nor do we foresee purchasing

such insurance to protect against a loss of key personnel and personnel.

are dependent upon the services of Mr.

Zhenyong Liu for the continued growth and operation of our Company because of his experience

in the industry and his personal and business contacts in the PRC.

Liu has entered into an employment agreement with

Baoding Shengde, our wholly owned subsidiary and a PRC company, and that we have no reason to believe that Mr.

Liu will discontinue

his services with us or Dongfang Paper, the interruption or loss of his services would adversely affect our ability to effectively

run our business and pursue our business strategy as well as our results of operations.

may not be able to hire and retain qualified personnel to support our growth and if we are unable to retain or hire these personnel

in the future, our ability to improve our products and implement our business objectives could be adversely affected.

must attract, recruit and retain a sizeable workforce of technically competent employees.

Competition for senior management and

senior personnel in the PRC is intense, the pool of qualified candidates in the PRC is very limited, and we may not be able to

retain the services of our senior executives or senior personnel, or attract and retain high-quality senior executives or senior

personnel in the future.

● incur substantial debt;

● assume contingent liabilities;

● expend significant cash.

These actions could

have a material adverse effect on our operating results or the price of our common stock.

Moreover, even if we do obtain benefits

in the form of increased sales and earnings, there may be a lag between the time when the expenses associated with an acquisition

are incurred and the time when we recognize such benefits.

Acquisitions and investment activities also entail numerous risks, including:

● difficulties in the assimilation of acquired operations,

technologies and/or products;

● unanticipated costs associated with the acquisition

or investment transaction;

● the diversion of management’s attention from

other business concerns;

● adverse effects on existing business relationships

with suppliers and customers;

● risks associated with entering markets in which Dongfang

Paper has no or limited prior experience;

● the potential loss of key employees of acquired organizations;

● substantial charges for the amortization of certain

purchased intangible assets, deferred stock compensation or similar items.

We cannot ensure that

we will be able to successfully integrate any businesses, products, technology, or personnel that we might acquire in the future

and our failure to do so could have a material adverse effect on our and/or Dongfang Paper’s business, operating results

and financial condition.

We are responsible for the indemnification

of our officers and directors.

Our Articles of Incorporation

provides for the indemnification and/or exculpation of our directors, officers, employees, agents and other entities which deal

with us to the maximum extent provided, and under the terms provided, by the laws and decisions of the courts of the state of Nevada.

Although we do maintain professional error and omission insurance for the officers and directors, due to limitations of the insurance

coverage these indemnification provisions could still result in substantial expenditures which we may be unable to recoup through

the insurance and could adversely affect our business and financial conditions.

Zhenyong Liu, our Chairman of the Board and Chief

Executive Officer, Jing Hao, our Chief Financial Officer, Dahong Zhou, our Secretary, and Marco Ku Hon Wai, Wenbing Christopher

Wang, Lusha Niu, and Fuzeng Liu, our directors, are key personnel with rights to indemnification under our Articles of Incorporation.

We are dependent on certain key personnel

and loss of these key personnel could have a material adverse effect on our business, financial condition and results of operations.

Our success is, to

a certain extent, attributable to the management, sales and marketing, and paper factory operational expertise of key personnel.

Zhenyong Liu, our Chief Executive Officer and Chairman of the Board, Jing Hao, our Chief Financial Officer, Dahong Zhou, our Secretary,

and Shuting Liang, Dongfang Paper’s General Engineer, Gengqi Yang, Dongfang Paper’s Vice President of Sales and Marketing,

Xuetao Chen, Dongfang Paper’s Vice President of Environmental Protection and Xiaodong Liu, Baoding Shengde’s General

Manager, perform key functions in the operation of our business.

There can be no assurance that IT Tech Packaging, Dongfang Paper

or Baoding Shengde will be able to retain these officers after the term of their employment contracts expire.

The loss of these

officers could have a material adverse effect upon our business, financial condition, and results of operations.

We do not carry

key man life insurance for any of our key personnel or personnel nor do we foresee purchasing such insurance to protect against

a loss of key personnel and personnel.

We are dependent upon

the services of Mr.

Zhenyong Liu for the continued growth and operation of our Company because of his experience in the industry

and his personal and business contacts in the PRC.

Liu has entered into an employment agreement with Baoding Shengde,

our wholly owned subsidiary and a PRC company, and that we have no reason to believe that Mr.

Liu will discontinue his services

with us or Dongfang Paper, the interruption or loss of his services would adversely affect our ability to effectively run our business

and pursue our business strategy as well as our results of operations.

We may not be able to hire and retain

qualified personnel to support our growth and if we are unable to retain or hire these personnel in the future, our ability to

improve our products and implement our business objectives could be adversely affected.

We must attract, recruit

and retain a sizeable workforce of technically competent employees.

Competition for senior management and senior personnel in the

PRC is intense, the pool of qualified candidates in the PRC is very limited, and we may not be able to retain the services of our

senior executives or senior personnel, or attract and retain high-quality senior executives or senior personnel in the future.

This failure could materially and adversely affect our future growth and financial condition.

operating results may fluctuate as a result of factors beyond our control.

operating results may fluctuate significantly in the future as a result of a variety of factors, many of which are beyond our

These factors include:

costs of paper products and development;

relative speed and success with which we can obtain and maintain customers, merchants and vendors for our products;

expenditure for equipment;

and promotional activities and other costs;

in our pricing policies, suppliers and competitors;

ability of our suppliers to provide products in a timely manner to their customers;

in operating expenses;

competition in the paper markets;

general economic and seasonal factors.

face risks related to product liability claims.

presently do not maintain product liability insurance.

We face the risk of loss because of adverse publicity associated with product

liability lawsuits, whether or not such claims are valid.

Our operating results may fluctuate

as a result of factors beyond our control.

Our operating results

may fluctuate significantly in the future as a result of a variety of factors, many of which are beyond our control.

These factors

● the costs of paper products and development;

● the relative speed and success with which we can obtain

and maintain customers, merchants and vendors for our products;

● capital expenditure for equipment;

● marketing and promotional activities and other costs;

● changes in our pricing policies, suppliers and competitors;

● the ability of our suppliers to provide products in

a timely manner to their customers;

● changes in operating expenses;

● increased competition in the paper markets;

● other general economic and seasonal factors.

We face risks related to product

liability claims.

We presently do not

maintain product liability insurance.

We face the risk of loss because of adverse publicity associated with product liability lawsuits,

whether or not such claims are valid.

We may not be able to avoid such claims.

Although product liability

lawsuits in the PRC are rare, and we have not, to date, experienced significant failure of our products, there is no guarantee

that we will not face such liability in the future.

This liability could be substantial and the occurrence of such loss or liability

may have a material adverse effect on our business, financial condition and prospects.

operating results also depend on the availability and pricing of energy and raw materials.

addition to our dependence upon wood pulp, recycled white scrap paper and paperboard costs, our operating results depend on the

availability and pricing of energy and other raw materials.

An interruption in the supply of supplemental chemical agents could

cause a material disruption at our mill.

In addition, an interruption in the supply of natural gas could cause a material disruption

at our facilities.

At present, our raw materials including natural gas are purchased from a number of suppliers, of which the

three largest suppliers account for over 89% of all purchases.

If any of these contracts were to be terminated for any reason,

or not renewed upon expiration, or if market conditions were to substantially change creating a significant increase in the price

of natural gas and recycled paper, we may not be able to find alternative, comparable suppliers or suppliers capable of providing

coal to us on terms or in amounts satisfactory to us.

have replaced all the coal boilers with natural gas boiler in September 2017, but due to the gas consumption rise significantly,

the government will from time to time issue mandated restriction/suspension of natural gas supply for all natural gas consumption

industries, including the paper manufacturing industry in order to secure adequate natural gas to households uses in urban and

We are subject to the risks of natural gas supply restriction and above-mentioned factors.

As a result, our business,

financial condition and operating results could suffer.

material disruption at one of our manufacturing facilities could prevent us from meeting customer demand, reduce our sales, and/or

negatively affect our net income.

of our manufacturing facilities, or any of our machines within an otherwise operational facility, could cease operations unexpectedly

due to a number of events, including:

power failures;

failure, including any malfunction of our waste water treatment facilities;

in the supply of raw materials, such as wood fiber, energy, or chemicals;

spill or release;

closure because

of environmental-related concerns;

of a drought or reduced rainfall on our water supply;

in the transportation infrastructure, including roads, bridges, railroad tracks, and tunnels;

fires, floods,

earthquakes, hurricanes, or other catastrophes;

or threats of terrorism;

Although product liability lawsuits in the PRC are

rare, and we have not, to date, experienced significant failure of our products, there is no guarantee that we will not face such

liability in the future.

This liability could be substantial and the occurrence of such loss or liability may have a material adverse

effect on our business, financial condition and prospects.

Our operating results also depend

on the availability and pricing of energy and raw materials.

In addition to our

dependence upon wood pulp, recycled white scrap paper and paperboard costs, our operating results depend on the availability and

pricing of energy and other raw materials.

An interruption in the supply of supplemental chemical agents could cause a material

disruption at our mill.

In addition, an interruption in the supply of natural gas could cause a material disruption at our facilities.

At present, our raw materials including natural gas are purchased from a number of suppliers, of which the three largest suppliers

account for over 89% of all purchases.

If any of these contracts were to be terminated for any reason, or not renewed upon expiration,

or if market conditions were to substantially change creating a significant increase in the price of natural gas and recycled paper,

we may not be able to find alternative, comparable suppliers or suppliers capable of providing coal to us on terms or in amounts

satisfactory to us.

We replaced all the

coal boilers with natural gas boiler in September 2017, but due to the gas consumption rise significantly, the government will

from time to time issue mandated restriction/suspension of natural gas supply for all natural gas consumption industries, including

the paper manufacturing industry in order to secure adequate natural gas to households uses in urban and rural areas.

We are subject

to the risks of natural gas supply restriction and above-mentioned factors.

As a result, our business, financial condition and

operating results could suffer.

A material disruption at one of our

manufacturing facilities could prevent us from meeting customer demand, reduce our sales, and/or negatively affect our net income.

Any of our manufacturing

facilities, or any of our machines within an otherwise operational facility, could cease operations unexpectedly due to a number

of events, including:

● maintenance outages;

● prolonged power failures;

● an equipment failure, including any malfunction of

our waste water treatment facilities;

● disruption in the supply of raw materials, such as

wood fiber, energy, or chemicals;

● a chemical spill or release;

● closure because of environmental-related concerns;

● explosion of a boiler;

● the effect of a drought or reduced rainfall on our

water supply;

● disruptions in the transportation infrastructure, including

roads, bridges, railroad tracks, and tunnels;

● fires, floods, earthquakes, hurricanes, epidemic or

other catastrophes;

● terrorism or threats of terrorism;

● labor difficulties;

other operational

any of the abovementioned events were to occur, we may be unable to meet customer demand, which may adversely affect our sales

and net income.

certificates, permits, and licenses related to our papermaking operations are subject to governmental control and renewal and

failure to obtain renewal will cause all or part of our operations to be terminated.

1988, the National Environmental Protection Bureau issued Interim Measures on the Administration of Water Pollutants Discharge

Permits, requiring all companies discharging pollution into the water as a direct or indirect byproduct of production to adhere

to certain caps on pollution discharge.

Additionally, such companies were required to obtain and annually renew a Pollution Discharge

Permit in order to conduct their operations.

The PRC government has the authority to shut down a company’s operations for

its failure to maintain a valid permit.

We renewed our Pollution Discharge Permit in August 2016.

Our latest permit is effective

from August 8, 2016 through August 7, 2019.

An application to renew will be filed by us with the local environment protection

agency before the expiration.

failure by us to obtain any certificate, permit, and license necessary for our operations or the failure by us to obtain the renewal

of any such certificate, permit or license may materially and adversely affect our business, prospects, financial condition and

results of operation.

with environmental regulations is expensive, and noncompliance may result in adverse publicity and potentially significant monetary

damages and fines or suspension of our business operations.

are required to comply with all Chinese national and local regulations regarding the protection of the environment.

with environmental regulation is expensive.

The Chinese government is adopting even more stringent environmental protection and

operational safety regulations and the costs of complying with these regulations are expected to increase.

Although we have obtained

all of the necessary approvals and permits for our production facilities currently existing, we cannot assure you that we will

be able to comply with all applicable environmental protection and operational safety requirements, and obtain all of the required

governmental approvals and permits that may be or may become applicable to us on a timely basis, or at all, or will be able to

complete all our registrations and filings with the government, in time for our future projects.

The relevant governmental authorities

may impose on us fines for any non-compliance, set deadlines for rectification, and order us to cease construction or production

if we fail to comply with their requirements.

we are unable to respond to pricing pressures, our business may be harmed.

order to remain competitive, from time to time we have to adjust the prices of our products to remain competitive.

have available sufficient financial or other resources to continue to make investments necessary to maintain our competitive position.

we fail to introduce enhancements to our existing products or to develop new products, our business and results of operations

could be adversely affected.

believe that our future success depends in part on our ability to enhance our existing products and develop new products in order

to continue to meet customer demand.

Our failure to introduce new or enhanced products on a timely and cost-competitive basis,

or the development of processes that make our existing products obsolete, could harm our business and results of operations.

auditor, like other independent registered public accounting firms operating in China, is not permitted to be subject to inspection

by the Public Company Accounting Oversight Board, and as such, investors may be deprived of the benefits of such inspection.

independent registered public accounting firm that issues the audit reports included in our annual reports filed with the SEC,

as an auditor of companies that are traded publicly in the United States and a firm registered with the Public Company Accounting

Oversight Board (United States), or PCAOB, is required by the laws of the United States to undergo regular inspections by PCAOB

to assess its compliance with the laws of the United States and professional standards.

On May 24, 2013, the PCAOB announced that

it had signed a Memorandum of Understanding (“MOU”) with Chinese securities regulators that would enable the PCAOB

under certain circumstances to obtain audit work papers of China-based audit firms.

The MOU establishes a framework under which

the PCAOB can request and obtain audit papers and permits the PCAOB to share the work papers it obtains with the SEC, subject

to certain requirements.

But the MOU, which is non-binding, is also limited by its own terms.

For instance, Chinese regulators

may refuse to produce documents in specified circumstances, including where production would violate Chinese law or run contrary

to the public interest.

Moreover, the MOU does not provide the PCAOB with the ability to conduct on-the-ground inspections of

auditors in China, an important part of the Board’s oversight function.

As a result, our auditor, like other independent

registered public accounting firms operating in China, is currently not inspected by PCAOB in the same way that PCAOB requests

independent registered public accounting firms operating outside China.

Inspections of other firms that PCAOB has conducted outside

of China have identified deficiencies in those firms’

audit procedures and quality control procedures, which may be addressed

as part of the inspection process to improve future audit quality.

The inability of PCAOB to conduct regular inspections of independent

registered public accounting firms operating in China makes it more difficult to evaluate the effectiveness of our auditor’s

audit procedures or quality control procedures.

As a result, investors may be deprived of the benefits of PCAOB regular inspections.

have limited insurance coverage and may incur losses resulting from product liability claims or business interruptions.

the insurance industry in China is still in an early stage of development, insurance companies in China currently offer limited

business insurance products.

● other operational problems.

If any of the abovementioned

events were to occur, we may be unable to meet customer demand, which may adversely affect our sales and net income.

Our certificates, permits, and licenses

related to our papermaking operations are subject to governmental control and renewal and failure to obtain renewal will cause

all or part of our operations to be terminated.

In 1988, the National

Environmental Protection Bureau issued Interim Measures on the Administration of Water Pollutants Discharge Permits, requiring

all companies discharging pollution into the water as a direct or indirect byproduct of production to adhere to certain caps on

pollution discharge.

Additionally, such companies were required to obtain and annually renew a Pollution Discharge Permit in order

to conduct their operations.

The PRC government has the authority to shut down a company’s operations for its failure to

maintain a valid permit.

We renewed our Pollution Discharge Permit in June 2017.

Our latest permit is effective from June 28, 2017

through June 27, 2020.

An application to renew will be filed by us with the local environment protection agency before the expiration.

The failure by us

to obtain any certificate, permit, and license necessary for our operations or the failure by us to obtain the renewal of any such

certificate, permit or license may materially and adversely affect our business, prospects, financial condition and results of

Compliance with environmental regulations

is expensive, and noncompliance may result in adverse publicity and potentially significant monetary damages and fines or suspension

of our business operations.

We are required to

comply with all Chinese national and local regulations regarding the protection of the environment.

Compliance with environmental

regulation is expensive.

The Chinese government is adopting even more stringent environmental protection and operational safety

regulations and the costs of complying with these regulations are expected to increase.

Although we have obtained all of the necessary

approvals and permits for our production facilities currently existing, we cannot assure you that we will be able to comply with

all applicable environmental protection and operational safety requirements, and obtain all of the required governmental approvals

and permits that may be or may become applicable to us on a timely basis, or at all, or will be able to complete all our registrations

and filings with the government, in time for our future projects.

The relevant governmental authorities may impose on us fines

for any non-compliance, set deadlines for rectification, and order us to cease construction or production if we fail to comply

with their requirements.

If we are unable to respond to pricing

pressures, our business may be harmed.

In order to remain

competitive, from time to time we have to adjust the prices of our products to remain competitive.

We may not have available sufficient

financial or other resources to continue to make investments necessary to maintain our competitive position.

If we fail to introduce enhancements

to our existing products or to develop new products, our business and results of operations could be adversely affected.

We believe that our

future success depends in part on our ability to enhance our existing products and develop new products in order to continue to

meet customer demand.

Our failure to introduce new or enhanced products on a timely and cost-competitive basis, or the development

of processes that make our existing products obsolete, could harm our business and results of operations.

Our auditor, like other independent

registered public accounting firms operating in China, is not permitted to be subject to inspection by the Public Company Accounting

Oversight Board, and as such, investors may be deprived of the benefits of such inspection.

The independent registered

public accounting firm that issues the audit reports included in our annual reports filed with the SEC, as an auditor of companies

that are traded publicly in the United States and a firm registered with the Public Company Accounting Oversight Board (United

States), or PCAOB, is required by the laws of the United States to undergo regular inspections by PCAOB to assess its compliance

with the laws of the United States and professional standards.

On May 24, 2013, the PCAOB announced that it had signed a Memorandum

of Understanding (“MOU”) with Chinese securities regulators that would enable the PCAOB under certain circumstances

to obtain audit work papers of China-based audit firms.

The MOU establishes a framework under which the PCAOB can request and obtain

audit papers and permits the PCAOB to share the work papers it obtains with the SEC, subject to certain requirements.

which is non-binding, is also limited by its own terms.

For instance, Chinese regulators may refuse to produce documents in specified

circumstances, including where production would violate Chinese law or run contrary to the public interest.

Moreover, the MOU does

not provide the PCAOB with the ability to conduct on-the-ground inspections of auditors in China, an important part of the Board’s

oversight function.

As a result, our auditor, like other independent registered public accounting firms operating in China, is

currently not inspected by PCAOB in the same way that PCAOB requests independent registered public accounting firms operating outside

Inspections of other firms that PCAOB has conducted outside of China have identified deficiencies in those firms’

audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit

The inability of PCAOB to conduct regular inspections of independent registered public accounting firms operating in China

makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures.

a result, investors may be deprived of the benefits of PCAOB regular inspections.

We have limited insurance coverage

and may incur losses resulting from product liability claims or business interruptions.

As the insurance industry

in China is still in an early stage of development, insurance companies in China currently offer limited business insurance products.

We do not have any product liability insurance or business interruption insurance.

Based on the insurance

products available in China, even if we decide to take out business interruption coverage, such insurance as currently available

offers limited coverage compared to that offered in many other jurisdictions.

Any business disruption, natural disaster, or product

liability claim could result in our incurring substantial costs and diversion of resources, which would have an adverse effect

on our business and results of operations.

Related To Doing Business in the PRC

in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in the PRC and

the profitability of such business.

business operations may be adversely affected by the current and future political environment in the PRC.

The PRC has operated

as a socialist state since the middle of the 20th century and is controlled by the Communist Party of China.

The Chinese government

exerts substantial influence and control over the manner in which we must conduct our business activities.

The PRC has only permitted

provincial and local economic autonomy and private economic activities since 1978.

The government of the PRC has exercised and

continues to exercise substantial control over virtually every sector of the Chinese economy, including the paper industry, through

regulation and state ownership.

Our ability to operate in the PRC may be adversely affected by changes in Chinese laws and regulations,

including those relating to taxation, import and export tariffs, raw materials, environmental regulations, land use rights, property

and other matters.

Under its current leadership, the government of the PRC has been pursuing economic reform policies that encourage

private economic activity and greater economic decentralization.

There is no assurance, however, that the government of the PRC

will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.

of the PRC government can have significant effects on the economic conditions of the PRC.

The PRC government has confirmed that

economic development will follow the model of a market economy.

Under this direction, we believe that the PRC will continue to

strengthen its economic and trading relationships with foreign countries and business development in the PRC will follow market

While we believe that this trend will continue, there can be no assurance that this will be the case.

change in policies by the PRC government could adversely affect our interests by, among other factors:

changes in laws, regulations

or the interpretation thereof, confiscatory taxation, restrictions on currency conversion, imports or sources of supplies, or

the expropriation or nationalization of private enterprises.

Although the PRC government has been pursuing economic reform policies

for more than two decades, there is no assurance that the government will continue to pursue such policies or that such policies

may not be significantly altered, especially in the event of a change in leadership, social or political disruption, or other

circumstances affecting the PRC’s political, economic and social life.

PRC laws and regulations governing our current business operations are sometimes vague and uncertain.

Any changes in such PRC

laws and regulations may harm our business.

PRC laws and regulations governing our current business operations are sometimes vague and uncertain.

The PRC’s legal system

is a civil law system based on written statutes, in which system decided legal cases have little value as precedents unlike the

common law system prevalent in the United States.

There are substantial uncertainties regarding the interpretation and application

of PRC laws and regulations, including but not limited to the laws and regulations governing our business, the enforcement and

performance of our contractual arrangements with our affiliated Chinese entity, Dongfang Paper, and its shareholders, or the enforcement

and performance of our arrangements with customers in the event of the imposition of statutory liens, death, bankruptcy and criminal

The Chinese government has been developing a comprehensive system of commercial laws, and considerable progress has

been made in introducing laws and regulations dealing with economic matters such as foreign investment, corporate organization

and governance, commerce, taxation and trade.

However, because these laws and regulations are relatively new, and because of the

limited volume of published cases and judicial interpretation and their lack of force as precedents, interpretation and enforcement

of these laws and regulations involve significant uncertainties.

New laws and regulations that affect existing and proposed future

businesses may also be applied retroactively.

Our major operating entity, Dongfang Paper, conducts its operations in China, and

as a result, we are required to comply with PRC laws and regulations.

We cannot assure you that our current ownership and operating

structure would not be found in violation of any current or future PRC laws or regulations.

Any of these or similar actions could

significantly disrupt our business operations or restrict us from conducting a substantial portion of our business operations,

which could materially and adversely affect our business, financial condition and results of operations.

We cannot predict what

effect the interpretation of existing or new PRC laws or regulations may have on our business.

If the relevant authorities find

that we are in violation of PRC laws or regulations, they would have broad discretion in dealing with such a violation, including,

without limitation:

Based on the insurance products available in

China, even if we decide to take out business interruption coverage, such insurance as currently available offers limited coverage

compared to that offered in many other jurisdictions.

Any business disruption, natural disaster, or product liability claim could

result in our incurring substantial costs and diversion of resources, which would have an adverse effect on our business and results

of operations.

Risks Related To Doing Business in the

Changes in the policies of the PRC

government could have a significant impact upon the business we may be able to conduct in the PRC and the profitability of such

Our business operations

may be adversely affected by the current and future political environment in the PRC.

The PRC has operated as a socialist state

since the middle of the 20th century and is controlled by the Communist Party of China.

The Chinese government exerts substantial

influence and control over the manner in which we must conduct our business activities.

The PRC has only permitted provincial and

local economic autonomy and private economic activities since 1978.

The government of the PRC has exercised and continues to exercise

substantial control over virtually every sector of the Chinese economy, including the paper industry, through regulation and state

Our ability to operate in the PRC may be adversely affected by changes in Chinese laws and regulations, including those

relating to taxation, import and export tariffs, raw materials, environmental regulations, land use rights, property and other

Under its current leadership, the government of the PRC has been pursuing economic reform policies that encourage private

economic activity and greater economic decentralization.

There is no assurance, however, that the government of the PRC will continue

to pursue these policies, or that it will not significantly alter these policies from time to time without notice.

Policies of the PRC

government can have significant effects on the economic conditions of the PRC.

The PRC government has confirmed that economic development

will follow the model of a market economy.

Under this direction, we believe that the PRC will continue to strengthen its economic

and trading relationships with foreign countries and business development in the PRC will follow market forces.

While we believe

that this trend will continue, there can be no assurance that this will be the case.

A change in policies

by the PRC government could adversely affect our interests by, among other factors:

changes in laws, regulations or the interpretation

thereof, confiscatory taxation, restrictions on currency conversion, imports or sources of supplies, or the expropriation or nationalization

of private enterprises.

Although the PRC government has been pursuing economic reform policies for more than three decades, there

is no assurance that the government will continue to pursue such policies or that such policies may not be significantly altered,

especially in the event of a change in leadership, social or political disruption, or other circumstances affecting the PRC’s

political, economic and social life.

The PRC laws and regulations governing

our current business operations are sometimes vague and uncertain.

Any changes in such PRC laws and regulations may harm our business.

The PRC laws and regulations

governing our current business operations are sometimes vague and uncertain.

The PRC’s legal system is a civil law system

based on written statutes, in which system decided legal cases have little value as precedents unlike the common law system prevalent

in the United States.

There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations,

including but not limited to the laws and regulations governing our business, the enforcement and performance of our contractual

arrangements with our affiliated Chinese entity, Dongfang Paper, and its shareholders, or the enforcement and performance of our

arrangements with customers in the event of the imposition of statutory liens, death, bankruptcy and criminal proceedings.

Chinese government has been developing a comprehensive system of commercial laws, and considerable progress has been made in introducing

laws and regulations dealing with economic matters such as foreign investment, corporate organization and governance, commerce,

taxation and trade.

However, because these laws and regulations are relatively new, and because of the limited volume of published

cases and judicial interpretation and their lack of force as precedents, interpretation and enforcement of these laws and regulations

involve significant uncertainties.

New laws and regulations that affect existing and proposed future businesses may also be applied

retroactively.

Our major operating entity, Dongfang Paper, conducts its operations in China, and as a result, we are required to

comply with PRC laws and regulations.

We cannot assure you that our current ownership and operating structure would not be found

in violation of any current or future PRC laws or regulations.

Any of these or similar actions could significantly disrupt our

business operations or restrict us from conducting a substantial portion of our business operations, which could materially and

adversely affect our business, financial condition and results of operations.

We cannot predict what effect the interpretation

of existing or new PRC laws or regulations may have on our business.

If the relevant authorities find that we are in violation

of PRC laws or regulations, they would have broad discretion in dealing with such a violation, including, without limitation:

● levying fines;

revoking Dongfang

Paper’s business and other licenses;

that we restructure our ownership or operations;

that we discontinue any portion or all of our business.

the material laws that we are subject to are the Price Law of The People’s Republic of China, Measurement Law of The People’s

Republic of China, Tax Law, Environmental Protection Law, Contract Law, Patent Law, Accounting Laws and Labor Law.

slowdown, inflation or other adverse developments in the PRC economy may harm our customers and the demand for our services and

of our operations are conducted in the PRC and all of our revenue is generated from sales in the PRC.

Although the PRC economy

has grown significantly in recent years, we cannot assure you that this growth will continue.

In 2018, China’s Gross Domestic

Product (“GDP”) growth rate was 6.6% as compared to 6.9% in 2017.

A slowdown in overall economic growth, an economic

downturn, a recession or other adverse economic developments in the PRC could significantly reduce the demand for our products

and harm our business.

With the slowdown of GDP growth rate, sales revenue for our CMPand offset printing paper in 2018 decreased

by approximately 14.99% and 72.51%, respectively, as compared to 2017.

Additionally,

while the PRC economy has experienced rapid growth, such growth has been uneven among various sectors of the economy and in different

geographical areas of the country.

● revoking Dongfang Paper’s business and other licenses;

● requiring that we restructure our ownership or operations;

● requiring that we discontinue any portion or all of our business.

Among the material

laws that we are subject to are the Price Law of The People’s Republic of China, Measurement Law of The People’s Republic

of China, Tax Law, Environmental Protection Law, Contract Law, Patent Law, Accounting Laws and Labor Law.

A slowdown, inflation or other adverse

developments in the PRC economy may harm our customers and the demand for our services and products.

All of our operations

are conducted in the PRC and all of our revenue is generated from sales in the PRC.

Although the PRC economy has grown significantly

in recent years, we cannot assure you that this growth will continue.

In 2019, China’s Gross Domestic Product (“GDP”)

growth rate was 6.1% as compared to 6.6% in 2018.

A slowdown in overall economic growth, an economic downturn, a recession or other

adverse economic developments in the PRC could significantly reduce the demand for our products and harm our business.

the slowdown of China’s GDP growth rate, sales revenue for our CMP and offset printing paper in 2019 increased by approximately

11.31% and 297.83%, respectively, as compared to 2018.

Additionally, while

the PRC economy experienced rapid growth, such growth has been uneven among various sectors of the economy and in different geographical

areas of the country.

Rapid economic growth could lead to growth in the money supply and rising inflation.

for our products rise at a rate that is insufficient to compensate for the rise in the costs of supplies, it may harm our profitability.

In order to control inflation in the past, the PRC government has imposed controls on bank credit, limits on loans for fixed assets

and restrictions on state bank lending.

If prices for our products

rise at a rate that is insufficient to compensate for the rise in the costs of supplies, it may harm our profitability.

to control inflation in the past, the PRC government has imposed controls on bank credit, limits on loans for fixed assets and

restrictions on state bank lending.

Such an austere policy can lead to a slowing of economic growth.

control of currency conversion may affect the value of your investment.

PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance

of currency out of the PRC.

We receive substantially all of our revenue in Renminbi, which is currently not a freely convertible

Shortages in the availability of foreign currency may restrict our ability to remit sufficient foreign currency to pay

dividends, or otherwise satisfy foreign currency denominated obligations.

Under existing PRC foreign exchange regulations, payments

of current account items, including profit distributions, interest payments and expenditures from the transaction, can be made

in foreign currencies without prior approval from the PRC State Administration of Foreign Exchange by complying with certain procedural

requirements.

However, approval from appropriate governmental authorities is required where Renminbi is to be converted into foreign

currency and remitted out of the PRC to pay capital expenses such as the repayment of bank loans denominated in foreign currencies.

PRC government may also in the future restrict access to foreign currencies for current account transactions.

If the foreign exchange

control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay

certain of our expenses as they come due.

fluctuation of the Renminbi may harm your investment.

value of the Renminbi against the U.S.

dollar and other currencies may fluctuate and is affected by, among other things, changes

in the PRC’s political and economic conditions.

According to the Bureau of the Fiscal Service, as of December 31, 2018,

$1 is converted into 6.8632 Yuan (RMB).

As we rely entirely on revenues earned in the PRC, any significant revaluation of the

Renminbi may materially and adversely affect our cash flows, revenues and financial condition.

For example, to the extent that

we need to convert U.S.

dollars we receive from an offering of our securities into Renminbi for Dongfang Paper’s operations,

appreciation of the Renminbi against the U.S.

dollar would diminish the value of the proceeds of the offering and this could harm

our business, financial condition and results of operations because it would reduce the proceeds available to us for capital investment

in proportion to the appreciation of the Renminbi.

Thus, if we raise 1,000,000 dollars and the Renminbi appreciates against the

dollar by 15%, then the proceeds will be worth only RMB5,833,720 as opposed to RMB 6,863,200 prior to the appreciation.

if we decide to convert our Renminbi into U.S.

dollars for the purpose of making payments for dividends on our common shares or

for other business purposes and the U.S.

Governmental control of currency

conversion may affect the value of your investment.

The PRC government

imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out

We receive substantially all of our revenue in Renminbi, which is currently not a freely convertible currency.

in the availability of foreign currency may restrict our ability to remit sufficient foreign currency to pay dividends, or otherwise

satisfy foreign currency denominated obligations.

Under existing PRC foreign exchange regulations, payments of current account

items, including profit distributions, interest payments and expenditures from the transaction, can be made in foreign currencies

without prior approval from the PRC State Administration of Foreign Exchange by complying with certain procedural requirements.

However, approval from appropriate governmental authorities is required where Renminbi is to be converted into foreign currency

and remitted out of the PRC to pay capital expenses such as the repayment of bank loans denominated in foreign currencies.

The PRC government

may also in the future restrict access to foreign currencies for current account transactions.

If the foreign exchange control

system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay certain

of our expenses as they come due.

The fluctuation of the Renminbi may

harm your investment.

The value of the Renminbi

against the U.S.

dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political

and economic conditions.

According to the Bureau of the Fiscal Service, as of December 31, 2019, $1 is converted into 6.9762 Yuan

As we rely entirely on revenues earned in the PRC, any significant revaluation of the Renminbi may materially and adversely

affect our cash flows, revenues and financial condition.

For example, to the extent that we need to convert U.S.

dollars we receive

from an offering of our securities into Renminbi for Dongfang Paper’s operations, appreciation of the Renminbi against the

dollar would diminish the value of the proceeds of the offering and this could harm our business, financial condition and

results of operations because it would reduce the proceeds available to us for capital investment in proportion to the appreciation

of the Renminbi.

Thus, if we raise 1,000,000 U.S.

dollars and the Renminbi appreciates against the U.S.

dollar by 15%, then the

proceeds will be worth only RMB5,929,770 as opposed to RMB 6,976,200 prior to the appreciation.

Conversely, if we decide to convert

our Renminbi into U.S.

dollars for the purpose of making payments for dividends on our common shares or for other business purposes

dollar appreciates against the Renminbi, the U.S.

dollar equivalent of the Renminbi we

convert would be reduced in proportion to the amount the U.S.

dollar equivalent of the Renminbi we convert would be reduced in

proportion to the amount the U.S.

dollar appreciates.

In addition, the depreciation of significant

RMB denominated assets could result in a charge to our income statement and a reduction in the dollar value of these assets.

if Dongfang Paper has RMB1,000,000 in assets and Renminbi is depreciated against the U.S.

dollar by 15%, then the assets will

be valued at $123,849 as opposed to $145,705 prior to the depreciation.

July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S.

the new policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies.

This change in policy has resulted in an approximately 5.15% depreciation of the Renminbi against the U.S.

In addition, the depreciation of significant RMB denominated assets could

result in a charge to our income statement and a reduction in the dollar value of these assets.

Thus, if Dongfang Paper has RMB1,000,000

in assets and Renminbi is depreciated against the U.S.

dollar by 15%, then the assets will be valued at $143,345 as opposed to

$168,640 prior to the depreciation.

On July 21, 2005,

the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S.

Under the new policy,

the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies.

in policy has resulted in an approximately 1.65% depreciation of the Renminbi against the U.S.

dollar as of December 31, 2019.

While the international reaction to the Renminbi revaluation has generally been positive, there remains significant

international pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and

more significant appreciation of the Renminbi against the U.S.

to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may materially

adversely affect us.

PRC State Administration of Foreign Exchange, or SAFE, has promulgated regulations, including the Notice on Relevant Issues Relating

to Domestic Residents’

Investment and Financing and Round-Trip Investment through Special Purpose Vehicles, or SAFE Circular

37, effective on July 14, 2014, and its appendixes, that require PRC residents, including PRC institutions and individuals,

to register with local branches of the SAFE in connection with their direct establishment or indirect control of an offshore entity,

for the purpose of overseas investment and financing, with such PRC residents’

legally owned assets or equity interests

in domestic enterprises or offshore assets or interests, referred to in SAFE Circular No.

While the international reaction to the Renminbi revaluation has generally been positive, there remains significant international

pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant

depreciation of the Renminbi against the U.S.

Failure to comply with PRC regulations

relating to the establishment of offshore special purpose companies by PRC residents may materially adversely affect us.

The PRC State Administration

of Foreign Exchange, or SAFE, has promulgated regulations, including the Notice on Relevant Issues Relating to Domestic Residents’

Investment and Financing and Round-Trip Investment through Special Purpose Vehicles, or SAFE Circular No.

37, effective on July

14, 2014, and its appendixes, that require PRC residents, including PRC institutions and individuals, to register with local branches

of the SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas

investment and financing, with such PRC residents’

legally owned assets or equity interests in domestic enterprises or offshore

assets or interests, referred to in SAFE Circular No.

37 as a “special purpose vehicle.”

SAFE Circular No.

37 further requires amendment to the registration in the event of any significant changes with respect to the

special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger,

division or other material event.

In the event that a PRC shareholder holding interests in a special purpose vehicle fails to

fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit

distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special

purpose vehicle may be restricted in their ability to contribute additional capital into its PRC subsidiary.

Further, failure

to comply with the various SAFE registration requirements described above could result in liability under PRC law for foreign

exchange evasion.

of uncertainty over the interpretation of Circular 37, we cannot assure you that, if challenged by government agencies, the structure

of our organization has fully complied with all applicable registrations or approvals required by Circular 37.

Moreover, because

of uncertainty over how Circular 37 will be interpreted and implemented, and how or whether SAFE will apply it to us, we cannot

predict how it will affect our business operations or future strategies.

A failure by such PRC resident beneficial holders or

future PRC resident stockholders to comply with Circular 37 , if SAFE requires it, could subject these PRC resident beneficial

holders to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiaries’

ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and

PRC’s legal and judicial system may not adequately protect our business and operations and the rights of foreign investors.

PRC legal and judicial system may negatively impact foreign investors.

In 1982, the National People’s Congress amended the

Constitution of China to authorize foreign investment and guarantee the “lawful rights and interests”

of foreign investors

requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such

as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material

In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration,

the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent

and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in

their ability to contribute additional capital into its PRC subsidiary.

Further, failure to comply with the various SAFE registration

requirements described above could result in liability under PRC law for foreign exchange evasion.

Because of uncertainty

over the interpretation of Circular 37, we cannot assure you that, if challenged by government agencies, the structure of our organization

has fully complied with all applicable registrations or approvals required by Circular 37.

Moreover, because of uncertainty over

how Circular 37 will be interpreted and implemented, and how or whether SAFE will apply it to us, we cannot predict how it will

affect our business operations or future strategies.

A failure by such PRC resident beneficial holders or future PRC resident stockholders

to comply with Circular 37, if SAFE requires it, could subject these PRC resident beneficial holders to fines or legal sanctions,

restrict our overseas or cross-border investment activities, limit our subsidiaries’

ability to make distributions or pay

dividends or affect our ownership structure, which could adversely affect our business and prospects.

The PRC’s legal and judicial

system may not adequately protect our business and operations and the rights of foreign investors.

The PRC legal and

judicial system may negatively impact foreign investors.

In 1982, the National People’s Congress amended the Constitution

of China to authorize foreign investment and guarantee the “lawful rights and interests”

of foreign investors in the

However, the PRC’s system of laws is not yet comprehensive.

The legal and judicial systems in the PRC are still

rudimentary, and enforcement of existing laws is inconsistent.

Many judges in the PRC lack the depth of legal training and experience

that would be expected of a judge in a more developed country.

Because the PRC judiciary is relatively inexperienced in enforcing

the laws that do exist, anticipation of judicial decision-making is more uncertain than would be expected in a more developed

It may be impossible to obtain swift and equitable enforcement of laws that do exist, or to obtain enforcement of the

judgment of one court by a court of another jurisdiction.

The PRC’s legal system is based on the civil law regime, that

is, it is based on written statutes;

a decision by one judge does not set a legal precedent that is required to be followed by

judges in other cases.

The legal and judicial systems in the PRC are still rudimentary,

and enforcement of existing laws is inconsistent.

Many judges in the PRC lack the depth of legal training and experience that would

be expected of a judge in a more developed country.

Because the PRC judiciary is relatively inexperienced in enforcing the laws

that do exist, anticipation of judicial decision-making is more uncertain than would be expected in a more developed country.

may be impossible to obtain swift and equitable enforcement of laws that do exist, or to obtain enforcement of the judgment of

one court by a court of another jurisdiction.

The PRC’s legal system is based on the civil law regime, that is, it is based

on written statutes;

a decision by one judge does not set a legal precedent that is required to be followed by judges in other

In addition, the interpretation of Chinese laws may be varied to reflect domestic political changes.

trend of legislation over the last 20 years has significantly enhanced the protection of foreign investment and allowed for more

control by foreign parties of their investments in Chinese enterprises.

However, the promulgation of new laws, changes to existing

laws and the pre-emption of local regulations by national laws may adversely affect foreign investors.

A change in leadership,

social or political disruption, or unforeseen circumstances affecting the PRC’s political, economic or social life, may

affect the PRC government’s ability to continue to support and pursue these reforms.

Such a shift could have a material

adverse effect on our business and prospects.

practical effect of the PRC legal system on our business operations in the PRC can be viewed from two separate but intertwined

considerations.

First, as a matter of substantive law, the foreign invested enterprise laws provide significant protection from

government interference.

In addition, these laws guarantee the full enjoyment of the benefits of corporate articles and contracts

to foreign invested enterprise participants.

These laws, however, do impose standards concerning corporate formation and governance,

which are qualitatively different from the general corporation laws of the United States.

Similarly, the PRC accounting laws mandate

accounting practices, which are not consistent with U.S.

The trend of legislation

over the last 20 years has significantly enhanced the protection of foreign investment and allowed for more control by foreign

parties of their investments in Chinese enterprises.

However, the promulgation of new laws, changes to existing laws and the pre-emption

of local regulations by national laws may adversely affect foreign investors.

A change in leadership, social or political disruption,

or unforeseen circumstances affecting the PRC’s political, economic or social life, may affect the PRC government’s

ability to continue to support and pursue these reforms.

Such a shift could have a material adverse effect on our business and

The practical effect

of the PRC legal system on our business operations in the PRC can be viewed from two separate but intertwined considerations.

as a matter of substantive law, the foreign invested enterprise laws provide significant protection from government interference.

In addition, these laws guarantee the full enjoyment of the benefits of corporate articles and contracts to foreign invested enterprise

participants.

These laws, however, do impose standards concerning corporate formation and governance, which are qualitatively different

from the general corporation laws of the United States.

Similarly, the PRC accounting laws mandate accounting practices, which

are not consistent with U.S.

generally accepted accounting principles.

PRC’s accounting laws

require that an annual “statutory audit”

be performed in accordance with PRC accounting standards and that the books

of account of foreign invested enterprises are maintained in accordance with Chinese accounting laws.

Article 14 of the People’s

Republic of China Wholly Foreign-Owned Enterprise Law requires a wholly foreign-owned enterprise to submit certain periodic fiscal

reports and statements to designated financial and tax authorities, at the risk of business license revocation.

While the enforcement

of substantive rights may appear less clear than United States procedures, foreign invested enterprises and wholly foreign-owned

enterprises are Chinese registered companies, which enjoy the same status as other Chinese registered companies in business-to-business

dispute resolution.

Any award rendered by an arbitration tribunal is enforceable in accordance with the United Nations Convention

on the Recognition and Enforcement of Foreign Arbitral Awards (1958).

Therefore, as a practical matter, although no assurances

can be given, the Chinese legal infrastructure, while different in operation from its United States counterpart, should not present

any significant impediment to the operation of foreign invested enterprises.

our principal assets are located outside of the United States and most of our directors and officers reside outside of the United

States, it may be difficult for you to enforce your rights based on U.S.

federal securities laws against us and our officers or

to enforce U.S.

court judgment against us or them in the PRC.

of our directors and officers reside outside the United States.

In addition, our operating company is located in the PRC and substantially

all of our assets are located outside of the United States.

It may therefore be difficult for investors in the United States to

enforce their legal rights based on the civil liability provisions of the U.S.

Federal securities laws against us in the courts

of either the U.S.

PRC’s accounting laws require that an annual “statutory

be performed in accordance with PRC accounting standards and that the books of account of foreign invested enterprises

are maintained in accordance with Chinese accounting laws.

Article 14 of the People’s Republic of China Wholly Foreign-Owned

Enterprise Law requires a wholly foreign-owned enterprise to submit certain periodic fiscal reports and statements to designated

financial and tax authorities, at the risk of business license revocation.

While the enforcement of substantive rights may appear

less clear than United States procedures, foreign invested enterprises and wholly foreign-owned enterprises are Chinese registered

companies, which enjoy the same status as other Chinese registered companies in business-to-business dispute resolution.

rendered by an arbitration tribunal is enforceable in accordance with the United Nations Convention on the Recognition and Enforcement

of Foreign Arbitral Awards (1958).

Therefore, as a practical matter, although no assurances can be given, the Chinese legal infrastructure,

while different in operation from its United States counterpart, should not present any significant impediment to the operation

of foreign invested enterprises.

Because our principal assets are

located outside of the United States and most of our directors and officers reside outside of the United States, it may be difficult

for you to enforce your rights based on U.S.

federal securities laws against us and our officers or to enforce U.S.

court judgment

against us or them in the PRC.

All of our directors

and officers reside outside the United States.

In addition, our operating company is located in the PRC and substantially all of

our assets are located outside of the United States.

It may therefore be difficult for investors in the United States to enforce

their legal rights based on the civil liability provisions of the U.S.

Federal securities laws against us in the courts of either

or the PRC and, even if civil judgments are obtained in U.S.

courts, to enforce such judgments in PRC courts.

Further, it is unclear if extradition treaties now in effect between the United States and the PRC would permit effective enforcement

against us or our officers and directors of criminal penalties, under the U.S.

it is unclear if extradition treaties now in effect between the United States and the PRC would permit effective enforcement against

us or our officers and directors of criminal penalties, under the U.S.

Federal securities laws or otherwise.

may be required to broaden the coverage of the mandatory social security insurance programs under the Labor Law of the PRC.

PRC Labor Law, effective January 1, 2008, requires that employers enroll in the following social security insurance programs and

offer certain employer-sponsored premium benefits to eligible employees:

(1) retirement endowment, (2) healthcare insurance, (3)

unemployment insurance, (4) workers’

We may be required to broaden the

coverage of the mandatory social security insurance programs under the Labor Law of the PRC.

The PRC Labor Law,

effective January 1, 2008, requires that employers enroll in the following social security insurance programs and offer certain

employer-sponsored premium benefits to eligible employees:

(1) retirement endowment, (2) healthcare insurance, (3) unemployment

insurance, (4) workers’

compensation insurance, and (5) pregnancy insurance.

Of these insurance programs, the

retirement endowment fund requires employee withholdings of 4% to 8% of the gross compensation, while the employer’s matching

contribution varies from 16% to 20% of such compensation.

While the Company is enrolled in the retirement endowment fund and is

withholding employees’

portion and the employer’s portion of the endowment contribution, many of the Company’s

employees have elected to waive their coverage under these mandatory social security insurance programs in favor of certain other

low-cost, local government-sponsored social security insurance programs for residents in non-urban districts.

Although we have

verified with the local government agencies for the validity of the employee waivers and reasonably believe that we are not required

to cover the employees who waived the benefits, the local government may change its policy and ask us to broaden our insurance

coverage to those who have specifically waived their rights.

Related to Our Common Stock

officers and directors control us through their positions and stock ownership and their interests may differ from other stockholders.

of December 31, 2018, there were 22,022,316 shares of our common stock issued and outstanding.

Zhenyong Liu, our Chief Executive

Officer, beneficially owns approximately 24.93% of our common stock.

As a result, he is able to influence the outcome of stockholder

votes on various matters, including the election of directors and extraordinary corporate transactions including business combinations.

Of these insurance programs, the retirement

endowment fund requires employee withholdings of 4% to 8% of the gross compensation, while the employer’s matching contribution

varies from 16% to 20% of such compensation.

While the Company is enrolled in the retirement endowment fund and is withholding

employees’

portion and the employer’s portion of the endowment contribution, many of the Company’s employees

have elected to waive their coverage under these mandatory social security insurance programs in favor of certain other low-cost,

local government-sponsored social security insurance programs for residents in non-urban districts.

Although we have verified with

the local government agencies for the validity of the employee waivers and reasonably believe that we are not required to cover

the employees who waived the benefits, the local government may change its policy and ask us to broaden our insurance coverage

to those who have specifically waived their rights.

Risks Related to Our Common Stock

Our officers and directors control

us through their positions and stock ownership and their interests may differ from other stockholders.

As of December 31,

2019, there were 22,054,816 shares of our common stock issued and outstanding.

Zhenyong Liu, our Chief Executive Officer, beneficially

owns approximately 23.42% of our common stock.

As a result, he is able to influence the outcome of stockholder votes on various

matters, including the election of directors and extraordinary corporate transactions including business combinations.

Liu’s interests may differ from those of other stockholders.

Furthermore, ownership of 24.93% of our common stock

Liu reduces the public float and liquidity, and may affect the market price, of our common stock as traded on the NYSE

may not continue to pay cash dividends and any return on investment may be limited to the value of our common stock.

we intend to retain the majority of any future earnings for use in the operation and expansion of our business, we did declare

four quarterly cash dividends in April 2012 and November 2013.

Although it is likely that our Board of Directors will continue

the quarterly cash dividend as a regular dividend policy in the coming years, there is no guarantee that the cash dividend will

not be discontinued or reduced.

Should we decide to continue the cash dividend, as a holding company, our ability to pay dividends

and meet other obligations depends upon the receipt of dividends or other payments from our operating subsidiaries.

our operating subsidiaries, from time to time, may be subject to restrictions on their ability to make distributions to us, including

restrictions on the conversion of local currency into U.S.

Furthermore, ownership of 23.42% of our common stock by Mr.

Liu reduces the public float and liquidity, and may affect the market price, of our common stock as traded on the NYSE MKT.

We may not continue to pay cash dividends and any return

on investment may be limited to the value of our common stock.

While we intend to

retain the majority of any future earnings for use in the operation and expansion of our business, we did declare four quarterly

cash dividends in April 2012 and November 2013.

Although it is likely that our Board of Directors will continue the quarterly cash

dividend as a regular dividend policy in the coming years, there is no guarantee that the cash dividend will not be discontinued

Should we decide to continue the cash dividend, as a holding company, our ability to pay dividends and meet other obligations

depends upon the receipt of dividends or other payments from our operating subsidiaries.

In addition, our operating subsidiaries,

from time to time, may be subject to restrictions on their ability to make distributions to us, including restrictions on the conversion

of local currency into U.S.

dollars or other hard currency and other regulatory restrictions.

we fail to comply with Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner, our business could be harmed and our

stock price could decline.

adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require annual assessment of U.S.

If we fail to comply with Section

404 of the Sarbanes-Oxley Act of 2002 in a timely manner, our business could be harmed and our stock price could decline.

Rules adopted by the

SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require annual assessment of U.S.

public companies’

internal control over financial reporting.

The standards that must be met for management to assess the internal control over financial

reporting as effective are complex, and require significant documentation, testing and possible remediation to meet the detailed

While we have not detected any significant deficiency or material weakness in our internal control and with respect

to the assessment of the internal control for the year ended December 31, 2018, we cannot guarantee the implementation of controls

and procedures in future years to be without any significant deficiency or material weakness.

common stock may be affected by limited trading volume and may fluctuate significantly.

common stock is traded on the NYSE MKT.

Although a trading market has developed for our common stock, there can be no assurance

that the trading market for our common stock will be sustained.

Failure to maintain a trading market for our common stock may

adversely affect our shareholders’

control over financial reporting.

The standards that must be met for management to assess the internal control over financial reporting

as effective are complex, and require significant documentation, testing and possible remediation to meet the detailed standards.

While we have not detected any significant deficiency or material weakness in our internal control and with respect to the assessment

of the internal control for the year ended December 31, 2019, we cannot guarantee the implementation of controls and procedures

in future years to be without any significant deficiency or material weakness.

Our common stock may be affected

by limited trading volume and may fluctuate significantly.

Our common stock is

traded on the NYSE MKT.

Although a trading market has developed for our common stock, there can be no assurance that the trading

market for our common stock will be sustained.

Failure to maintain a trading market for our common stock may adversely affect our

shareholders’

ability to sell our common stock in short time periods, or at all.

Our common stock has

experienced, and may experience in the future, significant price and volume fluctuations, which could adversely affect the market

price of our common stock.

financings may dilute stockholders or impair our financial condition.

the future, we may need to raise additional funds through public or private financing, which might include the sale of equity

The issuance of equity securities could result in financial and voting dilution to our existing stockholders.

issuance of debt could result in effective subordination of stockholders’

interests to the debt, create the possibility

of default, and limit our financial and business alternatives.

Our common stock has experienced, and may

experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common

Future financings may dilute stockholders

or impair our financial condition.

In the future, we

may need to raise additional funds through public or private financing, which might include the sale of equity securities.

issuance of equity securities could result in financial and voting dilution to our existing stockholders.

The issuance of debt

could result in effective subordination of stockholders’

interests to the debt, create the possibility of default, and limit

our financial and business alternatives.

Unresolved Staff Comments

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors