What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2020-03-23 compared with 2019-03-07 · 616 added, 619 removed, 51 unchanged (96% of the section changed)

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Tech Packaging’s common stock is traded on the NYSE MKT exchange under the symbol “ITP”.

of March 7, 2019, we had approximately 3,100 shareholders of record of our common stock.

November 21, 2013, the Company declared another quarterly dividend of $0.005 per share to shareholders of record as of November

The dividend was paid on December 10, 2013.

Market for Registrant’s

Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

IT Tech Packaging’s

common stock is traded on the NYSE MKT exchange under the symbol “ITP”.

As of March 23, 2020,

we had approximately 3,100 shareholders of record of our common stock.

On November 21, 2013,

the Company declared another quarterly dividend of $0.005 per share to shareholders of record as of November 29, 2013.

was paid on December 10, 2013.

Total dividends declared and paid for the year ended December 31, 2013 were $323,032.

do not expect to pay dividends in the near future.

Future declaration of dividends will depend on, among other things, the Company’s

results of operations, capital requirements, financial condition and on such other factors as the Company’s Board of Directors

may in its discretion consider relevant and in the best long term interest of the shareholders.

Compensation Plan Information

August 28, 2011, the Company’s Annual General Meeting approved the 2011 Incentive Stock Plan (the “2011 ISP”)

as previously adopted by the Board of Directors on July 5, 2011.

Under the 2011 ISP, the Company may grant an aggregate of 375,000

shares of the Company’s common stock to the Company’s directors, officers, employees or consultants.

Specifically,

the Board and/or the Compensation Committee have authority to (a) grant, in its discretion, Incentive Stock Options or Non-statutory

Options, Stock Awards or Restricted Stock Purchase Offers;

(b) determine in good faith the fair market value of the stock covered

by any grant;

to be included in such grants;

and (d) make all other determinations necessary or advisable for the 2011 ISP’s administration.

On January 11, 2012, the Compensation Committee granted 109,584 shares of restricted common stock to certain officers and directors

of the Company.

On December 31, 2013, the Compensation Committee granted remaining 265,416 shares of restricted common stock to

39 recipients who are employees, officers and directors of the Company.

September 10, 2012, the Company’s Annual General Meeting approved the 2012 Incentive Stock Plan (the “2012 ISP”).

Under the 2012 ISP, the Company may grant an aggregate of 200,000 shares of the Company’s common stock to the Company’s

directors, officers, employees or consultants.

Specifically, the Board and/or the Compensation Committee have authority to (a)

grant, in its discretion, Incentive Stock Options or Non-statutory Options, Stock Awards or Restricted Stock Purchase Offers;

We do not expect to

pay dividends in the near future.

Future declaration of dividends will depend on, among other things, the Company’s results

of operations, capital requirements, financial condition and on such other factors as the Company’s Board of Directors may

in its discretion consider relevant and in the best long term interest of the shareholders.

Equity Compensation Plan Information

On August 28, 2011,

the Company’s Annual General Meeting approved the 2011 Incentive Stock Plan (the “2011 ISP”) as previously adopted

by the Board of Directors on July 5, 2011.

Under the 2011 ISP, the Company may grant an aggregate of 375,000 shares of the Company’s

common stock to the Company’s directors, officers, employees or consultants.

Specifically, the Board and/or the Compensation

Committee have authority to (a) grant, in its discretion, Incentive Stock Options or Non-statutory Options, Stock Awards or Restricted

Stock Purchase Offers;

(b) determine in good faith the fair market value of the stock covered by any grant;

receive grants and the number of shares, restrictions, terms and conditions to be included in such grants;

and (d) make all other

determinations necessary or advisable for the 2012 ISP’s administration.

On December 31, 2013, the Compensation Committee

granted 31,584 shares of restricted common stock under the 2012 ISP to 39 recipients who are employees, officers and directors

of the Company.

August 29, 2015, the Company’s Annual General Meeting approved the 2015 Omnibus Equity Incentive Plan (the “2015 ISP”).

Under the 2015 ISP, the Company may grant an aggregate of 1,500,000 shares of the Company’s common stock to the directors,

officers, employees and/or consultants of the Company and its subsidiaries.

The 2015 ISP provides for the granting of non-qualified

stock options, incentive stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance

eligible persons shall receive grants and the number of shares, restrictions, terms and conditions to be included in such grants;

and (d) make all other determinations necessary or advisable for the 2011 ISP’s administration.

On January 11, 2012, the

Compensation Committee granted 109,584 shares of restricted common stock to certain officers and directors of the Company.

31, 2013, the Compensation Committee granted remaining 265,416 shares of restricted common stock to 39 recipients who are employees,

officers and directors of the Company.

On September 10, 2012,

the Company’s Annual General Meeting approved the 2012 Incentive Stock Plan (the “2012 ISP”).

Under the 2012

ISP, the Company may grant an aggregate of 200,000 shares of the Company’s common stock to the Company’s directors,

officers, employees or consultants.

Specifically, the Board and/or the Compensation Committee have authority to (a) grant, in its

discretion, Incentive Stock Options or Non-statutory Options, Stock Awards or Restricted Stock Purchase Offers;

(b) determine in

good faith the fair market value of the stock covered by any grant;

the number of shares, restrictions, terms and conditions to be included in such grants;

and (d) make all other determinations necessary

or advisable for the 2012 ISP’s administration.

On December 31, 2013, the Compensation Committee granted 31,584 shares of

restricted common stock under the 2012 ISP to 39 recipients who are employees, officers and directors of the Company.

On August 29, 2015,

the Company’s Annual General Meeting approved the 2015 Omnibus Equity Incentive Plan (the “2015 ISP”).

the 2015 ISP, the Company may grant an aggregate of 1,500,000 shares of the Company’s common stock to the directors, officers,

employees and/or consultants of the Company and its subsidiaries.

The 2015 ISP provides for the granting of non-qualified stock

options, incentive stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance

stock awards, performance unit awards, unrestricted stock awards, distribution equivalent rights or any combination of the foregoing.

9 unchanged sentences

On January 12, 2016, the Company granted an aggregate of 1,133,916 shares

of common stock under its compensatory incentive plans to nine officers, directors and employees of and a consultant when the

stock was at $1.25 per share, as compensation for their services in the past years, of which 168,416 shares of common stock were

granted under the 2012 Incentive Stock Plan and 965,500 shares were granted under the 2015 Omnibus Equity Incentive.

13, 2018, the compensation committee granted an aggregate of 534,500 shares of common stock to fifteen officers, directors and

employees of the Company, which were granted under the 2015 Omnibus Equity Incentive Plan.

Total fair value of the shares of common

stock granted was calculated at $470,360 as of the date of issuance at $0.88 per share.

shares of common stock under the 2011, 2012 and 2015 ISPs, including shares originally authorized by equity holders and shares

remaining for future issuance as of December 31, 2018, has been issued.

Sales of Unregistered Securities

of Equity Securities by the Issuer and Affiliated Purchasers

of common stock under its compensatory incentive plans to nine officers, directors and employees of and a consultant when the stock

was at $1.25 per share, as compensation for their services in the past years, of which 168,416 shares of common stock were granted

under the 2012 Incentive Stock Plan and 965,500 shares were granted under the 2015 Omnibus Equity Incentive.

On September 13, 2018,

the compensation committee granted an aggregate of 534,500 shares of common stock to fifteen officers, directors and employees

of the Company, which were granted under the 2015 Omnibus Equity Incentive Plan.

Total fair value of the shares of common stock

granted was calculated at $470,360 as of the date of issuance at $0.88 per share.

On August 14, 2019,

the Company’s Annual General Meeting approved the 2019 Incentive Stock Plan (the “2019 ISP”).

Under the 2019

ISP, the Company may grant an aggregate of 2,000,000 shares of the Company’s common stock to the Company’s directors,

officers, employees or consultants.

Specifically, the Board and/or the Compensation Committee have authority to (a) grant, in its

discretion, Incentive Stock Options or Non-statutory Options, Stock Awards or Restricted Stock Purchase Offers;

(b) determine in

good faith the fair market value of the stock covered by any grant;

the number of shares, restrictions, terms and conditions to be included in such grants;

and (d) make all other determinations necessary

or advisable for the 2019 ISP’s administration.

All shares of common

stock under the 2011, 2012 and 2015 ISPs, including shares originally authorized by equity holders and shares remaining for future

issuance as of December 31, 2019, has been issued.

No shares of restricted common stock under the 2019 ISP was issued..

Recent Sales of Unregistered Securities

Purchases of Equity Securities by the Issuer and Affiliated

Selected Financial Data

selected financial data set forth below is derived from the consolidated financial statements of the Company.

The selected consolidated

statements of income and comprehensive income data for the years ended December 31, 2017 and 2018, and the selected consolidated

balance sheet data as of December 31, 2017 and 2018 have been derived from our audited consolidated financial statements included

elsewhere in this annual report.

Our selected consolidated statements of income and comprehensive income data for the year ended

December 31, 2014, 2015 and 2016 and the selected consolidated balance sheet data as of December 31, 2014, 2015 and 2016 have

been derived from our audited consolidated financial statements not included in this annual report.

Our historical results do

not necessarily indicate results expected for any future periods.

The selected consolidated financial data below should be read

in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations”,

the consolidated financial statements and notes thereto and the other information contained in this Form 10-K.

The financial information

has been prepared in accordance with U.S.

The selected financial

data set forth below is derived from the consolidated financial statements of the Company.

The selected consolidated statements

of income and comprehensive income data for the years ended December 31, 2018 and 2019, and the selected consolidated balance sheet

data as of December 31, 2018 and 2019 have been derived from our audited consolidated financial statements included elsewhere in

this annual report.

Our selected consolidated statements of income and comprehensive income data for the year ended December 31,

2015, 2016 and 2017 and the selected consolidated balance sheet data as of December 31, 2015, 2016 and 2017 have been derived from

our audited consolidated financial statements not included in this annual report.

Our historical results do not necessarily indicate

results expected for any future periods.

The selected consolidated financial data below should be read in conjunction with “Management’s

Discussion and Analysis of Financial Condition and Results of Operations”, the consolidated financial statements and notes

thereto and the other information contained in this Form 10-K.

The financial information has been prepared in accordance with U.S.

All financial information referred to herein is expressed in U.S.

dollars unless

otherwise noted.

Ended December 31,

thousands, except per share data)

STATEMENTS OF INCOME AND COMPREHENSIVE INCOME DATA

general and administrative expenses

(Loss) from impairment and disposal of property, plant and equipment

from disposal of assets held for sale (1)

from operations

(Loss) Income

and Diluted (Losses) Earnings per Share

BALANCE SHEETS DATA

and bank balances

receivable, net

plant, and equipment, net

stockholders’

gain from disposal of assets held for sale in 2014 was related to the gain from sales

of three employee dormitory buildings previously classified as assets held for sale to

a related party controlled by our Chairman and Chief Executive Officer Mr.

Zhenyong Liu.

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

following discussion of the financial condition and results of operations of the Company should be read in conjunction with the

selected financial data, the financial statements, and the notes to those statements that are included elsewhere in this annual

of Operations

for the year ended December 31, 2018 was $86,746,758, a decrease of $30,276,820, or 25.87%, from $117,023,578 for the previous

of Offset Printing Paper, Corrugating Medium Paper and Tissue Paper Products

from sales of offset printing paper, CMP and tissue paper products for the year ended December 31, 2018 was $86,733,136, a decrease

of $30,290,442, or 25.88%, from $117,023,578 for the year ended December 31, 2017.

This was mainly due to the decrease in sales

volume of Regular CMP and offset printing paper, which was partially offset by the increase in ASP of these products.

quantities of offset printing paper, CMP and tissue paper products sold during the year ended December 31, 2018 amounted to 156,849

tonnes, a decrease of 78,654 tonnes, or 33.40%, compared to 235,503 tonnes sold during the year ended December 31, 2017.

quantities of CMP and offset printing paper sold decreased by 76,850 tonnes in the year of 2018 as compared to 2017.

was suspended from late January 2018 to March 13, 2018 due to a government-mandated restriction on the natural gas supply.

of regular CMP was suspended in September 2018 due to equipment maintenance.

Production of offset printing paper was suspended

from August 2018 to December 2018 due to equipment maintenance and restriction on production volume by the government due to environmental

As a result, the production and sales volume of regular CMP and offset printing paper decreased significantly in 2018

as compared to year of 2017.The changes in revenue and quantity sold for the year ended December 31, 2018 and 2017 are summarized

$ (17,179,713 )

$ (14,382,821 )

Printing Paper

$ (13,550,765 )

Paper Products

$ (2,356,856 )

CMP, Offset Printing Paper and Tissue Paper Revenue

$ 117,023,578

dollars unless otherwise noted.

Year Ended December 31,

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME DATA

(in thousands, except per share data)

Selling, general and administrative expenses

Gain (Loss) from impairment and disposal of property, plant and equipment

Income from operations

Interest expense

Net Income (Loss)

Basic and Diluted Earnings (Losses) per Share

CONSOLIDATED BALANCE SHEETS DATA

Cash and bank balances

Accounts receivable, net

Property, plant, and equipment, net

Total liabilities

Total stockholders’

Management’s Discussion

and Analysis of Financial Condition and Results of Operations

The following discussion

of the financial condition and results of operations of the Company should be read in conjunction with the selected financial data,

the financial statements, and the notes to those statements that are included elsewhere in this annual report.

Results of Operations

Revenue for the year

ended December 31, 2019 was $117,614,886, an increase of $30,868,128, or 35.58%, from $86,746,758 for the previous year.

Revenue of Offset Printing Paper, Corrugating Medium Paper

and Tissue Paper Products

Revenue from sales

of offset printing paper, CMP and tissue paper products for the year ended December 31, 2019 was $117,613,736, an increase of $30,880,600,

or 35.60%, from $86,733,136 for the year ended December 31, 2018.

This was mainly due to the increase in sales volume of CMP, offset

printing paper and tissue paper, which was partially offset by the decrease in ASP of CMP and offset printing paper.

Total quantities of

offset printing paper, CMP and tissue paper products sold during the year ended December 31, 2019 amounted to 250,144 tonnes, an

increase of 93,295 tonnes, or 59.48%, compared to 156,849 tonnes sold during the year ended December 31, 2018.

Total quantities

of CMP and offset printing paper sold increased by 86,505 tonnes in the year of 2019 as compared to 2018.

We sold 6,790 tonnes

of tissue paper products in the year of 2019.

The increase was mainly due to the production suspension that took place from late

January 2018 to March 13, 2018 due to a government-mandated restriction on the natural gas supply, and the launch of our PM8 production

line in December 2018 for production and sales of tissue paper products.

The changes in revenue and quantity sold for the year

ended December 31, 2019 and 2018 are summarized as follows:

December 31, 2019

December 31, 2018

Sales Revenue

Quantity (Tonne)

Light-Weight CMP

Offset Printing Paper

Tissue Paper Products

Total CMP, Offset Printing Paper and Tissue Paper Revenue

$ 117,613,736

revenue (excluding revenue of digital photo paper and tissue paper products) for the 24 months ended December 31, 2018, are summarized

average selling price, or ASP, for our major products for the years ended December 31, 2018 and 2017 are summarized as follows:

Printing Paper ASP

Paper Products ASP

Monthly revenue (excluding

revenue of digital photo paper and tissue paper products) for the 24 months ended December 31, 2019, are summarized below:

The average selling

price, or ASP, for our major products for the years ended December 31, 2019 and 2018 are summarized as follows:

Offset Printing Paper ASP

Regular CMP ASP

Light-Weight CMP ASP

Tissue Paper Products ASP

Year Ended December 31, 2018

Year Ended December 31, 2019

Decrease from comparable period in the previous year

Decrease by percentage

The following is a

chart showing the month-by-month ASPs (excluding the ASPs of digital photo paper and tissue paper products) for the 24 month period

ended December 31, 2019:

December 31, 2018

from comparable period in the previous year

by percentage

following is a chart showing the month-by-month ASPs (excluding the ASPs of digital photo paper and tissue paper products) for

the 24 month period ended December 31, 2018:

from CMP amounted to $81,596,244 (94.08% of the total of the offset printing paper, CMP and tissue paper products revenues) for

the year ended December 31, 2018, representing a decrease of $14,382,821, or 14.99%, from $95,979,065 during 2017.

sold 150,658 tonnes of CMP in the year ended December 31, 2018 as compared to 207,089 tonnes in the year ended December 31, 2017,

representing a 27.25% decrease in quantity sold.

for regular CMP increased from $464/tonne in 2017 to $545/tonne in 2018, representing a 17.46% increase.

ASP in RMB for regular

CMP in 2017 and 2018 was RMB3,125 and RMB3,614, respectively, representing a 15.65% increase.

The quantity of regular CMP sold

decreased by 57,387 tonnes, from 173,399 tonnes in 2017 to 116,012 tonnes in 2018.

for light-weight CMP increased from $463/tonne in 2017 to $531/tonne in 2018, representing a $14.69% increase.

ASP in RMB for

light-weight CMP in 2017 and 2018 was RMB3,122 and RMB3,523, respectively, representing a 12.84% increase.

The quantity of light-weight

CMP sold increased by 956 tonnes, from 33,690 tonnes in 2017, to 34,646 tonnes in 2018.

production was suspended in the first and third quarter and our production volume was also restricted temporarily by the government

due to environmental concerns.

The government has been requiring outdated paper facilities to close since 2010 and is expected

to continue to force the closure of outdated facilities in the next few years.

We estimate that the market demand and ASPs for

CMP and other packaging paper will be volatile in the 2019.

PM6 production line, which produces regular CMP, has a designated capacity of 360,000 tonnes /year.

The utilization rates for

the year ended December 31, 2018 and 2017 were 32.54% and 48.01%, respectively, representing a decrease of 15.47%.

sold for regular CMP that was produced by the PM6 production line from January 2017 to December 2018 are as follows:

Printing Paper

from offset printing paper was $5,136,892 (5.92% of the total offset printing paper, CMP and tissue paper products revenues) for

the year ended December 31, 2018, representing a decrease of $13,550,765, or 72.51%, from $18,687,657 in 2017.

Corrugating Medium Paper

Revenue from CMP amounted

to $90,826,438 (77.22% of the total offset printing paper, CMP and tissue paper products revenues) for the year ended December

31, 2019, representing an increase of $9,230,194, or 11.31%, from $81,596,244 during 2018.

We sold 214,147 tonnes

of offset printing paper in the year ended December 31, 2018, compared to 26,610 tonnes in 2017, a decrease of 20,419 tonnes,

ASPs for offset printing paper in the year ended December 31, 2017 and 2018 was $702/tonne and $830/tonne, respectively,

representing a 18.23% increase.ASP in RMB for offset printing paper for the year ended December 31, 2017 and 2018 was RMB4,735

and RMB5,504, respectively, representing a 16.24% increase.

We estimate that the market demand and ASP of offset printing paper

will be volatile in 2019.

Paper Products

process base tissue paper purchased from a long-term supplier and produce finished tissue paper products, including toilet paper,

boxed and soft-packed tissues, handkerchief tissues and paper napkins, as well as bathroom and kitchen paper towels that are marketed

and sold under the Dongfang Paper brand.

In December 2018, we completed the construction and installation and test of operation

of PM8 and announced the commercial launch of tissue paper production.

We expect to commence the full operation of production

and sales of tissue paper products in year 2019.

of Digital Photo Paper

generated from selling digital photo paper were $13,622 for year 2018.

In June 2016, we suspended the production of digital photo

paper due to low market demand for our products.

cost of sales for CMP, offset printing paper and tissue paper products in the year ended December 31, 2018 was $80,909,412, a

decrease of $16,158,215, or 16.65%, from $97,067,627 for the year ended December 31, 2017.

This was mainly a result of the decrease

in volume sold, partially offset by increase in cost of recycled paper board and recycled white scrap paper.

Cost of sales for

CMP was $75,811,876 for the year ended December 31, 2018, as compared to $79,411,534 in 2017.

The decrease in the cost of sales

of $3,599,659 for CMP was mainly due to the decrease in the quantities of regular CMP sold, partially offset by the increase in

cost of recycled paper board and increase in sales volume of light-weighted CMP in the year of 2018.

of CMP in the year ended December 31, 2019 as compared to 150,658 tonnes in the year ended December 31, 2018, representing a 42.14%

increase in quantity sold.

ASP for regular CMP

dropped from $545/tonne in 2018 to $427/tonne in 2019, representing a 21.65% decrease.

ASP in RMB for regular CMP in 2018 and 2019

was RMB3,614 and RMB2,942, respectively, representing a 18.59% decrease.

The quantity of regular CMP sold increased by 52,825 tonnes,

from 116,012 tonnes in 2018 to 168,837 tonnes in 2019.

ASP for light-weight

CMP dropped from $531/tonne in 2018 to $414/tonne in 2019, representing a $22.03% decrease.

ASP in RMB for light-weight CMP in

2018 and 2019 was RMB3,523 and RMB2,857, respectively, representing a 18.90% decrease.

The quantity of light-weight CMP sold increased

by 10,664 tonnes, from 34,646 tonnes in 2018, to 45,310 tonnes in 2019.

Our PM6 production line, which produces

regular CMP, has a designated capacity of 360,000 tonnes /year.

The utilization rates for the year ended December 31, 2019 and

2018 were 46.68% and 32.54%, respectively, representing an increase of 14.14%.

Quantities sold for

regular CMP that was produced by the PM6 production line from January 2018 to December 2019 are as follows:

Offset Printing Paper

Revenue from offset

printing paper was $20,436,130 (17.38% of the total offset printing paper, CMP and tissue paper products revenues) for the year

ended December 31, 2019, representing an increase of $15,299,238, or 297.83%, from $5,136,892 in 2018.

We sold 29,207 tonnes of

offset printing paper in the year ended December 31, 2019, compared to 6,191 tonnes in 2018, an increase of 23,016 tonnes, or 371.77%.

ASPs for offset printing paper in the year ended December 31, 2018 and 2019 was $830/tonne and $700/tonne, respectively, representing

a 15.66% decrease.

ASP in RMB for offset printing paper for the year ended December 31, 2018 and 2019 was RMB5,504 and RMB4,824,

respectively, representing a 12.35% decrease.

Tissue Paper Products

We produce tissue

paper products, including toilet paper, boxed and soft-packed tissues, handkerchief tissues and paper napkins, as well as bathroom

and kitchen paper towels that are marketed and sold under the Dongfang Paper brand.

In December 2018 and November 2019, we completed

the construction, installation and test of operation of our PM8 and PM9 production lines.

We launched the complete line of processing

base tissue paper with designated capacity of 15,000 tonnes/year, and producing finished tissue paper products with designated

capacity of 10,000 tonnes/year.

tissue paper products was $6,351,168 (5.40% of the total offset printing paper, CMP and tissue paper products revenues) for

the year ended December 31, 2019, representing an increase of $6,351,168 from $nil in 2018.

We sold 6,790 tonnes of tissue

paper products in the year of 2019.

Cost of Sales

Total cost of

sales for CMP, offset printing paper and tissue paper products in the year ended December 31, 2019 was $103,922,414, an

increase of $23,013,001, or 28.44%, from $80,909,412 for the year ended December 31, 2018.

This was mainly a result of the

increase in volume sold, partially offset by the decreases in costs of recycled paper board and recycled white scrap paper.

Cost of sales for CMP was $81,511,234 for the year ended December 31, 2019, as compared to $75,811,876 in 2018.

in the cost of sales of $5,699,359 for CMP was mainly due to the increase in the quantities of CMP sold, partially offset by

the decrease in cost of recycled paper board in the year of 2019.

Average cost of sales per tonne for CMP decreased by

24.25%, from $503 for the year ended December 31, 2018, to $381 in 2019.

The decrease was mainly attributable to the lower

average unit purchase costs (net of applicable value added tax) of recycled paper board.

Cost of sales for offset printing

paper was $14,061,771 for the year ended December 31, 2019, as compared to $5,097,537 in 2018.

Average cost of sales per

tonne for CMP increased by 31.33%, from $383 for the year ended December 31, 2017, to $503 in 2018.

The increase was mainly attributable

to the higher average unit purchase costs (net of applicable value added tax) of recycled paper board in 2018 as compared to 2017.

Cost of sales for offset printing paper was $5,097,537 for the year ended December 31, 2018, as compared to $15,451,146 in 2017.

Average cost of sales per tonne of offset printing paper increased by 41.65%, from $581 in the year ended December 31, 2017, to

$823 in 2018.

The increase was mainly attributable to higher average unit purchase costs (net of applicable value added tax) of

recycled white scrap paper.

in cost of sales and cost per tonne by product for the year ended December 31, 2018 and 2017 are summarized below:

in percentage

$ (8,420,905 )

$ (3,599,659 )

Printing Paper

$ (10,353,609 )

Paper Products

CMP, Offset Printing Paper and Tissue Paper Revenue

tonne of offset printing paper decreased by 41.56%, from $823 in the year ended December 31, 2018, to $481 in 2019.

decrease was mainly attributable to lower average unit purchase costs (net of applicable value added tax) of recycled white

Cost of sales for tissue paper products was $8,349,409 for the year ended December 31, 2019.

Average cost of

sales per tonne of tissue paper products was $1,230 for the year ended December 31, 2019.

Changes in cost of

sales and cost per tonne by product for the year ended December 31, 2019 and 2018 are summarized below:

December 31, 2019

December 31, 2018

Light-Weight CMP

Offset Printing Paper

Tissue Paper Products

Total CMP, Offset Printing Paper and Tissue Paper Revenue

$ 103,922,414

average unit purchase costs (net of applicable value added tax) of recycled paper board and recycled white scrap paper for the

year ended December 31, 2018 were RMB 2,079/tonne (approximately $313/tonne) and RMB 3,013/tonne (approximately $454/tonne), respectively,

as compared to RMB 1,655/tonne (approximately $245/tonne) and RMB 2,848/tonne (approximately 422/tonne) for the year ended December

Our average unit purchase

costs (net of applicable value added tax) of recycled paper board and recycled white scrap paper for the year ended December 31,

2019 were RMB 1,536/tonne (approximately $223/tonne) and RMB 1,855/tonne (approximately $269/tonne), respectively, as compared

to RMB 2,079/tonne (approximately $313/tonne) and RMB 3,013/tonne (approximately 454/tonne) for the year ended December 31, 2018,

respectively.

These changes (in US dollars) represent a year-over-year increase of 27.76% for the recycled paper board

and a year-over-year increase of 7.58% for the recycled white scrap paper.

We use domestic recycled paper (sourced mainly from

the Beijing-Tianjin metropolitan area) exclusively.

Although we do not rely on imported recycled paper, the pricing of which tends

to be more volatile than domestic recycled paper, our experience suggests that the pricing of domestic recycled paper bears some

correlation to the pricing of imported recycled paper.

pricing trends of our major raw materials for the 24-month period from January 2017 to December 2018 are shown below:

and gas are our two main energy sources.

In order to reduce carbon emissions, we had been required to reduce coal consumption

by the local government.

After replacing all of the coal burning boilers with gas boilers, we stopped using coal in the fourth

quarter of 2017, which accounted for approximately 3% of total sales in 2017.

Electricity and gas accounted for approximately

6% and 9.5% of total sales in 2018, respectively, compared to 7% and 4% of total sales 2017.The monthly energy cost (electricity,

coal and gas) as a percentage of total monthly sales of our main paper products for the 24 months ended December 31, 2018 are

summarized as follows:

profit for December 31, 2018 was $5,820,401 (6.71% of the total revenue), representing a decrease of $14,135,550, or 70.83%, from

the gross profit of $19,955,951 (17.05% of the total revenue) for the year ended December 31, 2017.

The decrease was mainly due

to (i) the decrease in quantities sold and (ii) the increase of material purchase price of CMP and offset printing paper, partially

offset by the increase of ASP of these products.

Medium Paper, Offset Printing Paper and Tissue Paper Products

profit for offset printing paper, CMP and tissue paper products for the year ended December 31, 2018 was $5,823,724, a decrease

of $14,132,227, or 70.82%, from the gross profit of $19,955,951 for the year ended December 31, 2017.

The decrease was mainly

the result of the factors discussed above.

overall gross profit margin for offset printing paper, CMP and tissue paper products decreased by 10.34 percentage points, from

17.05% for the year ended December 31, 2017, to 6.71% for the year ended December 31, 2018.

profit margin for regular CMP for the year ended December 31, 2018 was 7.68%, or 9.26 percentage points lower, as compared to

gross profit margin of 16.94% for the year ended December 31, 2017.

Such decrease was primarily due to the increase of material

purchase price, partially offset by the increase in ASP of regular CMP.

profit margin for light-weight CMP for the year ended December 31, 2018 was 5.04%, or 13.88 percentage points lower, as compared

to gross profit margin of 18.92% for the year ended December 31, 2017.

profit margin for offset printing paper was 0.77% for the year ended December 31, 2018, a decrease of 16.55 percentage points,

as compared to 17.32% for the year ended December 31, 2017.

profit margin for tissue paper products was 0% for the year ended December 31, 2018, a decrease of 6.45 percentage points, as

compared to 6.45% for the year ended December 31, 2017.

gross profit margins for our corrugating medium paper and offset printing paper for the 24-month period ended December 31, 2018

are as follows:

General and Administrative Expenses

general and administrative expenses for the year ended December 31, 2018 were $13,098,373, an increase of $1,790,978, or 15.84%

from $11,307,395 for the year ended December 31, 2017.

The increase was mainly due to (i) compensation expenses resulting from

the issuance of 534,500 shares of common stock under our compensatory incentive plans in the year ended December 31, 2018, valued

at $470,360 and (ii) the depreciation of idle equipment during the suspension of production in the first quarter and third quarter

Income from Operations

loss for the year ended December 31, 2018 was $11,182,314, a decrease of $15,862,581, or 338.93%, from income from operations

of $4,680,267 for the year ended December 31, 2017.

The decrease in operating income was primarily due to the decrease in

gross profit and increase in selling, general and administrative expenses.

Income and Expenses

expense for the year ended December 31, 2018 decreased by $941,651, from $2,433,770 in the year ended December 31, 2017, to $1,492,119.

The Company had short-term and long-term interest-bearing loans and related party loans that aggregated $21,185,452 as of December

31, 2018, as compared to $25,466,009 as of December 31, 2017.

(Loss) Income

a result of the above, net loss was $10,545,684 for the year ended December 31, 2018, representing a decrease of $12,205,472, or 735.36%, from net income of $1,659,788 for year ended December 31, 2017.

accounts receivable increased by $1,032,950, or 56.03%, to $2,876,632 as of December 31, 2018, as compared with $1,843,682 as

of December 31, 2017.

We usually collect accounts receivable within 30 days of delivery and completion of sales.

consist of raw materials (accounting for 46.37% of total value of inventory as of December 31, 2018) and finished goods.

December 31, 2018, the recorded value of inventory decreased by 65.50% to $2,923,516 from $8,474,165 as of December 31, 2017.

As of December 31, 2018, the inventory of recycled paper board, which is the main raw material for the production of CMP, was

$412,317, approximately $5,925,057, or 93.49%, lower than the balance as of December 31, 2017.

These changes (in US dollars) represent a year-over-year decrease of 28.75% for the unit purchase cost of recycled

paper board and a year-over-year decrease of 40.75% for the unit purchase cost of recycled white scrap paper.

We use domestic recycled

paper (sourced mainly from the Beijing-Tianjin metropolitan area) exclusively.

Although we do not rely on imported recycled paper,

the pricing of which tends to be more volatile than domestic recycled paper, our experience suggests that the pricing of domestic

recycled paper bears some correlation to the pricing of imported recycled paper.

The pricing trends

of our major raw materials for the 24-month period from January 2018 to December 2019 are shown below:

Electricity and gas

are our two main energy sources.

Electricity and gas accounted for approximately 6% and 10.3% of total sales in 2019, respectively,

compared to 6% and 9.5% of total sales 2018.The monthly energy cost (electricity, coal and gas) as a percentage of total monthly

sales of our main paper products for the 24 months ended December 31, 2019 are summarized as follows:

Gross profit for December

31, 2019 was $13,679,518 (11.63% of the total revenue), representing an increase of $7,859,117, or 135.03%, from the gross profit

of $5,820,401 (6.71% of the total revenue) for the year ended December 31, 2018.

The increase was mainly due to (i) the increase

in quantities sold of CMP, offset printing paper and tissue paper and (ii) the decrease of material purchase price of CMP and

offset printing paper, partially offset by the decrease of ASP of these products.

Corrugating Medium Paper, Offset Printing Paper and Tissue

Paper Products

Gross profit for offset printing paper,

CMP and tissue paper products for the year ended December 31, 2019 was $13,691,322, an increase of $7,867,598, or 135.10%, from

the gross profit of $5,823,724 for the year ended December 31, 2018.

The increase was mainly the result of the factors discussed

The overall gross

profit margin for offset printing paper, CMP and tissue paper products increased by 4.93 percentage points, from 6.71% for

the year ended December 31, 2018, to 11.64% for the year ended December 31, 2019.

Gross profit margin

for regular CMP for the year ended December 31, 2019 was 10.29%, or 2.61 percentage points higher, as compared to gross profit

margin of 7.68% for the year ended December 31, 2018.

Such increase was primarily due to decrease of material purchase price, partially

offset by the decrease in ASP of regular CMP.

Gross profit margin

for light-weight CMP for the year ended December 31, 2019 was 10.13%, or 5.09 percentage points higher, as compared to gross profit

margin of 5.04% for the year ended December 31, 2018.

Gross profit margin

for offset printing paper was 31.19% for the year ended December 31, 2019, an increase of 30.42 percentage points, as compared

to 0.77% for the year ended December 31, 2018.

Such increase was mainly due to the decrease of purchase price of recycled white

scrap paper, partially offset by the decrease in ASP of offset printing paper.

Gross profit margin

for tissue paper products for the year ended December 31, 2019 was -31.46%.

Monthly gross profit

margins for our corrugating medium paper and offset printing paper for the 24-month period ended December 31, 2019 are as follows:

Selling, General and Administrative

Selling, general and

administrative expenses for the year ended December 31, 2019 were $9,781,719, a decrease of $3,316,654, or 25.32% from $13,098,373

for the year ended December 31, 2018.

The decrease was mainly due to additional repair and maintenance costs incurred during the

production suspension period and depreciation of idle fixed assets in 2018.

Income (Loss) from Operations

Operating income for

the year ended December 31, 2019 was $3,897,799, an increase of $15,080,113, or 134.86%, from loss from operations of $11,182,314

for the year ended December 31, 2018.

The increase in operating loss was primarily due to the increase in gross profit and the

decrease in selling, general and administrative expenses.

Other Income and Expenses

Interest expense for the year ended December

31, 2019 decreased by $565,751, from $1,492,119 in the year ended December 31, 2018, to $926,368.

The Company had short-term and

long-term interest-bearing loans and related party loans that aggregated $15,137,181 as of December 31, 2019, as compared to $21,185,452

as of December 31, 2018.

Net Income (Loss)

As a result of the

above, net income was $2,221,182 for the year ended December 31, 2019, representing an increase of $12,766,866, or 121.06%, from

net loss of $10,545,684 for year ended December 31, 2018.

Accounts Receivable

Net accounts receivable

increased by $242,679, or 8.44%, to $3,119,311 as of December 31, 2019, as compared with $2,876,632 as of December 31, 2018.

usually collect accounts receivable within 30 days of delivery and completion of sales.

Inventories consist

of raw materials (accounting for 23.04% of total value of inventory as of December 31, 2019), semi-finished goods and finished

As of December 31, 2019, the recorded value of inventory decreased by 43.63% to $1,647,882 from $2,923,516 as of December

As of December 31, 2019, the inventory of recycled paper board, which is the main raw material for the production of

CMP, was $40,032, approximately $372,285, or 90.29%, lower than the balance as of December 31, 2018.

Due to the volatility of recycled

paper board price, we reduced the Company’s inventory of recycled paper board in December 2018.

summary of changes in major inventory items is as follows:

Raw Materials

white scrap paper

photo base paper and other raw materials

paper board and recycled white scrap paper price, we maintained a minimum level of inventory of raw materials at the end of the

A summary of changes

in major inventory items is as follows:

Raw Materials

Payable and Notes Payable

payable and notes payable was $4,271,670 as of December 31, 2018, a decrease of 2,272,672, or 34.73%, from $6,544,342 as of December

Recycled paper board

Recycled white scrap paper

Tissue base paper

Digital photo base paper and other raw materials

Total Raw Materials

Semi-finished Goods

Finished Goods

Total inventory, gross

Inventory reserve

Total inventory, net

Accounts Payable and Notes Payable

Accounts payable and

notes payable was $250,486 as of December 31, 2019, a decrease of 4,021,184, or 94.14%, from $4,271,670 as of December 31, 2018.

Accounts payable was $250,486 and $629,054 as of December 31, 2019 and December 31, 2018, respectively.

relying on the bank acceptance notes issued under our credit facilities with Bank of Cangzhou to make the majority of our raw

materials payments to our vendors.

Our notes payable to Bank of Cangzhou were $3,642,616 and $6,121,637 as of December 31, 2018

and December 31, 2017, respectively.

We repaid the balance owed on the bank acceptance notes of $6,121,637 in January 2018.

January 2018, Bank of Cangzhou issued bank acceptance notes on our behalf for $3,642,616, which we paid off in January 2019.

and Capital Resources

of December 31, 2018, we had a net working capital deficit of $5,475,395, an increase of $3,704,659, from the net working capital

deficit of $1,770,736 at December 31, 2017.

Total current assets as of December 31, 2018 amounted to $24,158,872.

Substantially

all cash and cash equivalents are cash deposits in bank accounts.

Restricted cash of $3,642,616 was included in our current assets

as of December 31, 2018.

Restricted cash is deposited at the Bank of Cangzhou for purpose of securing the bank acceptance notes

from the bank.

The acceptance notes was paid off in January 2019.

liabilities as of December 31, 2018 totaled $29,634,267, an increase of $7,876,734, from the December 31, 2017 balance of $21,757,533.

We use bank acceptance notes, which are typically 6-to-12 month notes, to guarantee the payments to our vendors.

Notes payable

was $3,642,616 as of December 31, 2018, representing a decrease of $2,479,021, or 40.50%, from $6,121,637 as of December 31, 2017.

Most of our current short-term bank loans are either revolving or term loans.

We expect to renew these loans with the banks on

similar terms at or before maturity.

All of our short-term loans (with the exception of the notes payable, which carry no interest

but require a deposit equal to a portion of the credit facilities at the issuing banks) have interest-only monthly payments, with

a balloon payment for the entire principal amount upon maturity of the loan.

The long term loans from the credit union require

monthly and quarterly interest payments, with one large balloon payment upon maturity.

late January, 2018, the Company temporarily suspended its production due to a government-mandated restriction on the natural gas

The Company resumed production on March 14, 2018.

As a result, the Company incurred a net loss of $4.0 million in the

first quarter of 2018.

As the production resumed, the net cash generated from operations for the nine months from April 2018 to

December 2018 was $14 million (cash-in) as compared to the net cash-out of $4.8 million in the first quarter of 2018.

The management

expects that there will be sufficient and continuous cash-in from sales in the first half of year 2019 and the working capital

condition will be further improved.

In the meantime, we also extended our long-term loans which were due in June and November

2018 for additional five years.

Our ability to continue as a going concern is dependent upon obtaining the necessary financing

or negotiating the terms of the existing short-term and long term liabilities to meet our current and future liquidity needs.

loan-to-equity ratio was 12.72% as of December 31, 2018.

Our debt-asset ratio (i.e.

total liabilities divided by total assets)

was 17.99% as of December 31, 2018.

The industry average of debt asset ratios in China for 2017 was 55.91%, according to the latest

industry report in 2018 provided by China Paper Association at http://www.chinappi.org.

As long as we are able to manage our short-term

liquidity, we believe that our overall financial condition, compared to our Chinese peers, is reasonably healthy and should allow

us to further leverage our assets to obtain capital for future growth.

of operating lease

August 7, 2013, the Company’s Audit Committee and the Board of Directors approved the sale of the land use right of the

Headquarters Compound (the “LUR”), the office building and essentially all industrial-use buildings in the Headquarters

Compound (the “Industrial Buildings”), and three employee dormitory buildings located within the Headquarters Compound

(the “Dormitories”) to Hebei Fangsheng for cash prices of approximately $2.77 million, $1.15 million, and $4.31 million

respectively.

In connection with the sale of the Industrial Buildings, Hebei Fangsheng agreed to lease the Industrial Buildings

back to the Company for its original use for a term of up to three years, with an annual rental payment of approximately $150,743

(RMB1,000,000).

The lease agreement expired in August 2016.

On August 6, 2016 and August 6, 2018, the Company entered into two

supplementary agreements with Hebei Fangsheng, who agreed to extend the lease term for another four years in total, with the same

rental payment as original lease agreement.

The accrued rental owed to Hebei Fangsheng was approximately $203,188 and $60,378

which was recorded as part of the current liabilities as of December 31, 2018 and December 31, 2017, respectively.

Expenditure Commitment as of December 31, 2018

finance our daily operations mainly by cash flows generated from our business operations and loans from banking institutions.

Major capital expenditures in year ended December 31, 2018 were primarily financed by cash from operations.

As of December 31,

2018, we had approximately $2 million in capital expenditure commitments that were mainly related to improvement of Industrial

These commitments are expected to be financed by bank loans and cash flows generated from our business operations.

Production Lines at the Wei County Industrial Park

November 2012, we entered into a 15-year land lease with a land investment company in Wei County for the purpose of developing

the 49.4 acres of land into the base of our next capacity expansion.

In December 2012, we signed a contract with an equipment

contractor in Shanghai to build the first of our two tissue paper production lines in Wei County.

The two production lines, each

having production capacity of 15,000 tonnes/year, will be designated as PM8 and PM9 upon completion.

On December 14, 2018, the

Company announced the commercial launch of tissue paper production, following the completion of construction and equipment installation,

the receipt of proper approvals, including wastewater discharge permit, from local authorities, and the success of trial production

plan to build a second 15,000 tonnes/year tissue paper production line (designated as PM9) at an estimated cost of $7.8 million

in the next several months.

of Digital Photo Paper PM4 and PM5 Production Lines

August 2015, we completed the relocation of our digital photo paper production lines (PM4 and PM5), as well as related chemical

and packaging equipment, from the workshops located in our Headquarters Compound to a new location that is across the street from

our Xushui Paper Mill, the Xushui Mill Annex.

Total cost of the relocation of the PM4 and PM5 production lines and building construction

costs incurred was approximately $4.5 million.

acquired the land use rights of the 58,566 square meters at Xushui Mill Annex for approximately $7.7 million in April 2012 and

constructed three industrial buildings for the digital photo paper operations, a dormitory for factory workers and offices to

hold our consolidated Xushui District operations.

We completed the relocation and resumed commercial production of digital photo

paper at the new location in August 2015.

In June 2016, we suspended the production of digital photo paper due to low market demand

for our products.

,Cash Equivalents and restricted cash

cash, cash equivalents and restricted cash as of December 31, 2018 was $12,117,425, an increase of $3,099,998, from $9,017,427

as of December 31, 2017.

The increase of cash and cash equivalents for the year ended December 31, 2018 was attributable to a

number of factors:

We have been relying on

the bank acceptance notes issued under our credit facilities with Bank of Cangzhou to make the majority of our raw materials payments

to our vendors.

Our notes payable to Bank of Cangzhou were $nil and $3,642,616 as of December 31, 2019 and December 31, 2018, respectively.

In January 2018, Bank of Cangzhou issued bank acceptance notes on our behalf for $3,642,616, which we paid off in January 2019.

Renewal of operating lease

On August 7, 2013,

the Company’s Audit Committee and the Board of Directors approved the sale of the land use right of the Headquarters Compound

(the “LUR”), the office building and essentially all industrial-use buildings in the Headquarters Compound (the “Industrial

Buildings”), and three employee dormitory buildings located within the Headquarters Compound (the “Dormitories”)

to Hebei Fangsheng for cash prices of approximately $2.77 million, $1.15 million, and $4.31 million respectively.

In connection

with the sale of the Industrial Buildings, Hebei Fangsheng agreed to lease the Industrial Buildings back to the Company for its

original use for a term of up to three years, with an annual rental payment of approximately $145,037 (RMB1,000,000).

agreement expired in August 2016.

On August 6, 2016 and August 6, 2018, the Company entered into two supplementary agreements with

Hebei Fangsheng, who agreed to extend the lease term to August 9, 2022 with the same rental payment as original lease agreement.

The accrued rental owed to Hebei Fangsheng was approximately $56,552 and $203,188 which was recorded as part of the current liabilities

as of December 31, 2019 and December 31, 2018, respectively.

Capital Expenditure Commitment as of

December 31, 2019

We finance our daily

operations mainly by cash flows generated from our business operations.

As December 31, 2019, we had approximately $1 million in

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

These commitments are expected

to be financed by bank loans and cash flows generated from our business operations.

Cash ,Cash Equivalents and restricted

Our cash, cash equivalents

and restricted cash as of December 31, 2019 was $5,837,745, a decrease of $6,279,680, from $12,117,425 as of December 31, 2018.

The decrease of cash and cash equivalents for the year ended December 31, 2019 was attributable to a number of factors:

Net cash provided by operating activities

cash provided by operating activities was $9,790,713 for the year ended December 31, 2018.

The balance represented a decrease

of cash of $8,361,075, or 46.06%, from $18,151,788 provided for the year ended December 31, 2017.

Net loss for the year ended

December 31, 2018 was $10,545,684, representing a decrease of $12,205,472, or 735.36%, from a net income of $1,659,788 for the year

ended December 31, 2017.

Changes in various asset and liability account balances throughout the year ended December 31, 2018 also

contributed to the net change in cash from operating activities in year ended December 31, 2018.

Chief among such changes is the

increase of accounts receivable in the amount of $1,183,782 during the year of 2018 and the decrease of notes payable in the amount

of $2,261,147.

There was also a decrease of $5,322,320 in the ending inventory balance as of December 31, 2018 (an increase to

net cash for the year ended December 31, 2018 cash flow purposes).

In addition, the Company had non-cash expenses relating to

depreciation and amortization in the amount of $14,290,919.

The Company also had a net increase of $5,726,546 in prepayment and

other current assets (a decrease to net cash) and a net increase of $7,022,025 in other payables and accrued liabilities and due

to related parties (an increase to net cash), as well as a decrease in income tax payable of $291,119 (a decrease to net cash)

during the year ended December 31, 2018.

Net cash provided by

operating activities was $7,530,474 for the year ended December 31, 2019.

The balance represented a decrease of cash of $1,639,900,

or 17.88%, from $9,170,374 provided for the year ended December 31, 2018.

Net income for the year ended December 31, 2019 was

$2,221,182 representing an increase of $12,766,866, or 121.06%, from a net loss of $10,545,684 for the year ended December 31,

Changes in various asset and liability account balances throughout the year ended December 31, 2019 also contributed to

the net change in cash from operating activities in year ended December 31, 2019.

Chief among such changes is the increase of

accounts receivable in the amount of $294,882 during the year of 2019 (a decrease to net cash) and the decrease of notes payable

in the amount of $3,625,921 (an increase to net cash).

There was also a decrease of $1,242,780 in the ending inventory balance

as of December 31, 2019 (an increase to net cash for the year ended December 31, 2019 cash flow purposes).

In addition, the Company

had non-cash expenses relating to depreciation and amortization in the amount of $15,304,039 and provision of inventory reserve

The Company also had a net increase of $5,392,916 in prepayment and other current assets (a decrease to net cash)

and a net increase of $504,451 in other payables and accrued liabilities and related parties (an increase to net cash), as well

as an increase in income tax payable of $1,180,493 (an increase to net cash) during the year ended December 31, 2019.

Net cash used in investing activities

incurred $2,198,852 in net cash expenditures for investing activities during the year ended December 31, 2018, as compared to

$9,321,636 for the year ended December 31, 2017.

Expenditures in the year ended December 31, 2018 were for the progress payments

for the construction of our first tissue paper production line PM8 and related facilities, including three paper mill workshops

and maintenance workshops and four warehouses at the Wei County industrial park in Wei County, Hebei province.

We incurred $7,866,849

in net cash expenditures for investing activities during the year ended December 31, 2019, as compared to $2,198,852 for the year

ended December 31, 2018.

Expenditures in the year ended December 31, 2019 were for the prepayment of acquisition of Hebei Tengsheng

assets and expenditures on improvement of industrial building.

Net cash used in financing activities

cash used in financing activities was $3,165,607 for the year ended December 31, 2018, as compared to net cash used in financing

activities in the amount of $4,917,037 for the year ended December 31, 2017.

The decrease was mainly attributable to the repayment

of capital lease obligation in 2017.

and Commercial Bank of China (“ICBC”) Loan 1

Bank of Cangzhou

Net cash used in financing

activities was $5,772,467 for the year ended December 31, 2019, as compared to net cash used in financing activities in the amount

of $3,165,607 for the year ended December 31, 2018.

The decrease was mainly attributable to repayment of bank loans and related

party loans in 2019.

Short-term bank loans

January 10, 2017, the Company entered into a working capital loan agreement with the ICBC, with a balance of $4,285,145 as

of December 31, 2017.

The working capital loan was guaranteed by Hebei Tengsheng with its land use right pledged as collateral

for the benefit of the bank.

The loan bears a fixed interest rate of 4.5675% per annum.

Industrial and Commercial Bank of China (“ICBC”) Loan 1

Bank of Cangzhou

Total short-term bank loans

On February 6, 2018, the Company entered into a working capital loan agreement with the ICBC, with a balance of $4,079,730 as of December 31, 2018.

The working capital loan was guaranteed by Hebei Tengsheng with its land use right pledged as collateral for the benefit of the bank.

The loan bore a fixed interest rate of 5.4% per annum.

The loan was due and repaid on January 28, 2019.

October 18, 2017, the Company entered into a working capital loan agreement with the ICBC, with a balance of $2,907,778 as

of December 31, 2017.

The working capital loan is secured by the Company’s land use right as collateral

for the benefit of the bank.

The loan bears a fixed interest rate of 4.945% per annum.

The loan was due and repaid on October

January 2, 2018, the Company entered into a working capital loan agreement with the Bank of Cangzhou.

The loan was withdrawn

on January 4, 2018, with a balance of $5,099,662 as of December 31, 2018.

The loan bears a fixed interest rate of 6.09% per

The working capital loan is secured by the Company’s land use right and guaranteed by the Company’s CEO

and Baoding Shengde with its production equipment as collateral for the benefit of the bank.

The loan was due and repaid on

January 3, 2019.

February 6, 2018, the Company entered into a working capital loan agreement with the ICBC, with a balance of $4,079,730 as

of December 31, 2018.

The working capital loan was guaranteed by Hebei Tengsheng with its land use right pledged as collateral

for the benefit of the bank.

The loan bears a fixed interest rate of 5.4% per annum.

On January 2, 2018, the Company entered into a working capital loan agreement with the Bank of Cangzhou, with a balance of $5,099,662 as of December 31, 2018.

The loan bore a fixed interest rate of 6.09% per annum.

The working capital loan was secured by the Company’s land use right and guaranteed by the Company’s CEO and Baoding Shengde with its production equipment as collateral for the benefit of the bank.

The loan was due and repaid on January 3, 2019.

November 22, 2018, the Company entered into a working capital loan agreement with the ICBC, with a balance of $2,622,683 as

of December 31, 2018.

The working capital loan is secured by the Company’s land use right as collateral for the benefit

On November 22, 2018, the Company entered into a working capital loan agreement with the ICBC, with a balance of $2,622,683 as of December 31, 2018.

The working capital loan was secured by the Company’s land use right as collateral for the benefit of the bank.

The loan bore a fixed interest rate of 4.741% per annum.

The loan was repaid on October 19, 2019.

On December 20, 2019, the Company entered into a working capital loan agreement with the ICBC, with a balance of $6,163,814 as of December 31, 2019.

The working capital loan was secured by land use right of Hebei Tengsheng as collateral for the benefit of the bank.

The loan bears a fixed interest rate of 4.785% per annum.

The loan will be due on November 26, 2019.

of December 31, 2018, there were guaranteed short-term borrowings of $11,802,075 and unsecured bank loans of $nil.

The loan will be due and repaid by December 23, 2020.

As of December 31,

2019, there were guaranteed short-term borrowings of $6,163,814 and unsecured bank loans of $nil.

average short-term borrowing rates for the years ended December 31, 2018 and 2017 were approximately 5.66% and 5.27%, respectively.

loans from credit union

of December 31, 2018 and 2017, loans payable to Rural Credit Union of Xushui County, amounted to $7,197,808 and $7,560,221, respectively.

April 16, 2014, the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 5 years,

which is payable in various installments from June 21, 2014 to November 18, 2018.

The loan is guaranteed by an independent third

Interest payment is due quarterly and bears the rate of 0.72% per month.

On November 6, 2018, the loan was renewed for

additional 5 years and will be due and payable in various installments from December 21, 2018 to November 5, 2023.

As of December 31, 2018, there

were guaranteed short-term borrowings of $11,802,075 and unsecured bank loans of $nil.

The average short-term

borrowing rates for the years ended December 31, 2019 and 2018 were approximately 4.93% and 5.66%, respectively.

Long-term loans from credit union

As of December 31,

31, 2018 and 2017, total outstanding loan balance was $1,253,060 and $1,316,152, respectively, Out of the total outstanding loan

balance, current portion amounted were $nil and $1,316,152 as of December 31, 2018 and 2017, respectively, which are presented

2019 and 2018, loans payable to Rural Credit Union of Xushui County, amounted to $8,973,367 and $7,197,808, respectively.

On April 16, 2014,

the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 5 years, which was originally

due in various installments from June 21, 2014 to November 18, 2018.

The loan is guaranteed by an independent third party.

payment is due quarterly and bears the rate of 0.64% per month.

On November 6, 2018, the loan was renewed for additional 5 years

and will be due and payable in various installments from December 21, 2018 to November 5, 2023.

As of December 31, 2019 and 2018,

total outstanding loan balance was $1,232,763 and $1,253,060, respectively, Out of the total outstanding loan balance, current

portion amounted were $143,345 and $87,423 as of December 31, 2019 and 2018, respectively, which are presented as current liabilities

in the consolidated balance sheet and the remaining balance of $1,089,418 and $1,165,637 are presented as non-current liabilities

in the consolidated balance sheet as of December 31, 2019 and 2018, respectively.

On July 15, 2013,

the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 5 years, which was originally

due and payable in various installments from December 21, 2013 to July 26, 2018.

On June 21, 2018, the loan was extended for additional

5 years and will be due and payable in various installments from December 21, 2018 to June 20, 2023.

The loan is secured by certain

of the Company’s manufacturing equipment with net book value of $3,935,270 and $5,782,640 as of December 31, 2019 and 2018,

respectively.

Interest payment is due quarterly and bears a fixed rate of 0.64% per month.

As of December 31, 2019 and 2018, the

total outstanding loan balance was $3,583,613 and $3,642,615, respectively.

Out of the total outstanding loan balance, current

portion amounted were $172,013 and $101,993 as of December 31, 2019 and 2018 respectively, which are presented as current liabilities

in the consolidated balance sheet and the remaining balance of $3,411,600 and $3,540,622 are presented as non-current liabilities

in the consolidated balance sheet as of December 31, 2019 and 2018, respectively.

On April 20, 2017,

the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 2 years, which is due and

payable in various installments from August 26, 2017 to April 19, 2019.

The loan was guaranteed by Hebei Tengsheng with its land

use right pledged as collateral for the benefit of the bank.

Interest payment was due quarterly and bore a fixed rate of 0.6% per

As of December 31, 2019 and December 31, 2018, the total outstanding loan balance was $nil and $2,302,133, respectively,

which are presented as non-current liabilities in the consolidated balance sheet as of December 31, 2019 and 2018, respectively.

On April 17, 2019,

the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 2 years, which was due and

payable in various installments from August 21, 2019 to April 16, 2021.

The loan is secured by Hebei Tengsheng with its land use

right as collateral for the benefit of the bank.

Interest payment is due quarterly and bears a fixed rate of 0.6% per month.

of December 31, 2019 and 2018, the total outstanding loan balance was $2,293,512 and $nil, respectively.

Out of the total outstanding

loan balance, current portion amounted were $1,146,756 and $nil as of December 31, 2019 and 2018, respectively, which are presented

as current liabilities in the consolidated balance sheet and the remaining balance of $1,146,756 and $nil are presented as non-current

liabilities in the consolidated balance sheet as of December 31, 2019 and 2018, respectively.

July 15, 2013, the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 5 years,

which was originally due and payable in various installments from December 21, 2013 to July 26, 2018.

On June 21, 2018, the loan

was extended for additional 5 years and will be due and payable in various installments from December 21, 2018 to June 20, 2023.

The loan is secured by certain of the Company’s manufacturing equipment with net book value of $5,782,640 and $7,963,285

as of December 31, 2018 and 2017, respectively.

Interest payment is due quarterly and bears a fixed rate of 0.72% per month.

of December 31, 2018 and 2017, the total outstanding loan balance was $3,642,615 and $3,826,022, respectively.

Out of the total

outstanding loan balance, current portion amounted were $nil and $3,826,022 as of December 31, 2018 and 2017, respectively, which

are presented as current liabilities in the consolidated balance sheet and the remaining balance of $3,642,615 and $nil are presented

as non-current liabilities in the consolidated balance sheet as of December 31, 2018 and 2017, respectively.

April 20, 2017, the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 2 years,

which is due and payable in various installments from August 26, 2017 to April 19, 2019.

The loan is guaranteed by Hebei Tengsheng

with its land use right pledged as collateral for the benefit of the bank.

Interest payment is due quarterly and bears a fixed

rate of 0.6% per month.

As of December 31, 2018 and December 31, 2017, the total outstanding loan balance was $2,302,133 and $2,418,047,

On December 12, 2019,

the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 2 years, which was due and

payable in various installments from June 21, 2020 to December 11, 2021.

The loan is secured by Hebei Tengsheng with its land use

right as collateral for the benefit of the bank.

Interest payment is due quarterly and bears a fixed rate of 7.56% per annum.

of December 31, 2019 and 2018, the total outstanding loan balance was $1,863,479 and $nil, respectively.

Out of the total outstanding

loan balance, current portion amounted were $143,345 and $nil as of December 31, 2019 and 2018, respectively, which are presented

as current liabilities in the consolidated balance sheet and the remaining balance of $1,720,134 and $nil are presented as non-current

liabilities in the consolidated balance sheet as of December 31, 2019 and 2018, respectively.

Total interest expenses

for the short-term bank loans and long-term loans for the years ended December 31, 2019 and 2018 were $831,732 and $1,214,708,

respectively.

Out of the total outstanding loan balance, current portion amounted were $2,302,133 and $1,224,328 as of December

31, 2018 and December 31, 2017, respectively, which are presented as current liabilities in the consolidated balance sheet and

the remaining balance of $nil and $1,193,719 are presented as non-current liabilities in the consolidated balance sheet as of

September 30, 2018 and December 31, 2017, respectively.

interest expenses for the short-term bank loans and long-term loans for the years ended December 31, 2018 and 2017 were $1,214,708

and $1,196,814, respectively.

Zhenyong Liu, the Company’s CEO has loaned money to Dongfang Paper for working capital purposes over a period of time.

January 1, 2013, Dongfang Paper and Mr.

Zhenyong Liu renewed the three-year term loan previously entered on January 1, 2010, and

extended the maturity date further to December 31, 2015.

On December 31, 2015, the Company paid off the loan of $2,249,279, together

with interest of $391,374 for the period from 2013 to 2015.

Approximately $373,490 and $392,296 of interest were outstanding and

Zhenyong Liu, which were recorded in other payables and accrued liabilities as part of the current liabilities in the

consolidated balance sheet as of December 31, 2018 and 2017, respectively.

December 10, 2014, Mr.

Zhenyong Liu provided a loan to the Company, amounted to $8,742,278 to Dongfang Paper for working capital

purpose with an interest rate of 4.35% per annum, which was based on the primary lending rate of People’s Bank of China.

The unsecured loan was provided on December 10, 2014, and would be originally due on December 10, 2017.

During the year of 2016,

the Company repaid $6,012,416 to Mr.

Zhenyong Liu, together with interest of $288,596.

In February 2018, the Company repaid $3,014,863

Shareholder Loans

Mr Zhenyong Liu, the

Company’s CEO has loaned money to Dongfang Paper for working capital purposes over a period of time.

On January 1, 2013,

Dongfang Paper and Mr.

Zhenyong Liu renewed the three-year term loan previously entered on January 1, 2010, and extended the maturity

date further to December 31, 2015.

On December 31, 2015, the Company paid off the loan of $2,249,279, together with interest of

$391,374 for the period from 2013 to 2015.

Approximately $367,441 and $373,490 of interest were outstanding to Mr.

Zhenyong Liu,

which were recorded in other payables and accrued liabilities as part of the current liabilities in the consolidated balance sheet

as of December 31, 2019 and 2018, respectively.

On December 10, 2014,

Zhenyong Liu provided a loan to the Company, amounted to $8,742,278 to Dongfang Paper for working capital purpose with an interest

rate of 4.35% per annum, which was based on the primary lending rate of People’s Bank of China.

The unsecured loan was provided

on December 10, 2014, and would be originally due on December 10, 2017.

During the year of 2016, the Company repaid $6,012,416

Zhenyong Liu, together with interest of $288,596.

As of December 31, 2018 and 2017, the outstanding loan balance was $nil

and $3,060,818, respectively and the accrued interest was $43,711 and $45,912, respectively, which was recorded in other payables

and accrued liabilities as part of the current liabilities in the consolidated balance sheet.

March 1, 2015, the Company entered an agreement with Mr.

Zhenyong Liu which allows Dongfang Paper to borrow from the CEO an amount

up to approximately $17,484,555 (RMB120,000,000) for working capital purposes.

The advances or funding under the agreement are

due three years from the date each amount is funded.

The loan is unsecured and carries an annual interest rate set on the basis

of the primary lending rate of the People’s Bank of China at the time of the borrowing.

On July 13, 2015, an unsecured amount

of $4,324,636 was drawn from the facility.

In February 2018, the company paid off the remaining balance, together

with interest of $20,400.

As of December 31, 2019 and 2018, approximately $43,003 and $43,711 of interest were outstanding to Mr.

Zhenyong Liu, which was recorded in other payables and accrued liabilities as part of the current liabilities in the consolidated

balance sheet.

On March 1, 2015,

the Company entered an agreement with Mr.

Zhenyong Liu which allows Dongfang Paper to borrow from the CEO an amount up to $17,201,342

(RMB120,000,000) for working capital purposes.

The advances or funding under the agreement are due three years from the date each

amount is funded.

The loan is unsecured and carries an annual interest rate set on the basis of the primary lending rate of the

People’s Bank of China at the time of the borrowing.

On July 13, 2015, an unsecured amount of $4,324,636 was drawn from the

On October 14, 2016 an unsecured amount of $2,883,091 was drawn from the facility.

In February 2018, the Company repaid $1,507,432 to Mr.

In February 2018, the company repaid

$1,507,432 to Mr.

Zhenyong Liu.

The loan would be originally due on July 12, 2018.

Liu agreed to extend the loan for additional 3 years and the remaining balance will be due on July 12, 2021.

On November 23, 2018,

the Company repaid $3,768,579 to Mr.

Zhenyong Liu agreed to extend the loan for

additional 3 years and the remaining balance will be due on July 12, 2021.

On November 23, 2018, the company repaid $3,768,579

Zhenyong Liu, together with interest of $158,651.

As of December 31, 2018 and 2017, the outstanding

loan balance were $2,185,569 and $7,652,047, respectively, and the accrued interest was $200,253 and $110,476, respectively, which

was recorded in other payables and accrued liabilities as part of the current liabilities in the consolidated balance sheet.

of December 31, 2018 and 2017, total amount of loans due to Mr.

Zhenyong Liu were $2,185,569 and $10,712,865, respectively.

interest expense incurred for such related party loans are $277,411 and $451,626 for the years ended December 31, 2018 and 2017,

respectively.

The accrued interest due to the CEO was approximately $617,454 and $548,684, as of December 31, 2018 and 2017, respectively,

which was recorded in other payables and accrued liabilities.

of December 31, 2018 and 2017, amount due to shareholders are $210,148 and $nil, respectively, which represents funds from shareholders

to pay for various expenses incurred in the U.S.

In December 2019, the company paid off the remaining balance, together

with interest of 94,636.

As of December 31, 2019 and 2018, the outstanding loan balance were $nil and $2,185,569, respectively,

and the accrued interest was $197,009 and $200,253, respectively, which was recorded in other payables and accrued liabilities

as part of the current liabilities in the consolidated balance sheet.

As of December 31,

2019 and 2018, total amount of loans due to Mr.

Zhenyong Liu were $nil and $2,185,569, respectively.

The interest expense incurred

for such related party loans are $94,636 and $277,411 for the years ended December 31, 2019 and 2018, respectively.

interest owe to the CEO was approximately $607,453 and $617,454, as of December 31, 2019 and 2018, respectively, which was recorded

in other payables and accrued liabilities.

As of December 31,

2019 and 2018, amount due to shareholder are $483,433 and $210,148, respectively, which represents funds from shareholders to pay

for various expenses incurred in the U.S.

The amount is due on demand with interest free.

Accounting Policies and Estimates

Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States,

which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of

contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during

the reporting periods.

Critical Accounting Policies and Estimates

The Company’s

financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require

us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets

and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting

Management makes these estimates using the best information available at the time the estimates are made.

However, actual results could differ materially from those estimates.

However, actual

results could differ materially from those estimates.

The most critical accounting policies are listed below:

Recognition Policy

Company recognizes revenue when goods are delivered and a formal arrangement exists, the price is fixed or determinable, the delivery

is completed, no other significant obligations of the Company exist, and collectability is reasonably assured.

Goods are considered

delivered when the customer’s truck picks up goods at our finished goods inventory warehouse.

Company evaluates the recoverability of long-lived assets and the related estimated remaining useful lives when events or circumstances

lead management to believe that the carrying value of an asset may not be recoverable and the undiscounted cash flows estimated

to be generated by those assets are less than the assets’

Revenue Recognition Policy

The Company recognizes

revenue when goods are delivered and a formal arrangement exists, the price is fixed or determinable, the delivery is completed,

no other significant obligations of the Company exist, and collectability is reasonably assured.

Goods are considered delivered

when the customer’s truck picks up goods at our finished goods inventory warehouse.

Long-Lived Assets

The Company evaluates

the recoverability of long-lived assets and the related estimated remaining useful lives when events or circumstances lead management

to believe that the carrying value of an asset may not be recoverable and the undiscounted cash flows estimated to be generated

by those assets are less than the assets’

carrying amount.

In such circumstances, those assets are written

down to estimated fair value.

Our judgments regarding the existence of impairment indicators are based on market conditions, assumptions

for operational performance of our businesses, and possible government policy toward operating efficiency of the Chinese paper

manufacturing industry.

For the years ended December 31, 2018 and 2017, no events or circumstances occurred for which an evaluation

of the recoverability of long-lived assets was required.

We are currently not aware of any events or circumstances that may indicate

any need to record such impairment in the future.

Currency Translation

functional currency of Dongfang Paper and Baoding Shengde is the Chinese Yuan Renminbi (“RMB”).

Topic 830-30, all assets and liabilities are translated into United States dollars using the current exchange rate at the end

of each fiscal period.

The current exchange rates used by the Company as of December 31, 2018 and 2017 to translate the Chinese

RMB to the U.S.

Dollars are 6.8632:1 and 6.5342:1, respectively.

Revenues and expenses are translated using the prevailing average

exchange rates at 6.6338:1, and 6.7423:1 for the years ended December 31, 2018 and 2017, respectively.

Translation adjustments

are included in other comprehensive income (loss).

Sheet Arrangements

were the guarantor for Baoding Huanrun Trading Co., for its long-term bank loans in an amount of $4,516,843 (RMB31,000,000), which

matures at various times in 2023.

In such circumstances, those assets are written down to estimated

Our judgments regarding the existence of impairment indicators are based on market conditions, assumptions for operational

performance of our businesses, and possible government policy toward operating efficiency of the Chinese paper manufacturing industry.

For the years ended December 31, 2019 and 2018, no events or circumstances occurred for which an evaluation of the recoverability

of long-lived assets was required.

We are currently not aware of any events or circumstances that may indicate any need to record

such impairment in the future.

Foreign Currency Translation

The functional currency

of Dongfang Paper and Baoding Shengde is the Chinese Yuan Renminbi (“RMB”).

Under ASC Topic 830-30, all

assets and liabilities are translated into United States dollars using the current exchange rate at the end of each fiscal period.

The current exchange rates used by the Company as of December 31, 2019 and 2018 to translate the Chinese RMB to the U.S.

are 6.9762:1 and 6.8632:1, respectively.

Revenues and expenses are translated using the prevailing average exchange rates at 6.8948:1,

and 6.6338:1 for the years ended December 31, 2019 and 2018, respectively.

Translation adjustments are included in other comprehensive

income (loss).

Off-Balance Sheet Arrangements

We were the guarantor

for Baoding Huanrun Trading Co., for its long-term bank loans in an amount of $4,443,680 (RMB31,000,000), which matures at various

times in 2023.

Baoding Huanrun Trading Co.

is one of our major suppliers of raw materials.

This helps us to

maintain a good relationship with the supplier and negotiate for better terms in payment for materials.

This helps us to maintain a good relationship

with the supplier and negotiate for better terms in payment for materials.

If Huanrun Trading Co.

were to become insolvent, the Company could be materially adversely affected.

Except as aforesaid, we have no material off-balance

sheet transactions.

Accounting Pronouncements

January 2016, the FASB issued ASU No.

2016-01, “Financial Instruments - Overall (Subtopic 825-10):

Recognition and Measurement

of Financial Assets and Financial Liabilities”

(“ASU 2016-01”).

The amendments in this update require all equity

investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted

for under equity method of accounting or those that result in consolidation of the investee).

The amendments in this update also

require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability

resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value

in accordance with the fair value option for financial instruments.

In addition, the amendments in this update eliminate the requirement

to disclose the method(s) and significant assumptions used to estimate the fair value that are required to be disclosed for financial

instruments measured at amortized cost on the balance sheet for public entities.

For public business entities, the amendments

in ASU 2016-01 are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal

Except for the early application guidance discussed in ASU 2016-01, early adoption of the amendments in this update is

not permitted.

We do not expect the adoption of ASU 2016-01 to have a material impact on our condensed consolidated financial

February 2016, the FASB issued ASU No.

2016-02, “Leases (Topic 842)”

(“ASU 2016-02”).

The amendments in

this update create Topic 842, Leases, and supersede the leases requirements in Topic 840, Leases.

Topic 842 specifies the accounting

The objective of Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information

to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease.

The main difference

between Topic 842 and Topic 840 is the recognition of lease assets and lease liabilities for those leases classified as operating

leases under Topic 840.

Topic 842 retains a distinction between finance leases and operating leases.

The classification criteria

for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing

between capital leases and operating leases in the previous leases guidance.

The result of retaining a distinction between finance

leases and operating leases is that under the lessee accounting model in Topic 842, the effect of leases in the statement of comprehensive

income and the statement of cash flows is largely unchanged from previous GAAP.

The amendments in ASU 2016-02 are effective for

fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entities.

Early application of the amendments in ASU 2016-02 is permitted.

We are currently in the process of evaluating the impact of the

adoption of ASU 2016-02 on our condensed consolidated financial statements.

June 2016, the FASB issued ASU No.

were to become insolvent, the

Company could be materially adversely affected.

Except as aforesaid, we have no material off-balance sheet transactions.

Recent Accounting Pronouncements

In June 2016, the

FASB issued ASU No.

2016-13, “Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses

on Financial Instruments”

Measurement of Credit Losses on Financial

Instruments”

(“ASU 2016-13”).

Financial Instruments-Credit Losses (Topic 326) amends guidelines

on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities.

For assets held at

amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an

entity to reflect its current estimate of all expected credit losses.

The allowance for credit losses is a valuation account that

is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected.

For available-for-sale

debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit

losses be presented as an allowance rather than as a write-down.

ASU 2016-13 affects entities holding financial assets and net

investment in leases that are not accounted for at fair value through net income.

The amendments affect loans, debt securities,

trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial

assets not excluded from the scope that have the contractual right to receive cash.

The amendments in this ASU will be effective

for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

We are currently evaluating

the impact of the adoption of ASU 2016-13 on our condensed consolidated financial statements.

Financial Instruments-Credit Losses (Topic 326) amends guidelines on reporting

credit losses for assets held at amortized cost basis and available-for-sale debt securities.

For assets held at amortized cost

basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect

its current estimate of all expected credit losses.

The allowance for credit losses is a valuation account that is deducted from

the amortized cost basis of the financial assets to present the net amount expected to be collected.

For available-for-sale debt

securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses

be presented as an allowance rather than as a write-down.

ASU 2016-13 affects entities holding financial assets and net investment

in leases that are not accounted for at fair value through net income.

The amendments affect loans, debt securities, trade receivables,

net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded

from the scope that have the contractual right to receive cash.

The amendments in this ASU will be effective for fiscal years beginning

after December 15, 2019, including interim periods within those fiscal years.

We are currently evaluating the impact of the adoption

of ASU 2016-13 on our condensed consolidated financial statements.

In August 2018, the

FASB issued ASU 2018-13, Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.

The amendments

in this standard will remove, modify and add certain disclosures under ASC Topic 820, Fair Value Measurement, with the objective

of improving disclosure effectiveness.

ASU 2018-13 will be effective for the Company’s fiscal year beginning April 1, 2020,

with early adoption permitted.

The transition requirements are dependent upon each amendment within this update and will be applied

either prospectively or retrospectively.

The Company does not expect ASU 2018-13 to have a material impact to the Company’s

consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12,

Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes.

The amendments in this Update related to separate financial

statements of legal entities that are not subject to tax should be applied on a retrospective basis for all periods presented.

The amendments related to changes in ownership of foreign equity method investments or foreign subsidiaries should be applied on

a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year

The amendments related to franchise taxes that are partially based on income should be applied on either a retrospective

basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as

of the beginning of the fiscal year of adoption.

All other amendments should be applied on a prospective basis.

We do not expect

the adoption of ASU 2019-12 to have a material impact on our condensed consolidated financial statements.

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 5. Market for Registrant’s Common Equity