What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-12 compared with 2020-08-11 · 1050 added, 965 removed, 877 unchanged (70% of the section changed)

Financial Statements

TECH PACKAGING, INC.

CONSOLIDATED BALANCE SHEETS

OF JUNE 30, 2020 AND DECEMBER 31, 2019

and bank balances

receivable (net of allowance for doubtful accounts of $57,531 and $59,922 as of June 30, 2020 and December 31, 2019, respectively)

and other current assets

from related parties

IT TECH PACKAGING, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2020 AND DECEMBER

September 30,

Current Assets

on property, plant and equipment

plant, and equipment, net

tax recoverable

tax asset non-current

Cash and bank balances

Restricted cash

Accounts receivable (net of allowance for doubtful accounts of $64,435 and $59,922 as of September 30, 2020 and December 2019, respectively)

Prepayments and other current assets

Due from related parties

Total current assets

Prepayment on property, plant and equipment

Finance lease right-of-use assets, net

Property, plant, and equipment, net

Value-added tax recoverable

Deferred tax asset non-current

$ 193,329,964

$ 190,198,430

AND STOCKHOLDERS' EQUITY

portion of long-term loans from credit union

from customers

to related parties

payroll and employee benefits

payables and accrued liabilities

taxes payable

LIABILITIES AND STOCKHOLDERS’

Current Liabilities

from credit union

liabilities (including amounts of the consolidated VIE without recourse to the Company of $16,746,095 and $19,460,257 as of

June 30, 2020 and December 31, 2019, respectively)

and Contingencies

Stockholders'

stock, 500,000,000 shares authorized, $0.001 par value per share, 28,514,816 and 22,054,816 shares issued

paid-in capital

earnings reserve

other comprehensive loss

stockholders' equity

Liabilities and Stockholders' Equity

Short-term bank loans

Current portion of long-term loans from credit union

Lease liability

Accounts payable

Advance from customers

Due to related parties

Accrued payroll and employee benefits

Other payables and accrued liabilities

Income taxes payable

Total current liabilities

Loans from credit union

Deferred gain on sale-leaseback

Lease liability - non-current

Derivative liability

Total liabilities (including amounts of the consolidated VIE without recourse to the Company of $17,636,464 and $19,558,568 as of September 30, 2020 and December 31, 2019, respectively)

Commitments and Contingencies

Stockholders’

Common stock, 500,000,000 shares authorized, $0.001 par value

per share, 28,514,816 and 22,054,816 shares issued and outstanding as of September 30, 2020 and December, 31,2019, respectively

Additional paid-in capital

Statutory earnings reserve

Accumulated other comprehensive loss

Retained earnings

Total stockholders’

Total Liabilities and Stockholders’

$ 193,329,964

3 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cost of sales

5 unchanged sentences

Gain on acquisition of a subsidiary

(Loss) Income from Operations

Income (Loss) from Operations

Other Income (Expense):

8 unchanged sentences

Foreign currency translation adjustment

Total Comprehensive Loss

$ (3,098,613 )

Total Comprehensive Income (Loss)

$ (2,472,352 )

7 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

Six Months Ended

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

Nine Months Ended

September 30,

Cash Flows from Operating Activities:

$ (3,937,292 )

$ (2,272,525 )

Adjustments to reconcile net income to net cash provided by operating activities:

1 unchanged sentence

Loss on derivative liability

Loss from disposal and impairment of property, plant and equipment

(Recovery from) Allowance for bad debts

11 unchanged sentences

Income taxes payable

Net Cash Provided by (Used in) Operating Activities

Net Cash Provided by Operating Activities

Cash Flows from Investing Activities:

Purchases of property, plant and equipment

Proceeds from sale of property, plant and equipment

Acquisition of a subsidiary

6 unchanged sentences

(11,499,285 )

Payment of capital lease obligation

Net Cash Provided by (Used in) Financing Activities

1 unchanged sentence

Net Increase (Decrease) in Cash and Cash Equivalents

(10,983,054 )

Cash, Cash Equivalents and Restricted Cash - Beginning of Period

9 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

Comprehensive

4 unchanged sentences

$ 166,549,915

Issuance of shares to Weitian

Foreign currency translation adjustment

Balance at September 30, 2019

$ (8,329,333 )

$ 112,639,116

$ 161,567,586

Balance at December 31, 2019

$ (6,057,537 )

$ 114,794,796

$ 165,995,062

Issuance of shares to officer and directors

2 unchanged sentences

Foreign currency translation adjustment

Balance at June 30, 2020

Balance at September 30, 2020

$ (1,852,602 )

109 unchanged sentences

Accounting Standards Codification (the “ASC”) issued by the Financial Accounting Standard Board (the “FASB”).

The revenue generated from Dongfang Paper for the three months ended June 30, 2020 and 2019 was accounted for 96.79% and 100%

of the Company’s total revenue, repectively.

The revenue generated from Dongfang Paper for the six months ended June 30,

The revenue generated from Dongfang Paper for the three months ended September 30, 2020 and 2019 was accounted for 99.34% and

100% of the Company’s total revenue, respectively.

The revenue generated from Dongfang Paper for the nine months ended September

30, 2020 and 2019 was accounted for 98.44% and 100% of the Company’s total revenue, respectively.

Dongfang Paper also accounted

for 90.15% and 91.01% of the total assets of the Company as of June 30, 2020 and December 31, 2019, respectively.

for 90.53% and 91.01% of the total assets of the Company as of September 30 2020 and December 31, 2019, respectively.

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of June 30, 2020 and December 31, 2019, details of the Company’s subsidiaries and variable interest entities are as follows:

Incorporation

of September 30, 2020 and December 31, 2019, details of the Company’s subsidiaries and variable interest entities are as

Incorporation

Establishment

Incorporation or

Percentage of

or Establishment

Establishment

Principal Activity

Dongfang Holding

November 13, 2006

Inactive investment holding

Shengde Holdings

February 25, 2009

State of Nevada

Investment holding

production and distribution

interest entity (“VIE”):

production and distribution

Baoding Shengde

Paper production and

Variable interest entity (“VIE”):

Dongfang Paper

March 10, 1996

Paper production and

Paper is treated as a 100% controlled variable interest entity of the Company.

20 unchanged sentences

Paper’s assets and liabilities (after elimination of intercompany transactions and balances) in the Company’s condensed

consolidated balance sheets as of June 30, 2020 and December 31, 2019 are as follows:

consolidated balance sheets as of September 30, 2020 and December 31, 2019 are as follows:

September 30,

Current Assets

6 unchanged sentences

Prepayment on property, plant and equipment

Finance lease right-of-use assets, net

Property, plant, and equipment, net

5 unchanged sentences

Current portion of long-term loans from credit union

Lease liability

Accounts payable

6 unchanged sentences

Loans from credit union

Loans from a related party

Lease liability - non-current

Total liabilities

22 unchanged sentences

unless otherwise noted.

The balance sheet as of June 30, 2020 and the results of operations for the six months ended June 30,

The balance sheet as of September 30, 2020 and the results of operations for the nine months ended September

30, 2020 are not necessarily indicative of the results to be expected for any future period.

40 unchanged sentences

the Company could realize in a current market exchange.

As of June 30, 2020 and December 31, 2019, the carrying value of the Company’s

short term financial instruments, such as cash and cash equivalents, accounts receivable, accounts and notes payable, short-term

bank loans, balance due to a related party and obligation under capital lease, approximate at their fair values because of the

short maturity of these instruments;

while loans from credit union and loans from a related party approximate at their fair value

as the interest rates thereon are close to the market rates of interest published by the People’s Bank of China.

Management determined that liabilities created

by beneficial conversion features associated with the issuance of certain warrants (see “

Derivative liabilities”

As of September 30, 2020 and December 31, 2019, the carrying value of

the Company’s short term financial instruments, such as cash and cash equivalents, accounts receivable, accounts and notes

payable, short-term bank loans, balance due to a related party and obligation under capital lease, approximate at their fair values

because of the short maturity of these instruments;

while loans from credit union and loans from a related party approximate at

their fair value as the interest rates thereon are close to the market rates of interest published by the People’s Bank

determined that liabilities created by beneficial conversion features associated with the issuance of certain warrants (see “

Derivativeliabilities”

under Note (10)), meet the criteria of derivatives and are required to be measured at fair value.

The fair value of these

derivative liabilities was determined based on management’s estimate of the expected future cash flows required to settle

derivative liabilities wasdetermined based on management’s estimate of the expected future cash flows required to settle

the liabilities.

20 unchanged sentences

Restricted Cash

cash was nil as of June 30, 2020 and December 31, 2019.

cash was nil as of September 30, 2020 and December 31, 2019.

TECH PACKAGING, INC.

3 unchanged sentences

of corrugating medium paper, offset printing paper and tissue paper products.

Inventories consisted of the following as of June

Inventories consisted of the following as of September

30, 2020 and December 31, 2019:

September 30,

Raw Materials

1 unchanged sentence

Recycled white scrap paper

Base paper, mask fabric and other raw materials

Base paper and other raw materials

Semi-finished Goods

4 unchanged sentences

Prepayments and other current assets

and other current assets consisted of the following as of June 30, 2020 and December 31, 2019:

and other current assets consisted of the following as of September 30, 2020 and December 31, 2019:

September 30,

Prepaid land lease

2 unchanged sentences

Property, plant and equipment, net

of June 30, 2020 and December 31, 2019, property, plant and equipment consisted of the following:

of September 30, 2020 and December 31, 2019, property, plant and equipment consisted of the following:

September 30,

Property, Plant, and Equipment:

9 unchanged sentences

$ 151,616,852

of June 30, 2020 and December 31, 2019, land use rights represented two parcel of state-owned lands located in Xushui District

of September 30, 2020 and December 31, 2019, land use rights represented two parcel of state-owned lands located in Xushui District

and Wei County of Hebei Province in China, with lease terms of 50 years expiring in 2061 and 2066, respectively.

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

in progress mainly represents payments for paper machine of a new tissue paper production line PM10 and improvement of the office

building and essentially all industrial-use buildings in the Headquarters Compound.

of June 30, 2020 and December 31, 2019, certain property, plant and equipment of Dongfang Paper with net values of $3,013,792

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of September 30, 2020 and December 31, 2019, certain property, plant and equipment of Dongfang Paper with net values of $2,690,540

and $3,935,270, respectively, have been pledged pursuant to a long-term loan from credit union for Dongfang Paper.

Land use right

of Dongfang Paper with net values of $5,606,524 and $5,757,546 as of June 30, 2020 and December 31, 2019, respectively, was pledged

for the bank loan from Industrial & Commercial Bank of China.

of Dongfang Paper with net values of $5,793,482 and $5,757,546 as of September 30, 2020 and December 31, 2019, respectively, was

pledged for the bank loan from Industrial & Commercial Bank of China.

Land use right of Hebei Tengsheng with net value of

and $5,200,452 as of June 30, 2020 and December 31, 2019, respectively, was pledged for a long-term loan from credit union of

Baoding Shengde.

In addition, land use right of Hebei Tengsheng with net value of $7,939,368 and $8,056,930 as of June 30, 2020

and December 31, 2019, respectively, was pledged for another long-term loan from credit union of Baoding Shengde.

bank loans ”

$5,327,293 and $5,200,452 as of September 30, 2020 and December 31, 2019, respectively, was pledged for a long-term loan from

credit union of Baoding Shengde.

In addition, land use right of Hebei Tengsheng with net value of $8,253,440 and $8,056,930 as

of September 30, 2020 and December 31, 2019, respectively, was pledged for another long-term loan from credit union of Baoding

Short-term bank loans ”

Long-term loans from credit union”

under Note (7), Loans Payable, for details of the transaction

and asset collaterals.

and amortization of property, plant and equipment was $3,721,640 and $3,859,399 for the three months ended June 30, 2020 and 2019,

respectively.

Depreciation and amortization of property, plant and equipment was $7,496,314 and $7,789,459 for the six months

ended June 30, 2020 and 2019, respectively.

(7), Loans Payable, for details of the transaction and asset collaterals.

and amortization of property, plant and equipment was $3,805,389 and $3,758,191 for the three months ended September 30, 2020

and 2019, respectively.

Depreciation and amortization of property, plant and equipment was $11,301,703 and $11,547,650 for the

nine months ended September 30, 2020 and 2019, respectively.

Financing with Sale-Leaseback

Company entered into a sale-leaseback arrangement (the “Lease Financing Agreement”) with TAC Leasing Co., Ltd.(“TLCL”)

on August 6, 2020, for a total financing proceedsin the amount of RMB 16 million (approximately US$2.3 million).

Under the sale-leaseback

arrangement, Hebei Tengsheng sold the Leased Equipment toTLCL for 16 million (approximately US$2.3 million).

Concurrent with the

sale of equipment, Hebei Tengsheng leases back the equipment soldto TLCL for a lease term of three years.

At the end of the lease

term, Hebei Tengsheng may pay a nominal purchase price of RMB 100 (approximately$15) to TLCL and buy back the Leased Equipment.

The Leased Equipment in amount of $2,349,452 wasrecorded as right-of-use assets and the net present value of the minimum lease

paymentswasrecorded as lease liability andcalculated with TLCL’s implicit interest rate of 15.6% per annum and stated at

$567,099 at the inception of the lease on August 17, 2020.

Tengsheng made two payments due according to the schedule.

As of September 30, 2020, the balance ofLeased Equipment net of amortization

was $2,336,399.

The lease liabilitywere $385,650 and its current portionin the amount of $168,546 as of September 30, 2020.

of the Leased Equipment was $12,718 for the three and nine months ended September 30, 2020.

Total interest expenses for the

sale-leaseback arrangement was $7,172 for the three and nine months ended September 30, 2020.

a result of the sale and leaseback, a deferred gain in the amount of $430,695 was recorded.The deferred gain isamortized over

the lease term and as an offset to amortization of the Leased Equipment.

future minimum lease payments of the capital lease as of September 30, 2020 were as follows:

September 30,

unearned discount

Current portion of lease liability

Loans Payable

September 30,

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

1 unchanged sentence

December 20, 2019, the Company entered into a working capital loan agreement with the ICBC, with a balance of $6,314,151 and $6,163,814

as of June 30, 2020 and December 31, 2019, respectively.

The working capital loan was secured by land use right of Hebei Tengsheng

as collateral for the benefit of the bank.

as of September 30, 2020 and December 31, 2019, respectively.

The working capital loan was secured by the land use right of Dongfang

Paper 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 and

repaid by December 23, 2020.

of June 30, 2020, there were guaranteed short-term borrowings of $6,073,875 and unsecured bank loans of $nil.

The loan will be due

and repaid by December 23, 2020.

of September 30, 2020, there were guaranteed short-term borrowings of $6,314,151 and unsecured bank loans of $nil.

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 three months ended June 30, 2020 and 2019 were approximately 4.79% and 4.77%, respectively.

The average short-term borrowing rates for the six months ended June 30, 2020 and 2019 were approximately 4.79% and 4.76%, respectively.

average short-term borrowing rates for the three months ended September 30, 2020 and 2019 were approximately 4.79% and 4.77%,

respectively.

The average short-term borrowing rates for the nine months ended September 30, 2020 and 2019 were approximately

4.79% and 4.76%, respectively.

TECH PACKAGING, INC.

1 unchanged sentence

loans from credit union

of June 30, 2020 and December 31, 2019, loans payable to Rural Credit Union of Xushui District, amounted to $8,835,443 and $8,973,367,

of September 30, 2020 and December 31, 2019, loans payable to Rural Credit Union of Xushui District, amounted to $9,192,229 and

$8,973,367, respectively.

September 30,

Rural Credit Union of Xushui District Loan 1

4 unchanged sentences

Long-term loans from credit union

of June 30, 2020, the Company’s long-term debt repayments for the next five years were as follows:

of September 30, 2020, the Company’s long-term debt repayments for the next five years were as follows:

Remainder of 2020

5 unchanged sentences

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

As of September

30, 2020 and December 31, 2019, total outstanding loan balance was $1,262,830 and $1,232,763, respectively.

Out of the total outstanding

loan balance, current portion amounted were $169,503 and $143,345 as of June 30, 2020 and December 31, 2019, respectively, which

are presented as current liabilities in the consolidated balance sheet and the remaining balance of $1,045,272 and $1,089,418

are presented as non-current liabilities in the consolidated balance sheet as of June 30, 2020 and December 31, 2019, respectively.

loan balance, current portion amounted were $176,209 and $143,345 as of September 30, 2020 and December 31, 2019, respectively,

which are presented as current liabilities in the consolidated balance sheet and the remaining balance of $1,086,621 and $1,089,418

are presented as non-current liabilities in the consolidated balance sheet as of September 30, 2020 and December 31, 2019, 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,

3 unchanged sentences

The loan is secured by certain of the Company’s manufacturing equipment with net book value of $2,690,540 and $3,935,270

as of June 30, 2020 and December 31, 2019, respectively.

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

As of June 30, 2020 and December 31, 2019, the total outstanding loan balance was $3,531,322 and $3,583,613, respectively.

Out of the total outstanding loan balance, current portion amounted were $240,130 and $172,013 as of June 30, 2020 and December

as of September 30, 2020 and December 31, 2019, respectively.

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

As of September 30, 2020 and December 31, 2019, the total outstanding loan balance was $3,671,018 and $3,583,613, respectively.

Out of the total outstanding loan balance, current portion amounted were $249,629 and $172,013 as of September 30, 2020 and December

31, 2019, respectively, which are presented as current liabilities in the consolidated balance sheet and the remaining balance

of $3,291,192 and $3,411,600 are presented as non-current liabilities in the consolidated balance sheet as of June 30, 2020 and

December 31, 2019, respectively.

of $3,421,389 and $3,411,600 are presented as non-current liabilities in the consolidated balance sheet as of September 30, 2020

and December 31, 2019, respectively.

April 17, 2019, the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 2 years,

1 unchanged sentence

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.

As of June 30, 2020 and December 31, 2019, the total outstanding loan balance was $2,260,047 and $2,293,512, respectively.

Out of the total outstanding loan balance, current portion amounted were $2,260,047 and $1,146,756 as of June 30, 2020 and December

31, 2019, respectively, which are presented as current liabilities in the consolidated balance sheet and the remaining balance

of $nil and $1,146,756 are presented as non-current liabilities in the consolidated balance sheet as of June 30, 2020 and December

with its land use right as collateral for the benefit of the credit union.

Interest payment is due quarterly and bears a fixed

rate of 0.6% per month.

As of September 30, 2020 and December 31, 2019, the total outstanding loan balance was $2,349,452 and

$2,293,512, respectively.

Out of the total outstanding loan balance, current portion amounted were $2,349,452 and $1,146,756 as

of September 30, 2020 and December 31, 2019, respectively, which are presented as current liabilities in the consolidated balance

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

as of September 30, 2020 and December 31, 2019, respectively.

TECH PACKAGING, INC.

3 unchanged sentences

The loan is secured by Hebei Tengsheng

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

Interest payment is due monthly and bears a fixed rate of 7.56%

As of June 30, 2020 and December 31, 2019, the total outstanding loan balance was $1,836,288 and $1,863,479, respectively.

Out of the total outstanding loan balance, current portion amounted were $988,770 and $143,345 as of June 30, 2020 and December

31, 2019, respectively, which are presented as current liabilities in the consolidated balance sheet and the remaining balance

of $847,518 and $1,720,134 are presented as non-current liabilities in the consolidated balance sheet as of June 30, 2020 and

December 31, 2019, respectively.

interest expenses for the short-term bank loans and long-term loans for the three months ended June 30, 2020 and 2019 were $241,436

with its land use right as collateral for the benefit of the credit union.

Interest payment is due monthly and bears a fixed rate

of 7.56% per annum.

As of September 30, 2020 and December 31, 2019, the total outstanding loan balance was $1,908,929 and $1,863,479,

respectively.

Out of the total outstanding loan balance, current portion amounted were $1,027,885 and $143,345 as of September

30, 2020 and December 31, 2019, respectively, which are presented as current liabilities in the consolidated balance sheet and

the remaining balance of $881,044 and $1,720,134 are presented as non-current liabilities in the consolidated balance sheet as

of September 30, 2020 and December 31, 2019, respectively.

interest expenses for the short-term bank loans and long-term loans for the three months ended September 30, 2020 and 2019 were

$251,266 and $214,907, respectively.

Total interest expenses for the short-term bank loans and long-term loans for the six months ended

June 30, 2020 and 2019 were $486,154 and $445,860, respectively.

Total interest expenses for the short-term bank loans and long-term loans for the nine months

ended September 30, 2020 and 2019 were $737,420 and $659,613, respectively.

Related Party Transactions

7 unchanged sentences

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

balance sheet as of June 30, 2020 and December 31, 2019, respectively.

balance sheet as of September 30, 2020 and December 31, 2019, respectively.

December 10, 2014, Mr.

7 unchanged sentences

the remaining balance, together with interest of $20,400.

As of June 30, 2020 and December 31, 2019, approximately $42,376 and

$43,003 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.

As of September 30, 2020 and December 31, 2019, approximately $44,052

and $43,003 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.

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

19 unchanged sentences

balance, together with interest of $94,636.

As of June 30, 2020 and December 31, 2019, the outstanding loan balance were $nil and

the accrued interest was $194,134 and $197,009, respectively, which was recorded in other payables and accrued liabilities as

part of the current liabilities in the consolidated balance sheet.

of June 30, 2020 and December 31, 2019, total amount of loans due to Mr.

As of September 30, 2020 and December 31, 2019, the outstanding loan balance were

$nil and the accrued interest was $201,814 and $197,009, respectively, which was recorded in other payables and accrued liabilities

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

of September 30, 2020 and December 31, 2019, total amount of loans due to Mr.

Zhenyong Liu were $nil.

The interest expense incurred

for such related party loans are $nil and $23,865 for the three months ended June 30, 2020 and 2019, respectively.

expenses incurred for such related party loans are $nil and $48,180 for the six months ended June 30, 2020 and 2019, respectively.

for such related party loans are $nil and $23,234 for the three months ended September 30, 2020 and 2019, respectively.

expenses incurred for such related party loans are $nil and $71,415 for the nine months ended September 30, 2020 and 2019, respectively.

The accrued interest owed to Mr.

Zhenyong Liu was approximately $598,589 and $607,453, as of June 30, 2020 and December 31, 2019,

Zhenyong Liu was approximately $622,269 and $607,453, as of September 30, 2020 and December 31,

2019, respectively, which was recorded in other payables and accrued liabilities.

of June 30, 2020 and December 31, 2019, amount due to shareholder are $657,433 and $483,433, respectively, which represents funds

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

of September 30, 2020 and December 31, 2019, amount due to shareholder are $657,433 and $483,433, 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.

12 unchanged sentences

lease agreement.

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

(10) Other payables and accrued liabilities

payables and accrued liabilities consist of the following:

Other payables and accrued liabilities consist of the following:

September 30,

Accrued electricity

5 unchanged sentences

(11) Derivative Liabilities

Company analyzed the warrant for derivative accounting consideration under ASC 815, “

The Company analyzed the warrant for derivative

accounting consideration under ASC 815, “

Derivatives and Hedging, and hedging, ”

determined that the instrument should be classified as a liability since the warrant becomes effective at issuance resulting in

there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.

815 requires we assess the fair market value of derivative liability at the end of each reporting period and recognize any change

in the fair market value as other income or expense item.

Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model

to calculate the fair value as of June 30, 2020.

and determined that the instrument

should be classified as a liability since the warrant becomes effective at issuance resulting in there being no explicit limit

to the number of shares to be delivered upon settlement of the above conversion options.

ASC 815 requires we assess the fair market

value of derivative liability at the end of each reporting period and recognize any change in the fair market value as other income

or expense item.

The Company determined our derivative liabilities

to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of September 30,

The Black-Scholes model requires six basic data inputs:

the exercise or strike

price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in

the future, and the dividend rate.

Changes to these inputs could produce a significantly higher or lower fair value measurement.

The fair value of each warrant is estimated using the Black-Scholes valuation model.

The following weighted-average

assumptions were used in the June 30, 2020:

Six months ended

the exercise or strike price, time to expiration, the risk-free interest

rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate.

Changes to these

inputs could produce a significantly higher or lower fair value measurement.

The fair value of each warrant is estimated using

the Black-Scholes valuation model.

The following weighted-average assumptions were used in the September 30, 2020:

Nine months ended

September 30,

Expected term

2 unchanged sentences

Risk-free interest rate

following table summarizes the changes in the derivative liabilities during the six months ended June 30, 2020:

0.16% - 0.24%

following table summarizes the changes in the derivative liabilities during the nine months ended September 30, 2020:

Fair Value Measurements Using Significant Observable Inputs (Level 3)

3 unchanged sentences

Change in fair value of derivative liability

Balance at June 30, 2020

following table summarizes the loss on derivative liability included in the income statement for the six months ended June 30,

2020 and 2019, respectively.

Six Months Ended

Balance at September 30, 2020

The following table summarizes

the loss on derivative liability included in the income statement for the nine months ended September 30, 2020 and 2019, respectively.

Nine months Ended

September 30,

Day one loss due to derivative liabilities as warrant

Loss on change in fair value of derivative liability

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of common stock to investors

August 27, 2014, the Company issued 1,562,500 shares of our common stock and warrants to purchase up to 781,250 shares of our

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

(12) Common Stock

Each share of common stock and accompanying warrant was sold at a price of $1.60.

April 29, 2020, the Company and certain institutional investors entered into a securities purchase agreement, as amended on May

4, 2020 (the “2020 Purchase Agreement”), pursuant to which the Company agreed to sell to such investors an aggregate

of 4,400,000 shares of common stock in a registered direct offering and warrants to purchase up to 4,400,000 shares of the Company’s

common stock in a concurrent private placement, for gross proceeds of approximately $2.55 million (net proceeds of approximately

2.27 million).

The purchase price for each share of Common Stock and the corresponding warrant was $0.58.

of common stock pursuant to the 2012 Incentive Stock Plan, 2015 Omnibus Equity Incentive and 2019 Omnibus Equity Incentive

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.

Issuance of common stock to investors

On August 27, 2014, the Company issued 1,562,500 shares of our

common stock and warrants to purchase up to 781,250 shares of our common stock.

Each share of common stock and accompanying warrant was sold

at a price of $1.60.

On April 29, 2020, the Company and certain

institutional investors entered into a securities purchase agreement, as amended on May 4, 2020 (the “2020 Purchase Agreement”),

pursuant to which the Company agreed to sell to such investors an aggregate of 4,400,000 shares of common stock in a registered

direct offering and warrants to purchase up to 4,400,000 shares of the Company’s common stock in a concurrent private placement,

for gross proceeds of approximately $2.55 million (net proceeds of approximately 2.27 million).

The purchase price for each share

of Common Stock and the corresponding warrant was $0.58.

Issuance of common stock pursuant to the 2012 Incentive Stock

Plan, 2015 Omnibus Equity Incentive and 2019 Omnibus Equity Incentive

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.

Please see Note (14), Stock Incentive Plans for more details.

fair value of the stock was calculated at $1,417,395 as of the date of grant.

September 13, 2018, the compensation committee granted an aggregate of 534,500 shares of common stock at $0.88 per share to fifteen

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

value of the shares of common stock granted was calculated at $470,360 as of the date of issuance.

April 2, 2020, the compensation committee granted an aggregate of 2,000,000 shares of restricted common stock to fifteen officers,

directors and employees of the Company, which were granted under the 2019 Omnibus Equity Incentive Plan.

Total fair value of the

shares of common stock granted was calculated at $1,200,000 as of the date of issuance at $0.60 per share.

of common stock to Weitian

October 15, 2018, the Company entered into an agreement with Weitian Group LCC (“Weitian”) and agreed as compensation

to issue to Weitian in the aggregate of 70,000 shares of common stock for investor relation consulting service rendered from October

15, 2018 to October 15, 2019.

Total fair value of the stock was calculated at

$1,417,395 as of the date of grant.

On September 13, 2018, the compensation

committee granted an aggregate of 534,500 shares of common stock at $0.88 per share 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.

On April 2, 2020, the compensation committee

granted an aggregate of 2,000,000 shares of restricted common stock to fifteen officers, directors and employees of the Company,

which were granted under the 2019 Omnibus Equity Incentive Plan.

Total fair value of the shares of common stock granted was calculated

at $1,200,000 as of the date of issuance at $0.60 per share.

Issuance of common stock to Weitian

On October 15, 2018, the Company entered

into an agreement with Weitian Group LCC (“Weitian”) and agreed as compensation to issue to Weitian in the aggregate

of 70,000 shares of common stock for investor relation consulting service rendered from October 15, 2018 to October 15, 2019.

shares of common stock were issued to Weitian on November 12, 2018.

Total fair value of the

shares of common stock granted was calculated at $32,625 at $0.87 per share.

32,500 shares of common stock were issued to Weitian

on August 13, 2019.

Total fair value of the shares of common stock granted was calculated at $17,550 at $0.54 per share.

of common stock to a consultant

January 2, 2020, the Company entered into an agreement with a consultant and agreed as compensation to issue to the consultant

in the aggregate of 60,000 shares of common stock for merge and acquisition consulting service rendered from January 2, 2020 to

January 2, 2021.

60,000 shares of common stock were issued to this consultant on April 28, 2020.

Total fair value of the shares

of common stock issued was calculated at $42,000 at $0.70 per share.

Total fair value of the shares of common stock granted was

calculated at $32,625 at $0.87 per share.

32,500 shares of common stock were issued to Weitian on August 13, 2019.

Total fair value

of the shares of common stock granted was calculated at $17,550 at $0.54 per share.

Issuance of common stock to a consultant

On January 2, 2020, the Company entered

into an agreement with a consultant and agreed as compensation to issue to the consultant in the aggregate of 60,000 shares of

common stock for merger and acquisition consulting service rendered from January 2, 2020 to January 2, 2021.

60,000 shares of common

stock were issued to this consultant on April 28, 2020.

Total fair value of the shares of common stock issued was calculated at

$42,000 at $0.70 per share.

(13) Warrants

2 unchanged sentences

shares of the Common Stock in a concurrent private placement.

The exercise price of the warrant is $0.7425 per

These warrants are exercisable on November 4, 2020 and have a term of exercise equal to five years and six months from

the date of issuance till November 4, 2025.

The Company classified warrant as liabilities and accounted for the issuance of

the Warrants as a derivative.

summary of stock warrant activities is as below:

Six Months Ended

June 30, 2020

The exercise price of the warrant is $0.7425 per share.

These warrants

are exercisable on November 4, 2020 and have a term of exercise equal to five years and six months from the date of issuance till

November 4, 2025.

The Company classified warrant as liabilities and accounted for the issuance of the Warrants as a derivative.

A summary of stock warrant activities is as below:

Nine months Ended

September 30, 2020

Outstanding and exercisable at beginning of the period

3 unchanged sentences

Outstanding and exercisable at end of the period

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes information

relating to outstanding and exercisable warrants as of June 30, 2020.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

following table summarizes information relating to outstanding and exercisable warrants as of September 30, 2020.

Warrants Outstanding

Warrants Exercisable

Weighted Average Remaining

Weighted Average

Contractual life

3 unchanged sentences

Exercise Price

Aggregate intrinsic value is the sum of the

amounts by which the quoted market price of the Company’s stock exceeded the exercise price of the warrants at June 30, 2020

Aggregate intrinsic value is the sum of

the amounts by which the quoted market price of the Company’s stock exceeded the exercise price of the warrants at September

30, 2020 for those warrants for which the quoted market price was in excess of the exercise price (“in-the-money”

There is no intrinsic value of the warrants as of June 30, 2020.

There is no intrinsic value of the warrants as of September 30, 2020.

(14) Earnings Per Share

the three months ended June 30, 2020 and 2019, basic and diluted net income per share are calculated as follows:

For the three months ended September 30, 2020 and 2019, basic

and diluted net income per share are calculated as follows:

Three Months Ended

September 30,

Basic (loss) income per share

8 unchanged sentences

Diluted (loss) income per share

the six months ended June 30, 2020 and 2019, basic and diluted net income per share are calculated as follows:

Six Months Ended

Basic loss per share

Net loss for the period - numerator

$ (3,416,318 )

Nine Months Ended

September 30,

Basic (loss) income per share

Net (loss) income for the period - numerator

$ (3,937,292 )

Weighted average common stock outstanding - denominator

Net loss per share

Diluted loss per share

Net loss for the period - numerator

$ (3,416,318 )

Net (loss) income per share

Diluted (loss) income per share

Net (loss) income for the period - numerator

$ (3,937,292 )

2 unchanged sentences

Weighted average common stock outstanding - denominator

Diluted loss per share

the three and six months ended June 30, 2020 and 2019 there were no securities with dilutive effect issued and outstanding.

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Company and Shengde Holdings are incorporated in the State of Nevada and are subject to the U.S.

federal tax and state statutory

tax rates up to 34% and 0%, respectively.

On December 22, 2017, the U.S.

enacted the Tax Cuts and Jobs Act (the “2017 TCJAAct”),

which significantly changed U.S.

Diluted (loss) income per share

For the three and nine months ended September 30, 2020 and 2019

there were no securities with dilutive effect issued and outstanding.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

(15) Income Taxes

United States

The Company and Shengde Holdings are incorporated

in the State of Nevada and are subject to the U.S.

federal tax and state statutory tax rates up to 34% and 0%, respectively.

December 22, 2017, the U.S.

enacted the Tax Cuts and Jobs Act (the “2017 TCJAAct”), which significantly changed U.S.

The Act 2017 TCJA lowered the Company’s U.S.

statutory federal income tax rate

from the highest rate of 35% to 21% effective January 1, 2018, while also imposing a deemed repatriation tax on deferred foreign

income which requires companies to pay a one-time transition tax on previously unremitted earnings of non-U.S.

subsidiaries that

were previously tax deferred and creates new taxes on certain foreign sourced earnings.

The SEC staff issued Staff Accounting

Bulletin (SAB) 118, which provides guidance on accounting for enactment effects of the 2017 TCJA.

SAB 118 provides a measurement

period of up to one year from the 2017 TCJA’s enactment date for companies to complete their accounting under ASC 740.

accordance with SAB 118, to the extent that a company’s accounting for certain income tax effects of the 2017 TCJA is incomplete

but it is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements.

cannot determine a provisional estimate to be included in its financial statements, it should continue to apply ASC 740 on the

basis of the provisions of the tax laws that were in effect immediately before the enactment of the 2017 TCJA.

connection with the Company’s initial analysis of the impact of the enactment of the 2017 TCJA, the Company recorded a net

tax expense of approximately $80,000 in the fourth quarter of 2017.

For various reasons that are discussed more fully below, including

the issuance of additional technical and interpretive guidance, the Company has not completed its accounting for the income tax

effects of certain elements of the 2017 TCJA.

However, with respect to the following, the Company was able to make reasonable

estimates of the 2017 TCJA’s effects and, as such, recorded provisional amounts:

The transition tax is a tax on previously untaxed accumulated and current earnings and profits (E&P) of certain of the

Company’s non-U.S.

statutory federal income tax rate from the highest rate of 35% to 21%

effective January 1, 2018, while also imposing a deemed repatriation tax on deferred foreign income which requires companies to

pay a one-time transition tax on previously unremitted earnings of non-U.S.

subsidiaries that were previously tax deferred and

creates new taxes on certain foreign sourced earnings.

The SEC staff issued Staff Accounting Bulletin (SAB) 118, which provides

guidance on accounting for enactment effects of the 2017 TCJA.

SAB 118 provides a measurement period of up to one year from the

2017 TCJA’s enactment date for companies to complete their accounting under ASC 740.

In accordance with SAB 118, to the extent

that a company’s accounting for certain income tax effects of the 2017 TCJA is incomplete but it is able to determine a reasonable

estimate, it must record a provisional estimate in its financial statements.

If a company cannot determine a provisional estimate

to be included in its financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws

that were in effect immediately before the enactment of the 2017 TCJA.

Transition tax:

The transition tax is a

tax on previously untaxed accumulated and current earnings and profits (E&P) of certain of the Company’s non-U.S.

subsidiaries.

To determine the amount of the transition tax, the Company must determine, in addition

to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S.

paid on such earnings.

Further, the transition tax is based in part on the amount of those earnings held in cash and other specified

The Company was able to make a reasonable estimate of the transition tax and recorded a provisional obligation and additional

income tax expense of approximately $80,000 in the fourth quarter of 2017.

However, the Company is continuing to gather additional

information and will consider additional technical guidance to more precisely compute and account for the amount of the transition

This amount may change when the Company finalizes the calculation of post-1986 foreign E&P previously deferred from U.S.

federal taxation and finalizes the amounts held in cash or other specified assets.

The 2017 TCJA’s transition tax is payable

over eight years beginning in 2018.

Hence, the Company only provided $6,528 for the year ended 31 December 2017.

Paper and Baoding Shengde are PRC operating companies and are subject to PRC Enterprise Income Tax.

Pursuant to the PRC New Enterprise

Income Tax Law, Enterprise Income Tax is generally imposed at a statutory rate of 25%.

provisions for income taxes for three months ended June 30, 2020 and 2019 were as follows:

To determine the amount of the transition tax, the Company must determine, in addition to other factors, the amount of post-1986

E&P of the relevant subsidiaries, as well as the amount of non-U.S.

income taxes paid on such earnings.

Further, the transition

tax is based in part on the amount of those earnings held in cash and other specified assets.

The Company was able to make a reasonable

estimate of the transition tax and recorded a provisional obligation and additional income tax expense of approximately $80,000

in the fourth quarter of 2017.

However, the Company is continuing to gather additional information and will consider additional

technical guidance to more precisely compute and account for the amount of the transition tax.

This amount may change when the

Company finalizes the calculation of post-1986 foreign E&P previously deferred from U.S.

federal taxation and finalizes the

amounts held in cash or other specified assets.

The 2017 TCJA’s transition tax is payable over eight years beginning in 2018.

Dongfang Paper and Baoding Shengde

are PRC operating companies and are subject to PRC Enterprise Income Tax.

Pursuant to the PRC New Enterprise Income Tax Law, Enterprise

Income Tax is generally imposed at a statutory rate of 25%.

The provisions for income taxes

for three months ended September 30, 2020 and 2019 were as follows:

Three Months Ended

September 30,

Provision for Income Taxes

3 unchanged sentences

Total Provision for (Deferred tax benefit)/ Income Taxes

provisions for income taxes for the six months ended June 30, 2020 and 2019 were as follows:

Six Months Ended

The provisions for income taxes

for the nine months ended September 30, 2020 and 2019 were as follows:

Nine Months Ended

September 30,

Provision for Income Taxes

3 unchanged sentences

Total Provision for (Deferred tax benefit)/ Income Taxes

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

addition to the reversible future PRC income tax benefits stemming from the timing differences of items such as recognition of

asset disposal gain or loss and asset depreciation, the Company was incorporated in the United States and incurred aggregate net

operating losses of approximately $nil and $6,710,939 for U.S.

income tax purposes for the years ended December 31, 2018 and 2017,

respectively.

The net operating loss carried forward may be available to reduce future years’

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

In addition to the reversible future PRC

income tax benefits stemming from the timing differences of items such as recognition of asset disposal gain or loss and asset

depreciation, the Company was incorporated in the United States and incurred aggregate net operating losses of approximately $nil

and $6,710,939 for U.S.

income tax purposes for the years ended December 31, 2018 and 2017, respectively.

The net operating loss

carried forward may be available to reduce future years’

taxable income.

forwards would expire, if not utilized, during the period of 2030 through 2035.

As of December 31, 2019, management believed that

the realization of all the U.S.

income tax benefits from these losses, which generally would generate a deferred tax asset if

it can be expected to be utilized in the future, appears not more than likely due to the Company’s limited operating history

and continuing losses for United States income tax purposes.

Accordingly, As of December 31, 2019, the Company provided a 100%

valuation allowance on the U.S.

deferred tax asset benefit to reduce the total deferred tax asset to the amount realizable for

the PRC income tax purposes.

Management reviews this valuation allowance periodically and will make adjustments as warranted.

A summary of the otherwise deductible (or taxable) deferred tax items is as follows:

These carry forwards would expire, if not utilized,

during the period of 2030 through 2035.

As of December 31, 2019, management believed that the realization of all the U.S.

tax benefits from these losses, which generally would generate a deferred tax asset if it can be expected to be utilized in the

future, appears not more than likely due to the Company’s limited operating history and continuing losses for United States

income tax purposes.

Accordingly, As of December 31, 2019, the Company provided a 100% valuation allowance on the U.S.

tax asset benefit to reduce the total deferred tax asset to the amount realizable for the PRC income tax purposes.

Management reviews

this valuation allowance periodically and will make adjustments as warranted.

A summary of the otherwise deductible (or taxable)

deferred tax items is as follows:

September 30,

Deferred tax assets (liabilities)

6 unchanged sentences

Total deferred tax assets, net

following table reconciles the statutory rates to the Company’s effective tax rate for:

The following table reconciles the statutory

rates to the Company’s effective tax rate:

Three Months Ended

September 30,

PRC Statutory rate

3 unchanged sentences

Effective income tax rate

Six Months Ended

Nine Months Ended

September 30,

PRC Statutory rate

3 unchanged sentences

Effective income tax rate

the three months ended June 30, 2020 and 2019, the effective income tax rate was estimated by the Company to be 7.5% and 15.2%,

respectively.

the six months ended June 30, 2020 and 2019, the effective income tax rate was estimated by the Company to be 15.1% and 20%, respectively.

of December 31, 2017, except for the one-time transition tax under the 2017 TCJA which imposes a U.S.

tax liability on all unrepatriated

foreign E&Ps, the Company does not believe that its future dividend policy and the available U.S.

tax deductions and net operating

losses will cause the Company to recognize any other substantial current U.S.

federal or state corporate income tax liability

in the near future.

Nor does it believes that the amount of the repatriation of the VIE’s earnings and profits for purposes

of paying dividends will change the Company’s position that its PRC subsidiary Baoding Shengde and the VIE, Dongfang Paper

are considered or are expected to be indefinitely reinvested offshore to support our future capacity expansion.

If these earnings

are repatriated to the U.S.

During the three months ended September 30, 2020 and 2019, the

effective income tax rate was estimated by the Company to be -5.3% and 24.8%, respectively.

During the nine months ended September 30, 2020 and 2019, the

effective income tax rate was estimated by the Company to be 12.8% and 75.9%, respectively.

As of December 31, 2017, except for the

one-time transition tax under the 2017 TCJA which imposes a U.S.

tax liability on all unrepatriated foreign E&Ps, the Company

does not believe that its future dividend policy and the available U.S.

tax deductions and net operating losses will cause the

Company to recognize any other substantial current U.S.

federal or state corporate income tax liability in the near future.

does it believes that the amount of the repatriation of the VIE’s earnings and profits for purposes of paying dividends will

change the Company’s position that its PRC subsidiary Baoding Shengde and the VIE, Dongfang Paper are considered or are expected

to be indefinitely reinvested offshore to support our future capacity expansion.

If these earnings are repatriated to the U.S.

resulting in U.S.

taxable income in the future, or if it is determined that such earnings are to be

remitted in the foreseeable future, additional tax provisions would be required.

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Company has adopted ASC Topic 740-10-05, Income Taxes.

To date, the adoption of this interpretation has not impacted the Company’s

financial position, results of operations, or cash flows.

The Company performed self-assessment and the Company’s liability

for income taxes includes the liability for unrecognized tax benefits, interest and penalties which relate to tax years still

subject to review by taxing authorities.

Audit periods remain open for review until the statute of limitations has passed, which

in the PRC is usually 5 years.

The completion of review or the expiration of the statute of limitations for a given audit period

could result in an adjustment to the Company’s liability for income taxes.

Any such adjustment could be material to the

Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations

for the given period.

As of December 31, 2019 and 2018, management considered that the Company had no uncertain tax positions

affecting its consolidated financial position and results of operations or cash flows, and will continue to evaluate for any uncertain

position in future.

There are no estimated interest costs and penalties provided in the Company’s consolidated financial

statements for the years ended December 31, 2019 and 2018, respectively.

The Company’s tax positions related to open tax

years are subject to examination by the relevant tax authorities and the major one is the China Tax Authority.

taxable income in the future, or if it is determined that such earnings are to be remitted in the foreseeable

future, additional tax provisions would be required.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

The Company has adopted ASC Topic 740-10-05,

Income Taxes.

To date, the adoption of this interpretation has not impacted the Company’s financial position, results of

operations, or cash flows.

The Company performed self-assessment and the Company’s liability for income taxes includes the

liability for unrecognized tax benefits, interest and penalties which relate to tax years still subject to review by taxing authorities.

Audit periods remain open for review until the statute of limitations has passed, which in the PRC is usually 5 years.

The completion

of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s

liability for income taxes.

Any such adjustment could be material to the Company’s results of operations for any given quarterly

or annual period based, in part, upon the results of operations for the given period.

As of December 31, 2019 and 2018, management

considered that the Company had no uncertain tax positions affecting its consolidated financial position and results of operations

or cash flows, and will continue to evaluate for any uncertain position in future.

There are no estimated interest costs and penalties

provided in the Company’s consolidated financial statements for the years ended December 31, 2019 and 2018, respectively.

The Company’s tax positions related to open tax years are subject to examination by the relevant tax authorities and the

major one is the China Tax Authority.

(16) Stock Incentive Plans

of common stock pursuant to the 2011 Incentive Stock Plan and 2012 Incentive Stock Plan

August 28, 2011, the Company’s Annual General Meeting approved the 2011 Incentive Stock Plan of IT Tech Packaging, Inc.

(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.

No stock or option was issued under the 2011 ISP until January 2, 2012, when the Compensation Committee granted

109,584 shares of restricted common stock to certain officers and directors of the Company when the stock was at $3.45 per share,

Issuance of common stock pursuant to the 2011 Incentive Stock

Plan and 2012 Incentive Stock Plan

On August 28, 2011, the Company’s

Annual General Meeting approved the 2011 Incentive Stock Plan of IT Tech Packaging, Inc.

(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.

No stock or option was issued

under the 2011 ISP until January 2, 2012, when the Compensation Committee granted 109,584 shares of restricted common stock to

certain officers and directors of the Company when the stock was at $3.45 per share, as compensation for their services in the

Total fair value of the stock was calculated at $378,065 as of the date of issuance.

On September 10, 2012, the Company’s

Annual General Meeting approved the 2012 Incentive Stock Plan of IT Tech Packaging, Inc.

(the “2012 ISP”) as previously

adopted by the Board of Directors on July 4, 2012.

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

(c) determine which 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 2012 ISP’s administration.

On December 31, 2013, the Compensation Committee granted restricted common shares of 297,000, out of which 265,416 shares were

granted under the 2011 ISP and 31,584 shares under the 2012 ISP, to certain officers, directors and employees of the Company when

the stock was at $2.66 per share, as compensation for their services in the past years.

Total fair value of the stock was calculated

at $790,020 as of the date of grant.

2015 Incentive Stock Plan

On August 29, 2015, the Company’s

Annual General Meeting approved the 2015 Omnibus Equity Incentive Plan of IT Tech Packaging, Inc.

(the “2015 ISP”)

as previously adopted by the Board of Directors on July 10, 2015.

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.

On January 12, 2016, the Compensation Committee granted restricted common shares of 1,133,916, of which 168,416 shares were granted

under the 2012 ISP and 965,500 shares under the 2015 ISP, to certain officers, directors, employees and a consultant of the Company

as compensation for their services in the past years.

Total fair value of the stock was calculated at $1,417,395 as of the date

September 10, 2012, the Company’s Annual General Meeting approved the 2012 Incentive Stock Plan of IT Tech Packaging, Inc.

(the “2012 ISP”) as previously adopted by the Board of Directors on July 4, 2012.

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;

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 restricted common shares of

297,000, out of which 265,416 shares were granted under the 2011 ISP and 31,584 shares under the 2012 ISP, to certain officers,

directors and employees of the Company when the stock was at $2.66 per share, as compensation for their services in the past years.

Total fair value of the stock was calculated at $790,020 as of the date of grant.

Incentive Stock Plan

August 29, 2015, the Company’s Annual General Meeting approved the 2015 Omnibus Equity Incentive Plan of IT Tech Packaging,

(the “2015 ISP”) as previously adopted by the Board of Directors on July 10, 2015.

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.

On January 12, 2016, the Compensation Committee granted restricted common shares of 1,133,916,

of which 168,416 shares were granted under the 2012 ISP and 965,500 shares under the 2015 ISP, to certain officers, directors,

employees and a consultant of the Company as compensation for their services in the past years.

Total fair value of the stock

was calculated at $1,417,395 as of the date of issuance at $1.25 per share.

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 ISP.

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.

of issuance at $1.25 per share.

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 ISP.

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.

2019 Incentive Stock Plan

October 31, 2019, the shareholders of the Company at the Company’s Annual Shareholders General Meeting adopted and approved

the 2019 Omnibus Equity Incentive Plan of IT Tech Packaging, Inc.

On October 31, 2019, the shareholders of

the Company at the Company’s Annual Shareholders General Meeting adopted and approved the 2019 Omnibus Equity Incentive Plan

of IT Tech Packaging, Inc.

(the “2019 ISP”).

Under the 2019 ISP, the Company

has reserved a total of 2,000,000 shares of common stock for issuance as or under awards to be made to the directors, officers,

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

On April 2, 2020, 2,000,000 shares of common stock were granted

under the 2019 ISP.

Total fair value of the shares of common stock granted was calculated at $1,200,000 as of the date of issuance

at $0.60 per share.

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Under the 2019 ISP, the Company has reserved a total of 2,000,000 shares

of common stock for issuance as or under awards to be made to the directors, officers, employees and/or consultants of the Company

and its subsidiaries.

On April 2, 2020, 2,000,000 shares of common stock were granted under the 2019 ISP.

Total fair value of the

shares of common stock granted was calculated at $1,200,000 as of the date of issuance at $0.60 per share.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

(17) Commitments and Contingencies

Company leases 32.95 acres of land from a local government in Xushui District, Baoding City, Hebei, China through a real estate

lease with a 30-year term, which expires on December 31, 2031.

The lease requires an annual rental payment of approximately $17,042

(RMB120,000).

This operating lease is renewable at the end of the 30-year term.

mentioned in Note (8) Related Party Transactions, in connection with the sale of Industrial Buildings to Hebei Fangsheng, Hebei

Fangsheng agrees to lease the Industrial Buildings back to the Company at an annual rental of $142,019 (RMB1,000,000), for a total

term of up to five years.

minimum lease payments of all operating leases are as follows:

Operating Lease

The Company leases 32.95 acres of land

from a local government in Xushui District, Baoding City, Hebei, China through a real estate lease with a 30-year term, which expires

on December 31, 2031.

The lease requires an annual rental payment of approximately $17,169 (RMB120,000).

This operating lease is

renewable at the end of the 30-year term.

As mentioned in Note (8) Related Party

Transactions, in connection with the sale of Industrial Buildings to Hebei Fangsheng, Hebei Fangsheng agrees to lease the Industrial

Buildings back to the Company at an annual rental of $143,078 (RMB1,000,000), for a total term of up to five years.

Future minimum lease payments of all operating

leases are as follows:

September 30,

Total operating lease payments

of June 30, 2020, the Company has signed several contracts for purchase of paper machine of a new tissue paper production line

PM10 and improvement of Industrial Buildings.

Total outstanding commitments under these contracts were $5,205,861 and $1,101,989

as of June 30, 2020 and December 31, 2019, respectively.

Capital commitment

As of September 30, 2020, the Company has

entered into several contracts for the purchase of paper machine of a new tissue paper production line PM10 and the improvement

of Industrial Buildings.

Total outstanding commitments under these contracts were $5,205,861 and $1,101,989 as of September 30,

2020 and December 31, 2019, respectively.

The Company expected to pay off all the balances within 1-3 years.

June 25, 2019, Dongfang Paper entered into an acquisition agreement with shareholder of Hebei Tengsheng Paper Co., Ltd.(“Hebei

Tengsheng”), a limited liability company organized under the laws of the PRC, pursuant to which Dongfang Paper will acquire

Hebei Tengsheng.

The consideration for the acquisition is RMB320 million (approximately $45 million), of which $1.4 million was

paid by the Company, and the balance consideration of $43.6 million is payable by December 31, 2021.

and Indemnities

Company agreed with Baoding Huanrun Trading Co., Ltd.(“Baoding Huanrun”), a major supplier of raw materials, to guarantee

certain obligations of this third party, and as of June 30, 2020 and December 31, 2019, the Company guaranteed its long-term loan

from financial institutions amounting to $4,378,840 (RMB31,000,000) that matured at various times in 2020-2023.

If Baoding Huanrun

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

On June 25, 2019, Dongfang Paper entered

into an acquisition agreement with shareholder of Hebei Tengsheng Paper Co., Ltd.(“Hebei Tengsheng”), a limited liability

company organized under the laws of the PRC, pursuant to which Dongfang Paper will acquire Hebei Tengsheng.

The consideration for

the acquisition is RMB320 million (approximately $46 million), of which $2.8 million was paid by the Company, and the balance consideration

of $43.2 million is payable by December 31, 2021.

Guarantees and Indemnities

The Company agreed with Baoding Huanrun

Trading Co., Ltd.(“Baoding Huanrun”), a major supplier of raw materials, to guarantee certain obligations of this third

party, and as of September 30, 2020 and December 31, 2019, the Company guaranteed its long-term loan from financial institutions

amounting to $4,552,062 (RMB31,000,000) that matured at various times in 2020-2023.

If Baoding Huanrun were to become insolvent,

the Company could be materially adversely affected.

(18) Segment Reporting

March 10, 2010, Baoding Shengde started its operations and thereafter the Company manages its operations through two business

operating segments:

Dongfang Paper, which produces offset printing paper and corrugating medium paper and Baoding Shengde, which

produces digital photo paper and single-use face masks.

They are managed separately because each business requires different technology

and marketing strategies.

Company evaluates performance of its operating segments based on net income.

Administrative functions such as finance, treasury,

and information systems are centralized.

However, where applicable, portions of the administrative function expenses are allocated

between the operating segments based on gross revenue generated.

The operating segments do share facilities in Xushui District,

Baoding City, Hebei Province, China.

All sales were sold to customers located in the PRC.

Since March 10, 2010, Baoding Shengde started

its operations and thereafter the Company manages its operations through two business operating segments:

Dongfang Paper, which

produces offset printing paper and corrugating medium paper and Baoding Shengde, which produces digital photo paper and single-use

They are managed separately because each business requires different technology and marketing strategies.

The Company evaluates performance of its

operating segments based on net income.

Administrative functions such as finance, treasury, and information systems are centralized.

However, where applicable, portions of the administrative function expenses are allocated between the operating segments based

on gross revenue generated.

The operating segments share facilities in Xushui District, Baoding City, Hebei Province, China.

sales were sold to customers located in the PRC.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Summarized financial information for the three reportable segments

is as follows:

Summarized financial information for the

three reportable segments is as follows:

Three Months Ended

June 30, 2020

Not Attributable

September 30, 2020

Elimination of

6 unchanged sentences

Net income (loss)

Three Months Ended

June 30, 2019

Not Attributable

Nine Months Ended

September 30, 2020

Elimination of

2 unchanged sentences

Depreciation and amortization

Loss from impairment and disposal of property, plant and equipment

Interest income

2 unchanged sentences

Net income (loss)

Six Months Ended

June 30, 2020

Not Attributable

As of September 30, 2020

Elimination of

1 unchanged sentence

Inter-segment

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Three Months Ended

September 30, 2019

Elimination of

Inter-segment

Depreciation and amortization

3 unchanged sentences

Net income (loss)

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

Six Months Ended

June 30, 2019

Not Attributable

Nine Months Ended

September 30, 2019

Elimination of

7 unchanged sentences

Net income (loss)

As of June 30, 2020

Not Attributable

Elimination of

Enterprise-wide,

Inter-segment

As of December 31, 2019

Not Attributable

Elimination of

2 unchanged sentences

(19) Concentration and Major Customers and Suppliers

For the three months ended June 30, 2020, the Company had no

single customer contributed over 10% of total sales.

For the three months ended June 30, 2019, the Company had no

single customer contributed over 10% of total sales.

For the three months ended June 30, 2020,

the Company had four major suppliers accounted for 74%, 11%, 4% and 3% of total purchases.

For the three months ended June 30, 2019,

the Company had three major suppliers accounted for 80%, 9% and 4% of total purchases.

For the six months ended June 30, 2020,

the Company had four major suppliers accounted for 73%, 11%, 4% and 4% of total purchases.

For the six months ended June 30, 2019,

the Company had three major suppliers accounted for 80%, 9% and 4% of total purchases.

For the three months ended September 30, 2020, the Company had

no single customer contributed over 10% of total sales.

For the three months ended September 30, 2019, the Company had

no single customer contributed over 10% of total sales.

For the three months ended September 30, 2020, the Company had

three major suppliers accounted for 75%, 11% and 3% of total purchases.For the three months ended September 30, 2019, the Company

had four major suppliers accounted for 71%, 13%, 4% and 4% of total purchases.

For the nine months ended September 30, 2020, the Company had

three major suppliers accounted for 74%, 11% and 4% of total purchases.

For the nine months ended September 30, 2019, the Company

had three major suppliers accounted for 77%, 10% and 4% of total purchases.

IT TECH PACKAGING, INC.

7 unchanged sentences

all of the banks in China in the event of bank failure, there is no deposit insurance system in China that is similar to the protection

provided by the Federal Deposit Insurance Corporation (“FDIC”) of the United States as of June 30, 2020 and December

provided by the Federal Deposit Insurance Corporation (“FDIC”) of the United States as of September 30, 2020 and December

On May 1, 2015, the new “Deposit Insurance Regulations”

3 unchanged sentences

bank accounts are all fully covered by

the FDIC insurance as of June 30, 2020 and December 31, 2019, respectively, while for the cash placed in financial institutions

in the PRC, the balances exceeding the maximum coverage of RMB500,000 amounted to RMB87,769,319 (US$12,397,672) as of June 30,

the FDIC insurance as of September 30, 2020 and December 31, 2019, respectively, while for the cash placed in financial institutions

in the PRC, the balances exceeding the maximum coverage of RMB500,000 amounted to RMB53,960,058 (US$7,923,534) as of September

(21) Risks and Uncertainties

20 unchanged sentences

arise from all such possible events.

During the quarter ended June 30, 2020, our revenue was affected by the temporary suspension

in production as a result of the pandemic outbreak.

We are still assessing our business operations and the total impact COVID-19

may have on our results and financial condition, but there can be no assurance that this analysis will enable us to avoid part

or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally.

We are still assessing our business operations and the total impact COVID-19 may have on our

results and financial condition, but there can be no assurance that this analysis will enable us to avoid part or all of any impact

from the spread of COVID-19 or its consequences, including downturns in business sentiment generally.

(22) Recent Accounting Pronouncements

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,

11 unchanged sentences

(23) Subsequent Event

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

Cautionary Notice Regarding Forward-Looking Statements

The following discussion

of the financial condition and results of operations of the Company for the periods ended June 30, 2020 and 2019 should be read

in conjunction with the financial statements and the notes to the financial statements that are included elsewhere in this quarterly

In this quarterly

report, references to “the Company,”

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

Notice Regarding Forward-Looking Statements

following discussion of the financial condition and results of operations of the Company for the periods ended September 30, 2020

and 2019 should be read in conjunction with the financial statements and the notes to the financial statements that are included

elsewhere in this quarterly report.

this quarterly report, references to “the Company,”

“we,”

1 unchanged sentence

and “us”

refer to IT Tech Packaging,

to IT Tech Packaging, Inc.

and its PRC subsidiary and variable interest entity unless the context requires otherwise.

We make certain forward-looking

statements in this report.

Statements concerning our future operations, prospects, strategies, financial condition, future economic

performance (including growth and earnings), demand for our products, and other statements of our plans, beliefs, or expectations,

including the statements contained under the captions “Management’s Discussion and Analysis of Financial Condition

and Results of Operations”

make certain forward-looking statements in this report.

Statements concerning our future operations, prospects, strategies, financial

condition, future economic performance (including growth and earnings), demand for our products, and other statements of our plans,

beliefs, or expectations, including the statements contained under the captions “Management’s Discussion and Analysis

of Financial Condition and Results of Operations”

as well as captions elsewhere in this document, are forward-looking statements.

In some cases

these statements are identifiable through the use of words such as “anticipate”, “believe”, “estimate”,

“expect”, “intend”, “plan”, “project”, “target”, “can”,

“could”, “may”, “should”, “will”, “would”, and similar expressions.

We intend such forward-looking statements to be covered by the safe harbor provisions contained in Section 27A of the Securities

Act of 1933, as amended (the “Securities Act”) and in Section 21E of the Securities Exchange Act of 1934, as amended

(the “Exchange Act”).

The forward-looking statements we make are not guarantees of future performance and are subject

to various assumptions, risks, and other factors that could cause actual results to differ materially from those suggested by these

forward-looking statements.

Because such statements are subject to risks and uncertainties, actual results may differ materially

from those expressed or implied by the forward-looking statements.

Indeed, it is likely that some of our assumptions may prove

to be incorrect.

Our actual results and financial position may vary from those projected or implied in the forward-looking statements

and the variances may be material.

You are cautioned not to place undue reliance on such forward-looking statements.

and uncertainties, together with the other risks described from time to time in reports and documents that we file with the Securities

and Exchange Commission (the “SEC”) should be considered in evaluating forward-looking statements.

In evaluating the

forward-looking statements contained in this report, you should consider various factors, including, without limitation, the following:

(a) those risks and uncertainties related to general economic conditions, (b) whether we are able to manage our planned growth

efficiently and operate profitably, (c) whether we are able to generate sufficient revenues or obtain financing to sustain and

grow our operations, and (d) whether we are able to successfully fulfill our primary requirements for cash.

We assume no obligation

to update forward-looking statements, except as otherwise required under federal securities laws.

Results of Operations

Comparison of the Three months ended June 30, 2020 and

Revenue for the three

months ended June 30, 2020 was $26,362,273, a decrease of $7,257,675, or 21.59%, from $33,619,948 for the same period in the previous

This was mainly due to the decrease in sales volume of regular CMP and offset printing paper and Average Selling Prices (ASPs)

of CMP, offset printing paper and tissue paper products.

Revenue of Offset Printing Paper, Corrugating Medium Paper

and Tissue Paper Products

Revenue from sales

of offset printing paper, corrugating medium paper (“CMP”) and tissue paper products for the three months ended June

30, 2020 was $25,516,720, a decrease of $8,103,228, or 24.10%, from $33,619,948 for the second quarter of 2019.

Total offset printing

paper, CMP and tissue paper products sold during the three months ended June 30, 2020 amounted to 64,658 tonnes, a decrease of

5,731 tonnes, or 8.14%, compared to 70,389 tonnes sold in the comparable period in the previous year.

CMP production was suspended

in mid-January to early March 2020 due to Chines New Year and COVID-19 outbreak.

We resumed full capacity of CMP production in

The production of offset printing paper was suspended during January to May 2020 and resumed in June 2020.

in revenue dollar amount and in quantity sold for the three months ended June 30, 2020 and 2019 are summarized as follows:

In some cases these statements are identifiable through the use of words such as “anticipate”, “believe”,

“estimate”, “expect”, “intend”, “plan”, “project”, “target”,

“can”, “could”, “may”, “should”, “will”, “would”, and

similar expressions.

We intend such forward-looking statements to be covered by the safe harbor provisions contained in Section

27A of the Securities Act of 1933, as amended (the “Securities Act”) and in Section 21E of the Securities Exchange

Act of 1934, as amended (the “Exchange Act”).

The forward-looking statements we make are not guarantees of future

performance and are subject to various assumptions, risks, and other factors that could cause actual results to differ materially

from those suggested by these forward-looking statements.

Because such statements are subject to risks and uncertainties, actual

results may differ materially from those expressed or implied by the forward-looking statements.

Indeed, it is likely that some

of our assumptions may prove to be incorrect.

Our actual results and financial position may vary from those projected or implied

in the forward-looking statements and the variances may be material.

You are cautioned not to place undue reliance on such forward-looking

These risks and uncertainties, together with the other risks described from time to time in reports and documents

that we file with the Securities and Exchange Commission (the “SEC”) should be considered in evaluating forward-looking

In evaluating the forward-looking statements contained in this report, you should consider various factors, including,

without limitation, the following:

(a) those risks and uncertainties related to general economic conditions, (b) whether we are

able to manage our planned growth efficiently and operate profitably, (c) whether we are able to generate sufficient revenues

or obtain financing to sustain and grow our operations, and (d) whether we are able to successfully fulfill our primary requirements

We assume no obligation to update forward-looking statements, except as otherwise required under federal securities

of Operations

of the Three months ended September 30, 2020 and 2019

for the three months ended September 30, 2020 was $33,357,451, an increase of $419,534, or 1.27%, from $32,937,917 for the same

period in the previous year.This was mainly due to the increase in sales volume of face mask, tissue paper products and corrugating

medium paper (“CMP”).

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

from sales of offset printing paper, CMP and tissue paper products for the three months ended September 30, 2020 was $33,136,349,

an increase of $198,432, or 0.60%, from $32,937,917 for the third quarter of 2019.

Total offset printing paper, CMP and tissue

paper products sold during the three months ended September 30, 2020 amounted to 74,126 tonnes, an increase of 1,880 tonnes, or

2.60%, compared to 72,246 tonnes sold in the comparable period in the previous year.

The changes in revenue dollar amount and

in quantity sold for the three months ended September 30, 2020 and 2019 are summarized as follows:

Three Months Ended

June 30, 2020

June 30, 2019

September 30, 2020

September 30, 2019

Sales Revenue

$ (3,511,223 )

Quantity (Tonne)

Light-Weight CMP

$ (4,319,366 )

Offset Printing Paper

$ (4,974,777 )

Tissue Paper Products

Total CMP, Offset Printing Paper and Tissue Paper Revenue

$ (8,103,228 )

Monthly sales revenue

for the 24 months ended June 30, 2020, are summarized below:

The Average Selling

Prices (ASPs) for our main products in the three months ended June 30, 2020 and 2019 are summarized as follows:

sales revenue for the 24 months ended September 30, 2020, are summarized below:

Average Selling Prices (ASPs) for our main products in the three months ended September 30, 2020 and 2019 are summarized as follows:

Offset Printing

Three Months ended June 30, 2019

Three Months ended June 30, 2020

Three Months ended September 30, 2019

Three Months ended September 30, 2020

Decrease from comparable period in the previous year

Decrease by percentage

The following chart

shows the month-by-month ASPs for the 24-month period ended June 30, 2020:

Corrugating Medium Paper

Revenue from CMP amounted

to $21,874,725 (85.73% of the total offset printing paper, CMP and tissue paper products revenues) for the three months ended June

30, 2020, representing a decrease of $4,319,366, or 16.49%, from $26,194,091 for the comparable period in 2019.

We sold 59,590 tonnes

of CMP in the three months ended June 30, 2020 as compared to 60,576 tonnes for the same period in 2019, representing a 1.63% decrease

in quantity sold.

ASP for regular CMP

dropped from $435/tonne for the three months ended June 30, 2019 to $370/tonne for the three months ended June 30, 2020, representing

following chart shows the month-by-month ASPs for the 24-month period ended September 30, 2020:

from CMP amounted to $24,629,994 (74.33% of the total offset printing paper, CMP and tissue paper products revenues) for the three

months ended September 30, 2020, representing an increase of $280,943, or 1.15%, from $24,349,052 for the comparable period in

sold 60,991 tonnes of CMP in the three months ended September 30, 2020 as compared to 60,209 tonnes for the same period in 2019,

representing a 1.30% increase in quantity sold

for regular CMP dropped from $407/tonne for the three months ended September 30, 2019 to $406/tonne for the three months ended

September 30, 2020, representing a 0.25% decrease.

ASP in RMB for regular CMP for the third quarter of 2019 and 2020 was RMB2,846

and RMB2,816, respectively, representing a 1.05% decrease.

The quantity of regular CMP sold increased by 620 tonnes, from 47,487

tonnes in the third quarter of 2019 to 48,107 tonnes in the third quarter of 2020.

for light-weight CMP were $394/tonne for the three months ended September 30, 2019 and 2020.

ASP in RMB for light-weight CMP for

the third quarter of 2019 and 2020 was RMB2,758 and RMB2,727, respectively, representing a 1.12% decrease.

The quantity of light-weight

CMP sold increased by 163 tonnes, from 12,721 tonnes in the third quarter of 2019, to 12,884 tonnes in the third quarter of 2020.

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

The utilization rates for

the third quarter of 2020 and 2019 were 53.77% and 53.19%, respectively, representing an increase of 0.58%.

sold for regular CMP that was produced by the PM6 production line from October 2018 to September 2020 are as follows:

Paper Products

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 brand “Qingmu”.

In December 2018

and November 2019, we completed the construction, installation and test of operation of our PM8 and PM9 production lines.

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 15,000 tonnes/year.

from tissue paper products was $2,380,052 (7.18% of the total offset printing paper, CMP and tissue paper products revenues) for

the three months ended September 30, 2020, representing an increase of $828,769, or 53.42%, from $1,551,283 for the three months

ended September 30, 2019.

We sold 2,855 tonnes of tissue paper in the third quarter of 2020, as compared to 1,840 tonnes in the

comparable period of 2019, representing an increase of 1,015 tonnes, or 55.16%.

Except for the production suspension in the first

quarter of 2020, the production and sales of tissue paper products have been growing up steadily since the launch of PM8 and PM9

in December 2018 and November 2019.

for tissue paper products decreased from $843/tonne for the three months ended September 30, 2019 to $834/tonne for the three

months ended September 30, 2020, representing a 1.07% decrease.

ASP in RMB for tissue paper products for the third quarter of

2019 and 2020 was RMB5,912 and RMB5,766, respectively, representing a 2.47% decrease.

The quantity of tissue paper products sold

increased by 1,015 tonnes, from 1,840 tonnes in the third quarter of 2019, to 2,855 tonnes in the third quarter of 2020.

printing paper

from offset printing paper was $6,126,303 (18.49% of the total offset printing paper, CMP and tissue paper products revenues)

for the three months ended September 30, 2020, representing a decrease of $911,279, or 12.95%, from $7,037,582 for the three months

ended September 30, 2019.

This is mainly due to the decrease in ASP of offset printing paper.

We sold 10,280 tonnes of offset

printing paper in the third quarter of 2020, as compared to 10,198 tonnes in the comparable period of 2019, an increase of 82

tonnes, or 0.80%.

ASPs for offset printing paper for the third quarter of 2019 and 2020 were $690 and $596, respectively, representing

a 13.62% decrease.

ASP in RMB for regular CMP for the second quarter of 2019 and 2020 was RMB2,962 and RMB2,610, respectively,

representing an 11.88% decrease.

The quantity of regular CMP sold decreased by 1,014 tonnes, from 47,994 tonnes in the second quarter

of 2019 to 46,979 tonnes in the second quarter of 2020.

ASP for light-weight

CMP decreased from $422/tonne for the three months ended June 30, 2019 to $357/tonne for the three months ended June 30, 2020,

representing a 15.40% decrease.

ASP in RMB for light-weight CMP for the second quarter of 2019 and 2020 was RMB2,875 and RMB2,522,

respectively, representing a 12.28% decrease.

The quantity of light-weight CMP sold increased by 29 tonnes, from 12,582 tonnes

in the second quarter of 2019, to 12,611 tonnes in the second quarter of 2020.

Our PM6 production

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

The utilization rates for the second quarter

of 2020 and 2019 were 52.47% and 52.78%, respectively, representing a decrease of 0.31%.

Quantities sold for

regular CMP that was produced by the PM6 production line from July 2018 to June 2020 are as follows:

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 brand “Qingmu”.

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 15,000 tonnes/year.

Revenue from tissue

paper products was $2,379,807 (9.33% of the total offset printing paper, CMP and tissue paper products revenues) for the three

months ended June 30, 2020, representing an increase of $1,190,915, or 100.17%, from $1,188,892 for the three months ended June

We sold 2,884 tonnes of tissue paper in the second quarter of 2020, as compared to 1,254 tonnes in the comparable period

of 2019, representing an increase of 1,630 tonnes, or 129.98%.

ASP for tissue paper

products decreased from $948/tonne for the three months ended June 30, 2019 to $825/tonne for the three months ended June 30, 2020,

ASP in RMB for offset printing paper for the third quarter of 2019 and 2020 was RMB4,779 and RMB4,159, respectively,

representing a 12.97% decrease.

ASP in RMB for tissue paper products for the second quarter of 2019 and 2020 was RMB6,512 and RMB5,827,

respectively, representing a 10.52% decrease.

Offset printing paper

Revenue from offset

printing paper was $1,262,188 (4.95% of the total offset printing paper, CMP and tissue paper products revenues) for the three

months ended June 30, 2020, representing a decrease of $4,974,777, or 79.76%, from $6,236,965 for the three months ended June 30,

We sold 2,183 tonnes of offset printing paper in the second quarter of 2020, as compared to 8,559 tonnes in the comparable

period of 2019, a decrease of 6,376 tonnes, or 74.49%.

ASPs for offset printing paper for the second quarter of 2019 and 2020 were

$729 and $578, respectively, representing a 20.71% decrease.

ASP in RMB for offset printing paper for the second quarter of 2019

and 2020 was RMB4,934 and RMB4,071, respectively, representing a 17.49% decrease.

Revenue of Face Mask

On April 29, 2020, we launched a production

line of non-medical single-use face masks, following the completion of raw materials preparation, trial run of the equipment and

the sample products inspection.

Revenue generated from selling face masks were $845,553 for the three months ended June 30, 2020.

We sold 6,280 thousand pieces of face masks in the second quarter of 2020.

Cost of Sales

Total cost of sales

for CMP, offset printing paper and tissue paper products for the quarter ended June 30, 2020 was $23,461,291, a decrease of $7,250,528,

or 23.61%, from $30,711,819 for the comparable period in 2019.

This was mainly due to the decrease in sales quantity of CMP and

offset printing paper and the decrease in material costs.

Cost of sales for

CMP was $19,743,977 for the quarter ended June 30, 2020, as compared to $24,231,791 for the comparable period in 2019.

in the cost of sales of $4,487,814 for CMP was mainly due to the decrease in sales volume of regular CMP and the decrease in average

cost of sales.

Average cost of sales per tonne for CMP decreased by 17.25%, from $400 in the second quarter of 2019 to $331 in

the second quarter of 2020.

The decrease in average cost of sales was mainly attributable to the lower average unit purchase costs

(net of applicable value added tax) of recycled paper board in second quarter of 2020 compared to the second quarter of 2019.

Cost of sales for

offset printing paper was $963,531 for the quarter ended June 30, 2020, as compared to $4,617,156 for the comparable period in

Average cost of sales per tonne of offset printing paper decreased by 18.18%, from $539 in the three months ended June 30,

2019, to $441 during the comparable period in 2020.

The decrease in average cost of sales of offset printing paper was mainly due

to the decrease in manufacturing overhead costs (i.e.

utilities, repair and maintenance etc.).

Cost of sales for

tissue paper products was $2,753,783 for the quarter ended June 30, 2020, as compared to $1,862,872 for the comparable period in

The increase in the cost of sales of $890,911 for tissue paper products was mainly due to the increase in sales volume of

tissue paper products, partially offset by the decrease in average cost of sales.

Average cost of sales per tonne of tissue paper

products decreased by 35.73%, from $1,486 in the three months ended June 30, 2019, to $955 for the comparable period in 2020.

is mainly due to the decrease in cost of tissue base paper.

Changes in cost of

sales and cost per tonne by product for the quarters ended June 30, 2020 and 2019 are summarized below:

April 29, 2020, we launched a production line of non-medical single-use face masks, following the completion of raw materials

preparation, trial run of the equipment and the sample products inspection.

Revenue generated from selling face masks were $221,102

for the three months ended September 30, 2020.

We sold 3,576 thousand pieces of face masks in the third quarter of 2020.

cost of sales for CMP, offset printing paper and tissue paper products for the quarter ended September 30, 2020 was $30,593,395,

an increase of $3,030,210, or 10.99%, from $27,563,185 for the comparable period in 2019.

This was mainly due to the increase

in material costs.

of sales for CMP was $22,898,910 for the quarter ended September 30, 2020, as compared to $20,711,656 for the comparable period

The increase in the cost of sales of $2,187,254 for CMP was mainly due to the increase in average cost of sales.

cost of sales per tonne for CMP increased by 9.01%, from $344 in the third quarter of 2019 to $375 in the third quarter of 2020.

The increase in average cost of sales was mainly attributable to the higher average unit purchase costs (net of applicable value

added tax) of recycled paper board in third quarter of 2020 compared to the third quarter of 2019.

of sales for offset printing paper was $4,969,350 for the quarter ended September 30, 2020, as compared to $4,696,459 for the

comparable period in 2019.

Average cost of sales per tonne of offset printing paper increased by 4.77%, from $461 in the three

months ended September 30, 2019, to $483 during the comparable period in 2020.

The increase in average cost of sales of offset

printing paper was mainly due to the increase in average unit purchase costs(net of applicable value added tax) of recycled white

of sales for tissue paper products was $2,725,135 for the quarter ended September 30, 2020, as compared to $2,155,070 for the

comparable period in 2019.

The increase in the cost of sales of $570,065 for tissue paper products was mainly due to the increase

in sales volume of tissue paper products, partially offset by the decrease in average cost of sales.

Average cost of sales per

tonne of tissue paper products decreased by 18.45%, from $1,171 in the three months ended September 30, 2019, to $955 for the

comparable period in 2020.

This is mainly due to the decrease in cost of tissue base paper.

in cost of sales and cost per tonne by product for the quarters ended September 30, 2020 and 2019 are summarized below:

Three Months Ended

June 30, 2020

June 30, 2019

Change in percentage

$ (3,469,526 )

September 30, 2020

September 30, 2019

Cost of Sales

Cost per Tonne

Cost of Sales

Cost per Tonne

Cost of Sales

Light-Weight CMP

$ (1,018,288 )

$ (4,487,814 )

Offset Printing Paper

$ (3,653,625 )

Tissue Paper Products

Total CMP, Offset Printing Paper and Tissue Paper

$ (7,250,528 )

Our average unit purchase

costs (net of applicable value added tax) of recycled paper board and recycled white scrap paper in the three months ended June

30, 2020 were RMB1,371/tonne (approximately $195/tonne), as compared to RMB1,559/tonne (approximately $230/tonne) for the three

months ended June 30, 2019.

These changes (in US dollars) represent a year-over-year decrease of 15.22% for the recycled paper

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

three months ended September 30, 2020 were RMB 1,754/tonne (approximately $251/tonne) and RMB 2,078/tonne (approximately $297/tonne),

as compared to RMB 1,372/tonne (approximately $200/tonne) and RMB 1,770/tonne (approximately $258/tonne) for the three months

ended September 30, 2019.

These changes (in US dollars) represent a year-over-year increase of 25.50% for the recycled paper board.

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

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 July 2018 to June 2020 are shown below:

The pricing trends of our major raw materials for the

24-month period from October 2018 to September 2020 are shown below:

Electricity and gas

are our two main energy sources.

Electricity and gas accounted for approximately 4% and 10.3% of total sales in the second quarter

of 2020, respectively, compared to 7% and 10.3% of total sales in the second quarter of 2019.

Electricity and gas accounted for approximately 4% and 10.9% of total sales in the third quarter

of 2020, respectively, compared to 5% and 10.4% of total sales in the third quarter of 2019.

The monthly energy cost as a percentage

of total monthly sales of our main paper products for the 24 months ended June 30, 2020 are summarized as follows:

of total monthly sales of our main paper products for the 24 months ended September 30, 2020 are summarized as follows:

Gross profit for the

three months ended June 30, 2020 was $2,558,829 (9.71% of the total revenue), representing a decrease of $349,300, or 12.01%, from

the gross profit of $2,908,129 (8.65% of the total revenue) for the three months ended June 30, 2019, as a result of factors described

Offset Printing Paper, CMP and Tissue Paper Products

three months ended September 30, 2020 was $2,567,551 (7.70% of the total revenue), representing a decrease of $2,807,181, or 52.23%,

from the gross profit of $5,374,732 (16.32% of the total revenue) for the three months ended September 30, 2019, as a result of

factors described above.

Offset Printing Paper, CMP and Tissue

Paper Products

Gross profit for offset

printing paper, CMP and tissue paper products for the three months ended June 30, 2020 was $2,055,429, a decrease of $852,700,

or 29.32%, from the gross profit of $2,908,129 for the three months ended June 30, 2019.

The decrease was mainly the result of

the factors discussed above.

printing paper, CMP and tissue paper products for the three months ended September 30, 2020 was $2,542,954, a decrease of $2,831,778,

or 52.69%, from the gross profit of $5,374,731 for the three months ended September 30, 2019.

The decrease was mainly the result

of the factors discussed above.

The overall gross

profit margin for offset printing paper, CMP and tissue paper products decreased by 8.65 percentage points, from 16.32% for the

three months ended June 30, 2019, to 8.06% for the three months ended June 30, 2020.

three months ended September 30, 2019, to 7.67% for the three months ended September 30, 2020.

Gross profit margin

for regular CMP for the three months ended June 30, 2020 was 9.02%, or 1.31 percentage points higher, as compared to gross profit

margin of 7.71% for the three months ended June 30, 2019.

Such increase was mainly due to the decrease in cost of recycled paper

board, partially offset by the decrease in ASP of regular CMP in the second quarter of 2020.

for regular CMP for the three months ended September 30, 2020 was 6.40%, or 8.28 percentage points lower, as compared to gross

profit margin of 14.68% for the three months ended September 30, 2019.

Such decrease was mainly due to the increase in cost of

recycled paper board in the third quarter of 2020.

Gross profit margin

for light-weight CMP for the three months ended June 30, 2020 was 12.51%, or 5.86 percentage points higher, as compared to gross

profit margin of 6.65% for the three months ended June 30, 2019.

The increase was mainly due to decrease in cost of recycled paper

board, partially offset by the decrease in ASP of light-weight CMP in the second quarter of 2020.

for light-weight CMP for the three months ended September 30, 2020 was 9.44%, or 6.49 percentage points lower, as compared to gross

profit margin of 15.93% for the three months ended September 30, 2019.

The decrease was mainly due to the increase in cost of recycled

paper board in the third quarter of 2020.

Gross profit margin

for offset printing paper was 23.66% for the three months ended June 30, 2020, a decrease of 2.31 percentage points, as compared

to 25.97% for the three months ended June 30, 2019.

The decrease was mainly due to the decrease in ASP of offset printing paper

in the second quarter of 2020.

for offset printing paper was 18.89% for the three months ended September 30, 2020, a decrease of 14.38 percentage points, as compared

to 33.27% for the three months ended September 30, 2019.

The decrease was mainly due to the increase in cost of recycled white

scrap paperand decrease in ASP of offset printing paper.

Gross profit margin

for tissue paper products for the three months ended June 30, 2020 was -15.71%, or 40.98 percentage points higher, as compared

to gross profit margin of -56.69% for the three months ended June 30, 2019.

Monthly gross profit

margins on the sales of our CMP and offset printing paper for the 24-month period ended June 30, 2020 are as follows:

Gross profit for face

masks for the three months ended June 30, 2020 was $503,400, representing a gross margin of 59.53%.

for tissue paper products for the three months ended September 30, 2020 was -14.50%, or 24.42 percentage points higher, as compared

to gross profit margin of -38.92% for the three months ended September 30, 2019.

The increase was mainly due to increase in sales

volume and decrease in cost of base paper, partially offset by decrease in ASP of tissue paper products in the third quarter of

Monthly gross profit margins on the

sales of our CMP and offset printing paper for the 24-month period ended September 30, 2020 are as follows:

Gross profit for face masks for the three months ended

September 30, 2020 was $24,598, representing a gross margin of 11.13%.

Selling, General and Administrative Expenses

Selling, general and

administrative expenses for the three months ended June 30, 2020 were $3,357,472, an increase of $949,613, or 39.44% from $2,407,859

for the three months ended June 30, 2019.

The increase was mainly due to the issuance of 2,000,000 shares of common stock to officers,

directors and employees of the Company, as compensatory incentive, valued at $1,200,000 and the issuance of 60,000 shares of common

stock to a consultant as compensation of service, valued at $42,000 in April 2020.

administrative expenses for the three months ended September 30, 2020 were $2,390,920, an increase of $366,373, or 18.10% from

$2,024,547 for the three months ended September 30, 2019.

The increase was mainly due to additional expenditure on investment

relation activities (e.g.

consultancy, board meeting etc.) in the third quarter of 2020 and reversal of over-provision of lease

expenses for the lands of Heibei Tengsheng in the third quarter of 2019.

Income (Loss) from Operations

Operating loss for

the quarter ended June 30, 2020 was $798,643, a decrease of $1,330,310, or 250.21%, from income from operations of $531,667 for

the quarter ended June 30, 2019.

The decrease in income from operations was primarily due to the decrease in gross profit and increase

in selling, general and administrative expenses.

Operating income for

the quarter ended September 30, 2020 was $176,631, a decrease of $3,172,675, or 94.73%, from $3,349,306 for the quarter ended September

The decrease in income from operations was primarily due to the decrease in gross profit and increase in selling, general

and administrative expenses.

Other Income and Expenses

Interest expense for

the three months ended June 30, 2020 increased by $2,665, from $238,771 in the three months ended June 30, 2019, to $241,436.

Company had short-term and long-term interest-bearing loans, related party loans and leasing obligations that aggregated $14,916,307

as of June 30, 2020, as compared to $15,942,513 as of June 30, 2019.

the three months ended September 30, 2020 increased by $21,451, from $236,987 in the three months ended September 30, 2019, to

The Company had short-term and long-term interest-bearing loans, related party loans and leasing obligations that aggregated

$16,060,576 as of September 30, 2020, as compared to $15,495,765 as of September 30, 2019.

Net Income (Loss)

As a result and the factors discussed above, net loss was

$980,031 for the quarter ended June 30, 2020, representing a decrease of $1,430,101, or 317.75%, from net income of $450,070 for

the quarter ended June 30, 2019.

Comparison of the six months ended

June 30, 2020 and 2019

Revenue for the six

months ended June 30, 2020 was $35,106,124, a decrease of $15,964,116, or 31.26%, from $51,070,240 for the same period in the previous

Revenue of Offset Printing Paper, Corrugating

Medium Paper and Tissue Paper Products

As a result and the

factors discussed above, net loss was $520,974 for the quarter ended September 30, 2020, representing a decrease of $2,859,001,

or 122.28%, from net income of $2,338,027 for the quarter ended September 30, 2019.

Comparison of the nine months

ended September 30, 2020 and 2019

Revenue for the nine

months ended September 30, 2020 was $68,463,575, a decrease of $15,544,582, or 18.5%, from $84,008,157 for the same period in 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 six months ended June 30, 2020 was $34,260,571, a decrease of $16,809,669,

or 32.91%, from $51,070,240 for the six months ended June 30, 2019.

This was mainly due to the decrease in sales volume of Regular

CMP and offset printing paper and the decrease in ASP of CMP, offset printing paper and tissue paper products.

Total quantities

of offset printing paper, CMP and tissue paper products sold during the six months ended June 30, 2020 amounted to 84,519 tonnes,

a decrease of 21,190 tonnes, or 20.05%, compared to 105,709 tonnes sold during the six months ended June 30, 2019.

Total quantities

of CMP and offset printing paper sold decreased by 22,402 tonnes in the six months of 2020 as compared to the same period of 2019.

We sold 4,069 tonnes of tissue paper products in the six months of 2020 as opposed to 2,857 tonnes in the same period of 2019.

The changes in revenue and quantity sold for the six months ended June 30, 2020 and 2019 are summarized as follows:

A summary of the above

changes and further analyses of the changes in our sales revenue are as follows:

Six Months Ended

June 30, 2020

June 30, 2019

of offset printing paper, CMP and tissue paper products for the nine months ended September 30, 2020 was $67,396,920, a decrease

of $16,611,237, or 19.77%, from $84,008,157 for the nine months ended September 30, 2019.

This was mainly due to the decrease in

sales volume of Regular CMP and offset printing paper and the decrease in ASP of CMP, offset printing paper and tissue paper products.

Total quantities of offset printing paper, CMP and tissue paper products sold during the nine months ended September 30, 2020 amounted

to 158,644 tonnes, a decrease of 19,312 tonnes, or 10.85%, compared to 177,956 tonnes sold during the nine months ended September

Total quantities of CMP and offset printing paper sold decreased by 21,538 tonnes in the nine months of 2020 as compared

to the same period of 2019.

We sold 6,923 tonnes of tissue paper products in the nine months of 2020 as opposed to 4,697 tonnes

in the same period of 2019.

CMP production was suspended in mid-January to early March 2020 due to Chines New Yearand COVID-19

We resumed full capacity of CMP production in May 2020.

The production of offset printing paper was suspended duringJanuary

to May 2020 and resumed in June 2020.

The changes in revenue and quantity sold for the nine months ended September 30, 2020 and

2019 are summarized as follows:

A summary of the above changes and further analyses

of the changes in our sales revenue are as follows:

Nine Months Ended

September 30, 2020

September 30, 2019

Sales Revenue

Quantity (Tonne)

$ (9,792,345 )

7 unchanged sentences

$ (16,611,237 )

ASPs for our main

products in the six-month period ended June 30, 2020 and 2019 are summarized as follows:

Offset Printing

Six Months Ended June 30, 2019

Six Months Ended June 30, 2020

Decrease from comparable period in the previous year

Decrease by percentage

Revenue of Face Mask

generated from selling face masks were $845,553 for the six months ended June 30, 2020.

We sold 6,280 thousand pieces of face masks

for the six months ended June 30, 2020 .

Cost of Sales

Total cost of sales

for CMP, offset printing paper and tissue paper products in the six months ended June 30, 2020 was $32,374,861, a decrease of $15,979,716,

or 33.05%, from $48,354,577 for the six months ended June 30, 2019.

This was mainly a result of the decrease in volume sold, partially

offset by decrease in cost of recycled paper board.

Cost of sales for CMP was $26,939,324 for the six months ended June 30, 2020,

as compared to $40,047,877 in the same period of 2019.

The decrease in the cost of sales of $13,108,553 for CMP was mainly due

to the decrease in the quantities of regular CMP sold, partially offset by the decrease in cost of recycled paper board in the

six months of 2020.

Average cost of sales per tonne for CMP decreased by 19.06%, from $425 for the six months ended June 30, 2019,

to $344 in the same period of 2020.

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 $963,531 for the six months ended June 30,

for our main products in the six-month period ended September 30, 2020 and 2019 are summarized as follows:

Months Ended September 30, 2019

Months Ended September 30, 2020

from comparable period in the previous year

by percentage

generated from selling face mask were $1,066,654 for the nine months ended September 30, 2020.

We sold 9,856 thousand pieces of

face masks in the third quarter of 2020.

cost of sales for CMP, offset printing paper and tissue paper products in the nine months ended September 30, 2020 was $62,968,256,

a decrease of $12,949,506, or 17.06%, from $75,917,762 for the nine months ended September 30, 2019.

This was mainly a result

of the decrease in volume sold, partially offset by decrease in cost of materials.

Cost of sales for CMP was $49,838,234 for the

nine months ended September 30, 2020, as compared to $60,759,533 in the same period of 2019.

The decrease in the cost of sales

of $10,921,299 for CMP was mainly due to the decrease in the quantities of regular CMP sold, partially offset by the decrease

in cost of recycled paper board in the nine months of 2020.

Average cost of sales per tonne for CMP decreased by 8.91%, from $393

for the nine months ended September 30, 2019, to $358 in the same period of 2020.

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 $5,932,881 for the nine months ended September 30, 2020, as compared to $9,313,615 in the same period of 2019.

cost of sales per tonne of offset printing paper decreased by 4.23%, from $497 for the nine months ended September 30, 2019, to

$476 in the same period of 2020.Cost of sales for tissue paper products was $7,197,141 for the nine months ended September 30,

2020, as compared to $5,844,614 in the same period of 2019.

Average cost of sales per tonne of offset printing paper decreased

by 18.18%, from $539 for the six months ended June 30, 2019, to $441 in the same period of 2020.

Cost of sales for tissue paper

products was $4,472,006 for the six months ended June 30, 2020, as compared to $3,689,544 in the same period of 2019.

of sales per tonne of tissue paper products decreased by 14.87%, from $1,291 for the six months ended June 30, 2019, to $1,099

in the same period of 2020.

Changes in cost of

sales and cost per tonne by product for the six months ended June 30, 2020 and 2019 are summarized below:

Six Months Ended

June 30, 2020

June 30, 2019

Change in percentage

Average cost of sales per tonne of tissue paper products decreased

by 16.40%, from $1,244 for the nine months ended September 30, 2019, to $1,040 for the same period of 2020.

in cost of sales and cost per tonne by product for the nine months ended September 30, 2020 and 2019 are summarized below:

in percentage

$ (8,493,028 )

Light-Weight CMP

$ (2,428,270 )

$ (10,921,299 )

Offset Printing Paper

Printing Paper

$ (3,380,734 )

Tissue Paper Products

Total CMP, Offset Printing Paper and Tissue Paper Revenue

Paper Products

CMP, Offset Printing Paper and Tissue Paper Revenue

$ (12,949,506 )

Gross profit for the

six months ended June 30, 2020 was $2,389,110 (6.81% of the total revenue), representing a decrease of $326,553, or 12.02%, from

the gross profit of $2,715,663 (5.32% of the total revenue) for the six months ended June 30, 2019.

The decrease was mainly due

to (i) the decrease in quantities sold of regular CMP and offset printing paper and (ii) the decrease of ASP of CMP, offset printing

paper and tissue paper products, partially offset by the decrease of material purchase price of CMP and tissue paper products.

Offset Printing Paper, CMP and Tissue

Paper Products

nine months ended September 30, 2020 was $4,956,662 (7.24% of the total revenue), representing a decrease of $3,133,733, or 38.73%,

from the gross profit of $8,090,395 (9.63% of the total revenue) for the nine months ended September 30, 2019.

The decrease was

mainly due to (i) the decrease in quantities sold of CMP and offset printing paper and (ii) the decrease of ASP of CMP, offset

printing paper and tissue paper products, partially offset by the decrease of material purchase price of CMP and tissue paper products.

Offset Printing Paper, CMP and Tissue Paper Products

Gross profit for offset

printing paper, CMP and tissue paper products for the six months ended June 30, 2020 was $1,885,710, a decrease of $829,953, or

30.56%, from the gross profit of $2,715,663 for the six months ended June 30, 2019.

The decrease was mainly the result of the factors

discussed above.

printing paper, CMP and tissue paper products for the nine months ended September 30, 2020 was $4,428,664, a decrease of $3,661,731,

or 45.26%, from the gross profit of $8,090,395 for the nine months ended September 30, 2019.

The decrease was mainly the result

of the factors discussed above.

The overall gross

profit margin for offset printing paper, CMP and tissue paper products increased by 0.18 percentage points, from 5.32% for the

six months ended June 30, 2019, to 5.50% for the six months ended June 30, 2020.

profit margin for offset printing paper, CMP and tissue paper products decreased by 3.06 percentage points, from 9.63% for the

nine months ended September 30, 2019, to 6.57% for the nine months ended September 30, 2020.

Gross profit margin

for regular CMP for the six months ended June 30, 2020 was 8.01%, or 3.29 percentage points higher, as compared to gross profit

margin of 4.72% for the six months ended June 30, 2019.

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

partially offset by the decrease in ASP of regular CMP.

for regular CMP for the nine months ended September 30, 2020 was 7.27%, or 1.12 percentage points lower, as compared to gross profit

margin of 8.39% for the nine months ended September 30, 2019.

Such decrease was primarily due to decrease of decrease in ASPof

regular CMP, partially offset by the decrease in material purchase price.

Gross profit margin

for light-weight CMP for the six months ended June 30, 2020 was 12.63%, or 10.63 percentage points higher, as compared to gross

profit margin of 2.00% for the six months ended June 30, 2019.

for light-weight CMP for the nine months ended September 30, 2020 was 11.23%, or 4.13 percentage points higher, as compared to

gross profit margin of 7.10% for the nine months ended September 30, 2019.

Gross profit margin

for offset printing paper was 23.66% for the six months ended June 30, 2020, a decrease of 2.31 percentage points, as compared

to 25.97% for the six months ended June 30, 2019.

for offset printing paper was 19.70% for the nine months ended September 30, 2020, a decrease of 10.14 percentage points, as compared

to 29.84% for the nine months ended September 30, 2019.

Such decrease was mainly due to the decrease in ASP of offset printing

Gross profit margin

for tissue paper products was -32.07% for the six months ended June 30, 2020, a decrease of 11.07 percentage points, as compared

to -21.00% for the six months ended June 30, 2019.

Gross profit for face

masks for the six months ended June 30, 2020 was $503,400, representing a gross margin of 59.53%.

Selling, General and Administrative

for tissue paper products was -24.82% for the nine months ended September 30, 2020, an increase of 2.22 percentage points, as compared

to -27.04% for the nine months ended September 30, 2019.

Gross profit for face masks for the nine months ended

September 30, 2020 was $527,997, representing a gross margin of 49.5%.

Selling, General and Administrative Expenses

Selling, general and

administrative expenses for the six months ended June 30, 2020 were $6,012,435, an increase of $623,103, or 11.56% from $5,389,332

for the six months ended June 30, 2019.

The increase was net impact of issuance of 2,000,000 shares of common stock valued at $1,200,000

to officers, directors and employees, issuance of 60,000 shares of common stock valued at $42,000 to a consultant and decrease

in sales commission to staff.

Loss from Operations

administrative expenses for the nine months ended September 30, 2020 were $8,445,356, an increase of $1,031,477, or 13.91% from

$7,413,879 for the nine months ended September 30, 2019.

The increase was net impact ofthe issuance of 2,000,000 shares of common

stock valued at $1,200,000 to officers, directors and employees andthe issuance of 60,000 shares of common stock valued at $42,000

to a consultant and a decrease in sales commission to staff.

Income (Loss) from Operations

Operating loss for

the six months ended June 30, 2020 was $3,665,325, a decrease of $1,023,053, or 38.72%, from $2,642,272 for the six months ended

June 30, 2019.

The decrease was primarily due to the decrease in gross profit and increase in selling, general and administrative

the nine months ended September 30, 2020 was $3,488,694, a decrease of $4,195,728, or 593.43%, from income from operations of $707,034

for the nine months ended September 30, 2019.

The decrease was primarily due to the decrease in gross profit and the increase in

selling, general and administrative expenses.

Other Income and Expenses

Interest expense for

the six months ended June 30, 2020 decreased by $7,886, from $494,040 for the six months ended June 30, 2019, to $486,154.

Company had short-term and long-term interest-bearing loans and related party loans that aggregated $14,916,307 as of June 30,

2020, as compared to $15,942,514 as of June 30, 2019.

Subsidy income of

$142,019 for the three month ended March 31, 2020 represents funding by the government to finance various expenditures during the

COVID-19 pandemic period.

the nine months ended September 30, 2020 increased by $13,565, from $731,027 for the nine months ended September 30, 2019, to $744,592.

The Company had short-term and long-term interest-bearing loans and lease obligation that aggregated $16,060,576 as of September

30, 2020, as compared to $15,495,765 as of September 30, 2019.

As a result of the

above, net loss was $3,416,318 for the six months ended June 30, 2020, representing a decrease of $1,143,793, or 50.33%, from $2,272,525

for six months ended June 30, 2019.

above, net loss was $3,937,292 for the nine months ended September 30, 2020, representing a decrease of $4,002,794, or 6110.95%,

from net income of $65,502 for nine months ended September 30, 2019.

Accounts Receivable

Net accounts receivable

increased by $44,831, or 1.44%, to $3,164,142 as of June 30, 2020, as compared with $3,119,311 as of December 31, 2019.

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

increased by $353,063, or 11.32%, to $3,472,374 as of September 30, 2020, as compared with $3,119,311 as of December 31, 2019.

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

Inventories consist

of raw materials (accounting for 79.77% of total value of inventory as of June 30, 2020), semi-finished goods and finished goods.

As of June 30, 2020, the recorded value of inventory increased by 247.89% to $5,852,473 from $1,682,298 as of December 31, 2019.

As of June 30, 2020, the inventory of recycled paper board, which is the main raw material for the production of CMP, was $4,116,442,

approximately $4,076,410, or 10182.88%, higher than the balance as of December 31, 2019.

Due to the volatility of recycled paper

board price, a minimum level of inventory was maintained at the end of 2019.

of raw materials (accounting for 80.81% of total value of inventory as of September 30, 2020), semi-finished goods and finished

As of September 30, 2020, the recorded value of inventory increased by 433.94% to $8,582,912 from $1,607,463 as of December

As of September 30, 2020, the inventory of recycled paper board, which is the main raw material for the production of

CMP, was $5,512,274, approximately $5,472,242, or 13669.67%, higher than the balance as of December 31, 2019.

Due to the volatility

of recycled paper board and recycled white scrap paper prices, a minimum level of inventory was maintained at the end of 2019.

A summary of changes

in major inventory items is as follows:

September 30,

Raw Materials

22 unchanged sentences

lease agreement.

The accrued rental owed to Hebei Fangsheng was $nil and $56,552 as of June 30, 2020 and December 31, 2019, respectively,

and such amounts were recorded as part of the current liabilities.

Capital Expenditure Commitment as of June 30, 2020

On May 5, 2020,

the Company announced it planned the commercial launch of a new tissue paper production line PM10 and the Company has signed

an agreement to purchase paper machine with paper machine supplier.

The Company expected the new tissue paper production line

to be launched after the completion of trial run.

As of June 30, 2020,

we had approximately $5 million in capital expenditure commitments that were mainly related to purchase of paper machine of PM10

and improvement of Industrial Buildings.

These commitments are expected to be financed by bank loans and cash flows generated from

our business operations.

The accrued rental owed to Hebei Fangsheng was $nil and $56,552 as of September 30, 2020 and December 31, 2019,

respectively, and such amounts were recorded as part of the current liabilities.

Capital Expenditure Commitment as of September 30, 2020

On May 5, 2020, the

Company announced it planned the commercial launch of a new tissue paper production line PM10 and the Company signed an agreement

to purchase paper machine with paper machine supplier.

The Company expected the new tissue paper production line to be launched

after the completion of trial run.

As of September 30,

2020, we had approximately $4 million in capital expenditure commitments that were mainly related to the purchase of paper machine

of PM10 and the improvement of Industrial Buildings.

These commitments are expected to be financed by bank loans and cash flows

generated from our business operations.

Financing with Sale-Leaseback

The Company entered

into a sale-leaseback arrangement (the “Lease Financing Agreement”) with TAC Leasing Co., Ltd.(“TLCL”)

on August 6, 2020, for a total financing proceeds in the amount of RMB 16 million (approximately US$2.3 million).

Under the sale-leaseback

arrangement, Hebei Tengsheng sold the Leased Equipment to TLCL for 16 million (approximately US$2.3 million).

Concurrent with the

sale of equipment, Hebei Tengsheng leases back the equipment sold to TLCL for a lease term of three years.

At the end of the lease

term, Hebei Tengsheng may pay a nominal purchase price of RMB 100 (approximately $15) to TLCL and buy back the Leased Equipment.

The Leased Equipment in amount of $2,349,452 was recorded as right-of-use assets and the net present value of the minimum lease

payments was recorded as lease liability and calculated with TLCL’s implicit interest rate of 15.6% per annum and stated

at $567,099 at the inception of the lease on August 17, 2020.

Hebei Tengsheng made

two payments due according to the schedule.

As of September 30, 2020, the balance of Leased Equipment net of amortization was

The lease liability were $385,650 and its current portion in the amount of $168,546 as of September 30, 2020.

Amortization of the

Leased Equipment was $12,718 for the three and nine months ended September 30, 2020.

Total interest expenses for the sale-leaseback

arrangement was $7,172 for the three and nine months ended September 30, 2020.

As a result of the

sale and leaseback, a deferred gain in the amount of $430,695 was recorded.

The deferred gain is amortized over the lease term

and as an offset to amortization of the Leased Equipment.

Cash and Cash Equivalents

Our cash, cash equivalents

and restricted cash as of June 30, 2020 was $12,828,030, an increase of $6,990,285, from $5,837,745 as of December 31, 2019.

increase of cash and cash equivalents for the six months ended June 30, 2020 was attributable to a number of factors:

and restricted cash as of September 30, 2020 was $8,209,905, an increase of $2,372,160, from $5,837,745 as of December 31, 2019.

The increase of cash and cash equivalents for the nine months ended September 30, 2020 was attributable to a number of factors:

Net cash provided by operating activities

Net cash provided by operating activities was $2,369,487

for the six months ended June 30, 2020.

The balance represented an increase of cash of $6,668,934, or 820.98%, from $812,309 used

in operating activities for the six months ended June 30, 2019.

Net loss for the six months ended June 30, 2020 was $3,416,318,

representing a decrease of $1,143,793, or 50.33%, from a net loss of $2,272,525 for the six months ended June 30, 2019.

in various asset and liability account balances throughout the six months ended June 30, 2020 also contributed to the net change

in cash from operating activities in six months ended June 30, 2020.

Chief among such changes is the increase of $4,291,622 in

the ending inventory balance as of June 30, 2020 (a decrease to net cash for the six months ended June 30, 2020 cash flow purposes).

In addition, the Company had non-cash expenses relating to depreciation and amortization in the amount of $7,496,314.

also had a net decrease of $5,739,395 in prepayment and other current assets (an increase to net cash) and a net decrease of $447,448

in other payables and accrued liabilities and related parties (an increase to net cash), as well as a decrease in income tax payable

of $968,474 (a decrease to net cash) during the six months ended June 30, 2020.

for the nine months ended September 30, 2020.

The balance represented a decrease of cash of $2,229,547, or 48.48%, from $4,599,034

provided for the nine months ended September 30, 2019.

Net loss for the nine months ended September 30, 2020 was $3,937,292, representing

a decrease of $4,002,794, or 6110.95%, from a net income of $65,502 for the nine months ended September 30, 2019.

Changes in various

asset and liability account balances throughout the nine months ended September 30, 2020 also contributed to the net change in

cash from operating activities in nine months ended September 30, 2020.

Chief among such changes is the increase of accounts receivable

in the amount of $272,857 during the nine months of 2020.

There was also an increase of $6,758,500 in the ending inventory balance

as of September 30, 2020 (a decrease to net cash for the nine months ended September 30, 2020 cash flow purposes).

the Company had non-cash expenses relating to depreciation and amortization in the amount of $11,301,703.

The Company also had

a net decrease of $2,099,669 in prepayment and other current assets (an increase to net cash) and a net decrease of $432,206 in

other payables and accrued liabilities and related parties (an increase to net cash), as well as a decrease in income tax payable

of $795,487 (a decrease to net cash) during the nine months ended September 30, 2020.

Net cash used in investing activities

We incurred $2,571,949

in net cash expenditures for investing activities during the six months ended June 30, 2020, as compared to $5,021,739 for the

same period of 2019.

Payments in the six months ended June 30, 2020 were for the expenditures on improvement of Industrial Buildings.

in net cash expenditures for investing activities during the nine months ended September 30, 2020, as compared to $6,449,181 for

the same period of 2019.

Payments in the nine months ended September 30, 2020 were for the payment of Heibei Tengsheng acquisition,

PM10 paper machine and expenditures on improvement of Industrial Buildings.

Net cash provided by financing activities

Net cash provided

by financing activities was proceeds from issuance of shares and warrants of $2,273,360 for the six months ended June 30, 2020,

as compared to net cash used in financing activities in the amount of $5,286,942 for the six months ended June 30, 2019.

by financing activities was proceeds from issuance of shares and warrants and repayment of lease liability of $2,241,043 for the

nine months ended September 30, 2020, as compared to net cash used in financing activities in the amount of $5,224,295 for the

nine months ended September 30, 2019.

Short-term bank loans

September 30,

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

Total short-term bank loans

On December 20, 2019,

the Company entered into a working capital loan agreement with the ICBC, with a balance of $6,073,875 and $6,163,814 as of June

30, 2020 and December 31, 2019, respectively.

The working capital loan was secured by land use right of Hebei Tengsheng as collateral

for the benefit of the bank.

On December 20, 2019, the Company entered

into a working capital loan agreement with the ICBC, with a balance of $6,314,151 and $6,163,814 as of September 30, 2020 and December

31, 2019, respectively.

The working capital loan was secured by the Land use right of Dongfang Paper as collateral for the benefit

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

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

As of June 30, 2020,

there were guaranteed short-term borrowings of $6,073,875 and unsecured bank loans of $nil.

As of December 31, 2019, there were

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

As of September 30, 2020, there were guaranteed

short-term borrowings of $6,314,151 and unsecured bank loans of $nil.

As of December 31, 2019, there were guaranteed short-term

borrowings of $6,163,814 and unsecured bank loans of $nil.

The average short-term borrowing rates

for the three months ended September 30, 2020 and 2019 were approximately 4.79% and 4.77%, respectively.

The average short-term

borrowing rates for the three months ended June 30, 2020 and 2019 were approximately 4.79% and 4.77%, respectively.

short-term borrowing rates for the six months ended June 30, 2020 and 2019 were approximately 4.79% and 4.76%, respectively.

borrowing rates for the nine months ended September 30, 2020 and 2019 were approximately 4.79% and 4.76%, respectively.

Long-term loans from credit union

As of June 30, 2020

As of September 30,

2020 and December 31, 2019, loans payable to Rural Credit Union of Xushui District, amounted to $9,192,229 and $8,973,367, respectively.

6 unchanged sentences

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

As of June 30, 2020 and December

As of September 30, 2020 and December

31, 2019, total outstanding loan balance was $1,262,830 and $1,232,763, respectively.

Out of the total outstanding loan balance,

current portion amounted were $169,503 and $143,345 as of June 30, 2020 and December 31, 2019, respectively, which are presented

current portion amounted were $176,209 and $143,345 as of September 30, 2020 and December 31, 2019, respectively, which are presented

as current liabilities in the consolidated balance sheet and the remaining balance of $1,086,621 and $1,089,418 are presented as

non-current liabilities in the consolidated balance sheet as of June 30, 2020 and December 31, 2019, respectively.

non-current liabilities in the consolidated balance sheet as of September 30, 2020 and December 31, 2019, respectively.

On July 15, 2013,

4 unchanged sentences

The loan is secured by certain

of the Company’s manufacturing equipment with net book value of $3,013,792 and $3,935,270 as of June 30, 2020 and December

of the Company’s manufacturing equipment with net book value of $2,690,540 and $3,935,270 as of September 30, 2020 and December

31, 2019, respectively.

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

As of June 30, 2020 and December

31, 2019, the total outstanding loan balance was $3,531,322 and $3,583,613, respectively.

Out of the total outstanding loan balance,

current portion amounted were $240,130 and $172,013 as of June 30, 2020 and December 31, 2019, respectively, which are presented

as current liabilities in the consolidated balance sheet and the remaining balance of $3,291,192 and $3,411,600 are presented as

non-current liabilities in the consolidated balance sheet as of June 30, 2020 and December 31, 2019, respectively.

As of September 30, 2020 and

December 31, 2019, the total outstanding loan balance was $3,671,018 and $3,583,613, respectively.

Out of the total outstanding

loan balance, current portion amounted were $249,629 and $172,013 as of September 30, 2020 and December 31, 2019, respectively,

which are presented as current liabilities in the consolidated balance sheet and the remaining balance of $3,421,389 and $3,411,600

are presented as non-current liabilities in the consolidated balance sheet as of September 30, 2020 and December 31, 2019, respectively.

On April 17, 2019,

4 unchanged sentences

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

of June 30, 2020 and December 31, 2019, the total outstanding loan balance was $2,260,047 and $2,293,512, respectively.

the total outstanding loan balance, current portion amounted were $2,260,047 and $1,146,756 as of June 30, 2020 and December 31,

2019, respectively, which are presented as current liabilities in the consolidated balance sheet and the remaining balance of $nil

and $1,146,756 are presented as non-current liabilities in the consolidated balance sheet as of June 30, 2020 and December 31,

2019, respectively.

of September 30, 2020 and December 31, 2019, the total outstanding loan balance was $2,349,452 and $2,293,512, respectively.

of the total outstanding loan balance, current portion amounted were $2,349,452 and $1,146,756 as of September 30, 2020 and December

31, 2019, respectively, which are presented as current liabilities in the consolidated balance sheet and the remaining balance

of $nil and $1,146,756 are presented as non-current liabilities in the consolidated balance sheet as of September 30, 2020 and

December 31, 2019, respectively.

On December 12, 2019,

4 unchanged sentences

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

of June 30, 2020 and December 31, 2019, the total outstanding loan balance was $1,836,288 and $1,863,479, respectively.

the total outstanding loan balance, current portion amounted were $988,770 and $143,345 as of June 30, 2020 and December 31, 2019,

respectively, which are presented as current liabilities in the consolidated balance sheet and the remaining balance of $847,518

and $1,720,134 are presented as non-current liabilities in the consolidated balance sheet as of June 30, 2020 and December 31,

2019, respectively.

of September 30, 2020 and December 31, 2019, the total outstanding loan balance was $1,908,929 and $1,863,479, respectively.

of the total outstanding loan balance, current portion amounted were $1,027,885 and $143,345 as of September 30, 2020 and December

31, 2019, respectively, which are presented as current liabilities in the consolidated balance sheet and the remaining balance

of $881,044 and $1,720,134 are presented as non-current liabilities in the consolidated balance sheet as of September 30, 2020

and December 31, 2019, respectively.

Total interest expenses

for the short-term bank loans and long-term loans for the three months ended June 30, 2020 and 2019 were $241,436 and $214,907,

for the short-term bank loans and long-term loans for the three months ended September 30, 2020 and 2019 were $251,266 and $214,907,

respectively.

Total interest expenses for the short-term bank loans and long-term loans for the six months ended June 30, 2020

Total interest expenses for the short-term bank loans and long-term loans for the nine months ended September 30,

2020 and 2019 were $737,420 and $659,613, respectively.

Shareholder Loans

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 $362,079 and $367,441 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 June 30, 2020

and December 31, 2019, respectively.

On December 10, 2014, Mr.

Zhenyong Liu provided

a loan to the Company, amounted to $8,483,083 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.

Liu, together with interest of $288,596.

In February 2018, the company paid off the remaining balance, together with interest of

As of June 30, 2020 and December 31, 2019, approximately $42,376 and $43,003 of interest were outstanding to Mr.

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

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 $ 16,950,350 (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.

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.

Zhenyong Liu,

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

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 to Mr.

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 $376,403 and $367,441 of interest were outstanding to Mr.

Zhenyong Liu,

together with interest of $158,651.

In December 2019, the company paid off the remaining balance, together with interest of 94,636.

As of June 30, 2020 and December 31, 2019, the outstanding loan balance were $nil and the accrued interest was $194,134 and $197,009,

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

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

as of September 30, 2020 and December 31, 2019, respectively.

On December 10, 2014,

Zhenyong Liu provided a loan to the Company, amounted to $8,483,083 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.

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

with interest of $20,400.

As of September 30, 2020 and December 31, 2019, approximately $44,052 and $43,003 of interest were outstanding

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

balance sheet.

As of June 30, 2020 and December 31, 2019,

total amount of loans due to Mr.

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 $17,620,887

(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.

Zhenyong Liu.

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

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.

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

with interest of $94,636.

As of September 30, 2020 and December 31, 2019, the outstanding loan balance were $nil and the accrued

interest was $201,814 and $197,009, respectively, which was recorded in other payables and accrued liabilities as part of the current

liabilities in the consolidated balance sheet.

As of September 30,

2020 and December 31, 2019, total amount of loans due to Mr.

Zhenyong Liu were $nil.

The interest expense incurred for such related party loans are $nil and

$23,865 for the three months ended June 30, 2020 and 2019, respectively.

The interest expenses incurred for such related party

loans are $nil and $48,180 for the six months ended June 30, 2020 and 2019, respectively.

The accrued interest owed to the CEO

was approximately $598,589 and $607,453, as of June 30, 2020 and December 31, 2019, respectively, which was recorded in other payables

and accrued liabilities.

As of June 30, 2020 and December 31, 2019,

amount due to shareholder are $657,433 and $483,433, respectively, which represents funds from shareholders to pay for various

expenses incurred in the U.S.

The interest expense incurred for such related

party loans are $nil and $23,234 for the three months ended September 30, 2020 and 2019, respectively.

The interest expenses incurred

for such related party loans are $nil and $71,415 for the nine months ended September 30, 2020 and 2019, respectively.

interest owed to Mr.

Zhenyong Liu was approximately $622,269 and $607,453, as of September 30, 2020 and December 31, 2019, respectively,

which was recorded in other payables and accrued liabilities.

As of September 30,

2020 and December 31, 2019, amount due to shareholder are $657,433 and $483,433, 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.

Critical Accounting Policies and Estimates

Critical Accounting Policies and

The Company’s

21 unchanged sentences

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

For the three months ended June 30, 2020 and 2019, no events or circumstances occurred for which an evaluation of the recoverability

For the three months ended September 30, 2020 and 2019, no events or circumstances occurred for which an evaluation of the recoverability

of long-lived assets was required.

6 unchanged sentences

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

exchange rates used by the Company as of June 30, 2020 and December 31, 2019 to translate the Chinese RMB to the U.S.

7.0795:1 and 6.9762:1, respectively.

exchange rates used by the Company as of September 30, 2020 and December 31, 2019 to translate the Chinese RMB to the U.S.

are 6.8101:1 and 6.9762:1, respectively.

Revenues and expenses are translated using the prevailing average exchange rates at 6.9892:1,

and 6.7087:1 for the three months ended June 30, 2020 and 2019, respectively.

Translation adjustments are included in other comprehensive

income (loss).

and 6.7087:1 for the nine months ended September 30, 2020 and 2019, respectively.

Translation adjustments are included in other

comprehensive income (loss).

Off-Balance Sheet Arrangements

3 unchanged sentences

Baoding Huanrun 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.

If Baoding Huanrun were

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

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

transactions.

This arrangement

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

Huanrun 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 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,

12 unchanged sentences

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-Q

Item 1. Financial Statements