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Item 5. Market for Registrant’s Common Equity

2021-03-23 compared with 2020-03-23 · 381 added, 401 removed, 266 unchanged (75% of the section changed)

Market for Registrant’s

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

Market for Registrant’s Common Equity, Related

Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

IT Tech Packaging’s

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

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

As of March 23, 2021,

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

On November 21, 2013,

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

was paid on December 10, 2013.

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

On November 21, 2013, the Company declared another

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

The dividend was paid on December 10, 2013.

Total dividends

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

We do not expect to

5 unchanged sentences

On August 29, 2015,

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

by the Board of Directors on July 5, 2011.

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

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

Specifically, the Board and/or the Compensation

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

Stock Purchase Offers;

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

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

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

On January 11, 2012, the

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

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

officers and directors of the Company.

On September 10, 2012,

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

Under the 2012

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

officers, employees or consultants.

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

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

(b) determine in

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

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

and (d) make all other determinations necessary

or advisable for the 2012 ISP’s administration.

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

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

On August 29, 2015,

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

36 unchanged sentences

All shares of common

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

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

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

stock under the 2015 and 2019 ISPs, including shares originally authorized by equity holders and shares remaining for future issuance

as of December 31, 2020, have been issued.

Recent Sales of Unregistered Securities

1 unchanged sentence

Selected Financial Data

The selected financial

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

The selected consolidated statements

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

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

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

consolidated statements of income and comprehensive income 2020 have been derived from our audited consolidated financial

statements included elsewhere in this annual report.

Our selected consolidated statements of income and comprehensive income

data for the year ended December 31, 2016, 2017, 2018 and 2019 and the selected consolidated balance sheet data as of

December 31, 2016, 2017, 2018 and 2019 have been derived from our audited consolidated financial statements not included in

this annual report.

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

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

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

Our historical results do not necessarily indicate

results expected for any future periods.

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

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

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

Our historical results do not necessarily indicate results expected for any future periods.

consolidated financial data below should be read in conjunction with “Management’s Discussion and Analysis of

Financial Condition and Results of Operations”, the consolidated financial statements and notes thereto and the other

information contained in this Form 10-K.

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

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

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

dollars unless otherwise noted.

3 unchanged sentences

Selling, general and administrative expenses

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

Income from operations

Loss from impairment and disposal of property, plant and equipment

(Loss) income from operations

Interest expense

Net Income (Loss)

Basic and Diluted Earnings (Losses) per Share

Net (Loss) Income

Basic and Diluted (Losses) Earnings per Share

CONSOLIDATED BALANCE SHEETS DATA

4 unchanged sentences

Total stockholders’

Management’s Discussion

and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

The following discussion

2 unchanged sentences

Results of Operations

Revenue for the year

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

for the year ended December 31, 2020 was $100,943,269, a decrease of $16,671,617, or 14.17%, from $117,614,886 for the

previous year.

This was mainly due to the decrease in sales volume of corrugating medium paper(“CMP”) and offset

printing paper and decrease in average selling prices (“ASP”) of CMP, offset printing paper and tissue paper

products, partially offset by the revenue generated from face masks in year 2020.

Revenue of Offset Printing Paper, Corrugating Medium Paper

1 unchanged sentence

Revenue from sales

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

of offset printing paper, CMP and tissue paper products for the year ended December 31, 2020 was $99,841,325, a decrease of $17,772,411,

or 15.11%, from $117,613,736 for the year ended December 31, 2019.

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

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

Total quantities of

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

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

Total quantities

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

We sold 6,790 tonnes

of tissue paper products in the year of 2019.

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

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

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

The changes in revenue and quantity sold for the year

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

This was mainly due to the decrease in sales volume of 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 year ended December 31, 2020 amounted to 227,331 tonnes, a decrease

of 22,813 tonnes, or 9.12%, compared to 250,144 tonnes sold during the year ended December 31, 2019.

Total quantities of CMP and offset printing paper sold decreased

by 26,111 tonnes in the year of 2020 as compared to 2019.

We sold 10,088 tonnes of tissue paper products in the year of 2020 as

opposed to 6,790 tonnes in 2019.

CMP production was suspended in mid-January to early March 2020 due to Chinese New Year and COVID-19

We resumed full capacity of CMP production in May 2020.

The production of offset printing paper was suspended during

January to May 2020 and resumed in June 2020.

The changes in revenue and quantity sold for the year ended December 31, 2020 and

2019 are summarized as follows:

December 31, 2020

1 unchanged sentence

Sales Revenue

Quantity (Tonne)

$ (9,725,603 )

Light-Weight CMP

$ (1,939,909 )

$ (11,665,512 )

Offset Printing Paper

$ (8,170,384 )

Tissue Paper Products

1 unchanged sentence

$ 117,613,736

Monthly revenue (excluding

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

The average selling

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

Offset Printing Paper ASP

Regular CMP ASP

Light-Weight CMP ASP

Tissue Paper Products ASP

$ (17,772,411 )

Monthly revenue (excluding revenue of digital

photo paper and tissue paper products) for the 24 months ended December 31, 2020, are summarized below:

The average selling price, or ASP, for our major products

for the years ended December 31, 2020 and 2019 are summarized as follows:

Year Ended December 31, 2019

2 unchanged sentences

Decrease by percentage

The following is a

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

ended December 31, 2019:

The following is a chart showing the month-by-month

ASPs (excluding the ASPs of digital photo paper and tissue paper products) for the 24 month period ended December 31, 2020:

Corrugating Medium Paper

1 unchanged sentence

to $79,160,926 (79.29% of the total offset printing paper, CMP and tissue paper products revenues) for the year ended December

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

31, 2020, representing a decrease of $11,665,512, or 12.84%, from $90,826,438 during 2019.

We sold 196,885 tonnes

of CMP in the year ended December 31, 2020 as compared to 214,147 tonnes in the year ended December 31, 2019, representing a 8.06%

increase in quantity sold.

decrease in quantity sold.

ASP for regular CMP

2 unchanged sentences

was RMB2,942 and RMB2,789, respectively, representing a 5.20% decrease.

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

The quantity of regular CMP sold decreased by 14,753 tonnes,

from 168,837 tonnes in 2019 to 154,084 tonnes in 2020.

3 unchanged sentences

and 2020 was RMB2,857 and RMB2,712, respectively, representing a 5.08% decrease.

The quantity of light-weight CMP sold increased

The quantity of light-weight CMP sold decreased

by 2,509 tonnes, from 45,310 tonnes in 2019, to 42,801 tonnes in 2020.

Our PM6 production line, which produces

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

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

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

Quantities sold for

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

Our PM6 production

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

The utilization rates for the year ended December

31, 2020 and 2019 were 42.56% and 46.68%, respectively, representing a decrease of 4.12%.

Quantities sold for regular CMP that was produced by

the PM6 production line from January 2019 to December 2020 are as follows:

Offset Printing Paper

1 unchanged sentence

printing paper was $12,265,746 (12.29% of the total offset printing paper, CMP and tissue paper products revenues) for the year

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

We sold 29,207 tonnes of

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

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

ended December 31, 2020, representing a decrease of $8,170,384, or 39.98%, from $20,436,130 in 2019.

We sold 20,358 tonnes of offset

printing paper in the year ended December 31, 2020, compared to 29,207 tonnes in 2019, a decrease of 8,849 tonnes, or 30.30%.

for offset printing paper in the year ended December 31, 2019 and 2020 was $700/tonne and $603/tonne, respectively, representing

a 13.86% decrease.

2 unchanged sentences

Tissue Paper Products

We produce tissue

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

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

In December 2018 and November 2019, we completed

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

We launched the complete line of processing

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

capacity of 10,000 tonnes/year.

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

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

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”.

2018 and November 2019, we completed the construction, installation and test of operation of our PM8 and PM9 production

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 $8,414,653 (8.43% of the total offset printing paper, CMP and tissue paper products revenues) for the year ended

December 31, 2020, representing an increase of $2,063,485, or 32.49%, from $6,351,168 in 2019.

We sold 10,088 tonnes of tissue

paper products in the year of 2019.

paper products (including 305 tonnes of tissue base paper) in the year ended December 31, 2020, as compared to 6,790 tonnes in

2019, an increase of 3,298 tonnes, or 48.57%.

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

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 $1,101,944 for the year

ended December 31, 2020.

We sold 10,301 thousand pieces of face masks in year of 2020.

Cost of Sales

Total cost of

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

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

This was mainly a result of the

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

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

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

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

Average cost of sales per tonne for CMP decreased by

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

The decrease was mainly attributable to the lower

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

Cost of sales for offset printing

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

Average cost of sales per

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

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

Total cost of sales for CMP, offset printing paper and tissue

paper products in the year ended December 31, 2020 was $94,669,389, a decrease of $9,253,025, or 8.90%, from $103,922,414 for the

year ended December 31, 2019.

This was mainly a result of the decrease in sales volume of CMP and offset printing paper, partially

offset by the increase in sales volume of tissue paper products.

Cost of sales for CMP was $74,279,241 for the year ended December

31, 2020, as compared to $81,511,234 in 2019.

The decrease in the cost of sales of $7,231,993 for CMP was mainly due to the decrease

in the quantities of CMP sold, partially offset by the increase in cost of recycled paper board in the year of 2020.

of sales per tonne for CMP decreased by 1.05%, from $381 for the year ended December 31, 2019, to $377 in 2020.

The slight decrease

was mainly attributable to lower unit cost of manufacturing overhead (e.g.

wages, repair and maintenance etc.) due to suspension

of production in February 2020, partially offset by higher average unit purchase costs (net of applicable value added tax) of recycled

Cost of sales for offset printing paper was $10,147,280 for the year ended December 31, 2020, as compared to $14,061,771

Average cost of sales per tonne of offset printing paper increased by 3.53%, from $481 for the year ended December 31,

2019, to $498 in 2020.

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

tax) of recycled white scrap paper.

Cost of sales for tissue paper products was $10,242,868 for the year ended December 31, 2020,

Average cost of

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

Changes in cost of

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

as compared to $8,349,409 in 2019.

Average cost of sales per tonne of tissue paper products decreased by 17.48%, from $1,230 for

the year ended December 31, 2019, to $1,015 for 2020.

Changes in cost of sales and cost per tonne by product

for the year ended December 31, 2020 and 2019 are summarized below:

December 31, 2020

December 31, 2019

Change in percentage

Cost of Sales

$ (5,689,393 )

Light-Weight CMP

$ (1,542,600 )

$ (7,231,993 )

Offset Printing Paper

$ (3,914,491 )

Tissue Paper Products

1 unchanged sentence

$ 103,922,414

$ (9,253,025 )

Our average unit purchase

3 unchanged sentences

respectively.

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

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

These changes (in US dollars) represent a year-over-year increase of 2.69% for the unit purchase cost of recycled

paper board and a year-over-year increase of 12.64% for the unit purchase cost of recycled white scrap paper.

We use domestic recycled

3 unchanged sentences

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

The pricing trends

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

Electricity and gas

are our two main energy sources.

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

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

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

Gross profit for December

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

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

The increase was mainly due to (i) the increase

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

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

The pricing trends of our major raw materials

for the 24-month period from January 2019 to December 2020 are shown below:

and gas are our two main energy sources.

Electricity and gas accounted for approximately 5% and 10.5% of total sales in 2020,

respectively, compared to 6% and 10.3% of total sales 2019.

The monthly energy cost (electricity, coal and gas) as a

percentage of total monthly sales of our main paper products for the 24 months ended December 31, 2020 are summarized as

Gross profit for December 31, 2020 was $5,701,985 (5.65% of

the total revenue), representing a decrease of $7,977,533, or 58.32%, from the gross profit of $13,679,518 (11.63% of the total

revenue) for the year ended December 31, 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 increase

in sales quantities of tissue paper products.

Corrugating Medium Paper, Offset Printing Paper and Tissue

Paper Products

Gross profit for offset printing paper,

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

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

The increase was mainly the result of the factors discussed

The overall gross

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

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

Gross profit margin

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

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

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

offset by the decrease in ASP of regular CMP.

Gross profit margin

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

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

Gross profit for offset printing paper, CMP and tissue paper

products for the year ended December 31, 2020 was $5,171,937, a decrease of $8,519,386, or 62.22%, from the gross profit of $13,691,322

for the year ended December 31, 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 6.46 percentage points, from 11.64% for the year ended December 31, 2019, to 5.18% for the

year ended December 31, 2020.

Gross profit margin for regular CMP for the year ended December

31, 2020 was 5.

42%, or 4.87 percentage points lower, as compared to gross profit margin of 10.29% for the year ended December

Such decrease was primarily due to decrease in ASP of regular CMP, partially offset by the decrease in unit cost of sales.

Gross profit margin for light-weight CMP for the year ended

December 31, 2020 was 8.93%, or 1.20 percentage points lower, as compared to gross profit margin of 10.13% for the year ended December

Gross profit margin for offset printing paper was 17.27% for

the year ended December 31, 2020, a decrease of 13.92 percentage points, as compared to 31.19% for the year ended December 31,

Such increase was mainly due to the increase of purchase price of recycled white scrap paper and the decrease in ASP of offset

printing paper.

Gross profit margin

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

for tissue paper products was -21.73% for the year ended December 31, 2020, an increase of 9.73 percentage points, as compared

to -31.46% for the year ended December 31, 2019.

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

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

Gross profit margin

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

Monthly gross profit

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

Selling, General and Administrative

Selling, general and

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

for the year ended December 31, 2018.

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

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

The increase was mainly due to the decrease in cost of tissue base paper.

Monthly gross profit margins for our corrugating

medium paper and offset printing paper for the 24-month period ended December 31, 2020 are as follows:

Gross profit for face masks for the year

ended December 31, 2020 was $530,049, representing a gross margin of 48.10%.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the year ended

December 31, 2020 were $11,157,789, an increase of $1,376,070, or 14.07% from $9,781,719 for the year ended December 31, 2019.

The increase was mainly attributed to issuance of 2,000,000 shares of common stock valued at $1,200,000 to officers and directors.

Income (Loss) from Operations

Operating income for

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

for the year ended December 31, 2018.

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

decrease in selling, general and administrative expenses.

Operating loss for the year ended December 31, 2020 was $5,455,804,

a decrease of $9,353,603, or 239.97%, from income from operations of $3,897,799 for the year ended December 31, 2019.

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 year ended December

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

The Company had short-term and

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

as of December 31, 2018.

Interest expense for

the year ended December 31, 2020 increased by $100,144, from $926,368 for the year ended December 31, 2019, to $1,026,512.

Company had short-term and long-term interest-bearing loans and lease obligation that aggregated $16,566,324 as of December 31,

2020, as compared to $15,137,181 as of December 31, 2019.

Net Income (Loss)

As a result of the

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

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

result of the above, net loss was $5,554,002 for the year ended December 31, 2020, representing a decrease of $7,775,184, or

350.05%, from net income of $2,221,182 for year ended December 31, 2019.

Accounts Receivable

Net accounts receivable

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

decreased by $730,254, or 23.41%, to $2,389,057 as of December 31, 2020, as compared with $3,119,311 as of December 31, 2019.

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

2 unchanged sentences

As of December 31, 2020, the recorded value of inventory decreased by 23.25% to $1,233,801 from $1,607,463 as of December

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

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

Due to the volatility of recycled

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

Due to the uncertainty of market and economy situation during the pandemic, a minimum level of inventory was maintained

at the end of 2020.

A summary of changes

4 unchanged sentences

Tissue base paper

Digital photo base paper and other raw materials

Mask fabric and other raw materials

Total Raw Materials

4 unchanged sentences

Total inventory, net

Accounts Payable and Notes Payable

Accounts payable and

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

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

We have been relying on

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

to our vendors.

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

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

Accounts Payable

Accounts payable was

$592,391 as of December 31, 2020, an increase of 341,905, or 136.50%, from $250,486 as of December 31, 2019.

Liquidity and Capital resources

As of December 31, 2020 the we had current assets of $14,909,605

and current liabilities of $18,340,074 (including amounts due to related parties of $727,433 and interest payable for related party

loans of $649,468), resulting in a working capital deficit of approximately $3,430,469;

as of December 31, 2019, the Company had

current assets of $24,041,239 and current liabilities of $16,835,460 (including amounts due to related parties of $1,147,438),

resulting in a working capital of approximately $7,205,779.

The deficit as of December 31, 2020 was mainly attributed to

the payments for acquisition of Hebei Tengsheng.

On June 25, 2019, Dongfang Paper entered into an acquisition agreement with shareholder

of Hebei Tengsheng, to buy up 100% shares of Hebei Tengsheng with a purchase price of RMB 320 million (approximately $49 million).

As of December 31, 2020, RMB 128 million (approximately $20 million) has been paid and recorded as ‘Prepayment on property,

plant and equipment’

in the consolidated balance sheet.

Renewal of operating lease

10 unchanged sentences

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

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

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

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

Capital Expenditure Commitment as of

December 31, 2019

We finance our daily

operations mainly by cash flows generated from our business operations.

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

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

Capital Expenditure Commitment as of December 31, 2019

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 December 31, 2020, we had approximately $4.6 million in

capital expenditure commitments that were mainly related to the purchase of paper machine of PM10.

These commitments are expected

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

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 proceeds in the amount of RMB 16 million (approximately

US$2.5 million).

Under the sale-leaseback arrangement, Hebei Tengsheng sold the Leased Equipment to TLCL for 16 million

(approximately US$2.5 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

Tengsheng made payments due according to the schedule.

As of December 31, 2020, the balance of Leased Equipment net of

amortization was $2,397,653.

The lease liability were $536,959 and its current portion in the amount of $182,852 as of

December 31, 2020.

Amortization of the Leased Equipment was $51,574 for the year ended December 31, 2020.

Total interest

expenses for the sale lease back arrangement was $28,083 for the year ended December 31, 2020.

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, Cash Equivalents and restricted

Our cash, cash equivalents

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

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

Our cash, cash equivalents and restricted

cash as of December 31, 2020 was $4,142,437, a decrease of $1,695,308, from $5,837,745 as of December 31, 2019.

The decrease of

cash and cash equivalents for the year ended December 31, 2020 was attributable to a number of factors:

Net cash provided by operating activities

Net cash provided by

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

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

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

Net income for the year ended December 31, 2019 was

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

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

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

Chief among such changes is the increase of

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

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

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

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

In addition, the Company

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

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

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

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

Net cash provided by operating activities was $16,143,527 for

the year ended December 31, 2020.

The balance represented an increase of cash of $8,613,053, or 114.38%, from $7,530,474 provided

for the year ended December 31, 2019.

Net loss for the year ended December 31, 2020 was $5,554,002, representing a decrease of

$7,775,184, or 350.05%, from a net income of $2,221,182 for the year ended December 31, 2019.

Changes in various asset and liability

account balances throughout the year ended December 31, 2020 also contributed to the net change in cash from operating activities

in year ended December 31, 2020.

Chief among such changes is the decrease of accounts receivable in the amount of $923,429 during

the year of 2020 (an increase to net cash for the year ended December 31, 2020 cash flow purposes).

There was also a decrease of

$458,878 in the ending inventory balance as of December 31, 2020 (an increase to net cash).

In addition, the Company had non-cash

expenses relating to depreciation and amortization in the amount of $15,793,854.

The Company also had a net decrease of $5,301,953

in prepayment and other current assets (an increase to net cash) and a net decrease of $796,595 in other payables and accrued liabilities

and related parties (an increase to net cash), as well as a decrease in income tax payable of $1,153,191 (a decrease to net cash)

during the year ended December 31, 2020.

Net cash used in investing activities

2 unchanged sentences

ended December 31, 2019.

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

assets and expenditures on improvement of industrial building.

Net cash used in financing activities

Net cash used in financing

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

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

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

party loans in 2019.

Expenditures in the year ended December 31, 2020 were mainly for the prepayment of acquisition of Hebei

Tengsheng assets and expenditures on improvement of industrial building.

Net cash provided in financing

Net cash provided

by financing activities was proceeds from issuance of shares and warrants and repayment of lease liability of $2,054,855 for the

year ended December 31, 2020, as compared to net cash used in financing activities in the amount of $5,772,467 for the year ended

December 31, 2019.

Short-term bank loans

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

Bank of Cangzhou

Industrial and Commercial Bank of China (“ICBC”) Loan 2

Total short-term bank loans

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

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

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

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

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

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

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

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

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

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

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

The loan was repaid on October 19, 2019.

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

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

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

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

As of December 31,

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

As of December 31, 2018, there

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

The average short-term

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

(a) On December 20, 2019, the Company entered into a working

capital loan agreement with the ICBC, with a balance of $6,163,814 as of December 31, 2019.

The working capital loan was secured

by 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%

The loan was repaid on December 14, 2020.

(b) On December 11, 2020, the Company entered into a working

capital loan agreement with the ICBC, with a balance of $6,435,348 as of December 31, 2020.

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%

The loan will be due and repaid at various installments by December 7, 2021.

As of December 31, 2020, there were guaranteed

short-term borrowings of $6,435,348 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 years ended December 31, 2020, and 2019 were approximately 4.79% and 4.93%, respectively.

Long-term loans from credit union

As of December 31,

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

As of December 31, 2020, and 2019, loans

payable to Rural Credit Union of Xushui County, amounted to $9,594,017 and $8,973,367, respectively.

On April 16, 2014,

10 unchanged sentences

in the consolidated balance sheet as of December 31, 2020, and 2019, respectively.

On July 15, 2013,

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

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

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

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

The loan is secured by certain

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

respectively.

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

As of December 31, 2019 and 2018, the

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

Out of the total outstanding loan balance, current

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

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

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

On April 20, 2017,

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

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

The loan was guaranteed by Hebei Tengsheng with its land

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

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

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

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

On April 17, 2019,

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

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

The loan is secured by Hebei Tengsheng with its land use

right as collateral for the benefit of the bank.

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

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

On June 21, 2018, the loan was extended

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

secured by certain of the Company’s manufacturing equipment with net book value of $2,349,796 and $3,935,270 as of December

31, 2020, and 2019, respectively.

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

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

Out of the total outstanding

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

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

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

On December 12, 2019,

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

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

The loan is secured by Hebei Tengsheng with its land use

right as collateral for the benefit of the bank.

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

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

Out of the total outstanding

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

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

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

Total interest expenses

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

As of December 31,

2020, and 2019, the total outstanding loan balance was $3,831,476 and $3,583,613, respectively.

Out of the total outstanding loan

balance, current portion amounted were $337,169 and $172,013 as of December 31, 2020, and 2019 respectively, which are presented

as current liabilities in the consolidated balance sheet and the remaining balance of $3,494,307 and $3,411,600 are presented as

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

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

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

The loan is secured by Hebei Tengsheng with its

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

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

As of December 31, 2020 and 2019, the total outstanding loan balance was $2,452,145 and $2,293,512, respectively.

of the total outstanding loan balance, current portion amounted were $2,452,145 and $1,146,756 as of December 31, 2020 and 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 December 31, 2020 and 2019, respectively.

12, 2019, the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 2 years, which

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

The loan is secured by Hebei Tengsheng with

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

Interest payment is due monthly and bears a fixed rate of

7.56% per annum.

As of December 31, 2020, and 2019, the total outstanding loan balance was $1,992,368 and $1,863,479, respectively.

Out of the total outstanding loan balance, current portion amounted were $1,992,368 and $143,345 as of December 31, 2020, and 2019,

respectively, which are presented as current liabilities in the consolidated balance sheet and the remaining balance of $nil and

$1,720,134 are presented as non-current liabilities in the consolidated balance sheet as of December 31, 2020, and 2019, respectively.

Total interest

expenses for the short-term bank loans and long-term loans for the years ended December 31, 2020, and 2019 were $695,287 and $831,732,

respectively.

12 unchanged sentences

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

On December 10, 2014,

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

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

The unsecured loan was provided

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

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

10, 2014, Mr.

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

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

The unsecured

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

During the year of 2016, the Company

repaid $6,012,416 to Mr.

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

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

with interest of $20,400.

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

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

balance sheet.

On March 1, 2015,

In February 2018, the company paid off the remaining

balance, together with interest of $20,400.

As of December 31, 2020, and 2019, approximately $45,978 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.

2015, the Company entered an agreement with Mr.

1 unchanged sentence

$17,201,342 (RMB120,000,000) for working capital purposes.

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

amount is funded.

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

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

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

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.

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

In February 2018, the company repaid

$1,507,432 to Mr.

In February 2018, the

company repaid $1,507,432 to Mr.

Zhenyong Liu.

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

Zhenyong Liu agreed to extend the loan for

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

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.

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

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

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

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

together with interest of 94,636.

As of December 31, 2020, and 2019, the outstanding interest was $210,635 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 December

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

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

The interest expense incurred

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

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

in other payables and accrued liabilities.

Zhenyong Liu were $nil.

The interest expense incurred for such related party

loans are $nil and $94,636 for the years ended December 31, 2020, and 2019, respectively.

The accrued interest owe to the CEO was

approximately $649,468 and $607,453, as of December 31, 2020, and 2019, respectively, which was recorded in other payables and

accrued liabilities.

As of December

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

for various expenses incurred in the U.S.

31, 2020, and 2019, amount due to shareholder are $727,433 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.

30 unchanged sentences

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

Under ASC Topic 830-30, all

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

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

are 6.9762:1 and 6.8632:1, respectively.

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

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

Translation adjustments are included in other comprehensive

income (loss).

Under ASC Topic 830-30, all assets and

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

exchange rates used by the Company as of December 31, 2020 and 2019 to translate the Chinese RMB to the U.S.

Dollars are 6.5249:1

and 6.9762:1, respectively.

Revenues and expenses are translated using the prevailing average exchange rates at 6.8941:1, and 6.8948:1

for the years ended December 31, 2020 and 2019, respectively.

Translation adjustments are included in other comprehensive income

Off-Balance Sheet Arrangements

12 unchanged sentences

In June 2016, the

FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

ASU 2016-13 replaced the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit

losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

ASU 2016-13 requires use of a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments.

ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted.

In October 2019, the

FASB issued ASU No.

2019-10, “Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial

Instruments”

(“ASU 2016-13”).

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

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

For assets held at amortized cost

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

its current estimate of all expected credit losses.

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

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

For available-for-sale debt

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

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

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

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

The amendments affect loans, debt securities, trade receivables,

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

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

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

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

We are currently evaluating the impact of the adoption

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

In August 2018, the

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

The amendments

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

of improving disclosure effectiveness.

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

with early adoption permitted.

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

either prospectively or retrospectively.

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

consolidated financial statements.

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

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

The amendments in this Update related to separate financial

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

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

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

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

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

of the beginning of the fiscal year of adoption.

Effective Dates”, to finalize the effective

date delays for private companies, not-for-profits, and smaller reporting companies applying the CECL standards.

The ASU is effective

for reporting periods beginning after December 15, 2022 and interim periods within those fiscal years.

Early adoption is permitted.

We are currently evaluating the impact of the adoption of ASU 2016-13 on our condensed consolidated financial statements.

In December 2019,

the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

ASU 2019-12 will simplify the

accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve

consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

business entities, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning

after December 15, 2020.

All other amendments should be applied on a prospective basis.

We do not expect

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

We do not expect the adoption of ASU 2019-12

to have a material impact on our condensed consolidated financial statements.

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

What changed 10-K

Item 5. Market for Registrant’s Common Equity