What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-04-19 compared with 2011-09-26 · 736 added, 628 removed, 20 unchanged (99% of the section changed)

Corporate History

Orient Paper, Inc.

was incorporated in the State of Nevada on December 9, 2005, under the name “Carlateral, Inc.” Through the steps described immediately below, we became the holding company for Hebei Baoding Orient Paper Milling Company Limited (“HBOP”), a producer and distributor of paper products in China, on October 29, 2007, and effective December 21, 2007, we changed our name to “Orient Paper, Inc.” to more accurately describe our business.

On November 13, 2006, Dongfang Zhiye Holding Limited (“Dongfang Holding”) was formed as a holding corporation with no operations under the laws of the British Virgin Islands.

On July 16, 2007, Dongfang Holding entered an agreement to acquire all of the issued and outstanding stock and ownership of HBOP and placed such shares in trust with Zhenyong Liu, Xiaodong Liu, and Shuangxi Zhao pursuant to a trust agreement executed as of the same date.

Under the terms of the trust agreement, Mr.

Zhao (the original shareholders of HBOP) would exercise control over the disposition of Dongfang Holding’s shares in HBOP on Dongfang Holding’s behalf until Dongfang Holding successfully completed the change in registration of HBOP’s capital with the relevant PRC Administration of Industry and Commerce as the 100% owner of HBOP’s shares.

On October 29, 2007, Orient Paper entered into an agreement and plan of merger (the “Merger Agreement”) with (i) its own wholly owned subsidiary, CARZ Merger Sub, Inc., (ii) Dongfang Holding and (iii) each of Dongfang Holding shareholders (Zhenyong Liu, Xiaodong Liu, Chen Li, Ning Liu, Jie Liu, Shenzhen Huayin Guaranty & Investment Company Limited, Top Good International Limited, Total Giant Group Limited, Total Shine Group Limited, Victory High Investment Limited, Think Big Trading Limited, Huge Step Enterprises Limited, and Sure Believe Enterprise Limited) (the “Dongfang Holding Shareholders”).

Pursuant to the Merger Agreement, Dongfang Holding merged with CARZ Merger Sub, Inc.

via a share exchange, with Dongfang Holding as the surviving entity (the “Merger Transaction”).

In exchange for their shares in Dongfang Holding, the Dongfang Holding Shareholders received an aggregate of 7,450,497 (as adjusted for a four-for-one reverse stock split effected in November 2009) newly-issued shares of our common stock, which shares were distributed pro ratably among the Dongfang Holding Shareholders in accordance with their respective ownership interests in Dongfang Holding.

As a result of the merger transaction, Dongfang Holding became a wholly owned subsidiary of Orient Paper, which, in turn, made Orient Paper the indirect owner of Dongfang Holding’s operating company subsidiary, HBOP.

HBOP, the entity through which we operate our business currently has no subsidiaries, either wholly or partially-owned.

Due to Dongfang Holding’s inability, as the 100% owner of HBOP, to complete the registration of HBOP’s capital under its name within the proper time limits set forth under PRC law, it was not recorded as the registered owner of HBOP in PRC.

As such, Dongfang Holding’s ownership of HBOP was deemed to be held in trust by Zhenyong Liu, Xiaodong Liu, and Shuangxi Zhao.

In connection with the consummation of the restructuring transactions described below, Dongfang Holding directed its trustees to return its shares in HBOP to their original shareholders, and the HBOP shareholders entered into certain agreements with Baoding Shengde Paper Co., Ltd.

(“Baoding Shengde”) to transfer the control of HBOP over to Baoding Shengde.

On June 24, 2009, the Company consummated a number of restructuring transactions pursuant to which it acquired all of the issued and outstanding shares of Shengde Holdings, Inc., a Nevada corporation.

IT Tech Packaging,

(the “Company”) was incorporated in the State of Nevada on December 9, 2005, under the name “Carlateral,

Through the steps described below, we became the holding company for Hebei Baoding Dongfang Paper Milling Company Limited

(“Dongfang Paper”), a producer and distributor of paper products in China, on October 29, 2007, and effective December

21, 2007, we changed our name to “Orient Paper, Inc.”.

Effective on August

1, 2018, we changed our corporate name to IT Tech Packaging, Inc.

The name change was effected through a parent/subsidiary short-form

merger of IT Tech Packaging, Inc., our wholly-owned Nevada subsidiary formed solely for the purpose of the name change, with and

We were the surviving entity.

In connection with the name change, our common stock began being traded under a new NYSE

symbol, “ITP,”

at such time.

On October 29, 2007,

pursuant to an agreement and plan of merger (the “Merger Agreement”), the Company acquired Dongfang Zhiye Holding Limited

(“Dongfang Holding”), a corporation formed on November 13, 2006 under the laws of the British Virgin Islands, and issued

the shareholders of Dongfang Holding an aggregate of 7,450,497 (as adjusted for a four-for-one reverse stock split effected in

November 2009) shares of our common stock, which shares were distributed pro-rata to the shareholders of Dongfang Holding in accordance

with their respective ownership interests in Dongfang Holding.

At the time of the Merger Agreement, Dongfang Holding owned all

of the issued and outstanding stock and ownership of Dongfang Paper and such shares of Dongfang Paper were held in trust with Zhenyong

Liu, Xiaodong Liu and Shuangxi Zhao, for Mr.

Zhao (the original shareholders of Dongfang Paper) to exercise

control over the disposition of Dongfang Holding’s shares in Dongfang Paper on Dongfang Holding’s behalf until Dongfang

Holding successfully completed the change in registration of Dongfang Paper’s capital with the relevant PRC Administration

of Industry and Commerce as the 100% owner of Dongfang Paper’s shares.

As a result of the merger transaction, Dongfang Holding

became a wholly owned subsidiary of the Company, and Dongfang Holding’s wholly owned subsidiary, Dongfang Paper, became an

indirectly owned subsidiary of the Company.

Dongfang Holding,

as the 100% owner of Dongfang Paper, was unable to complete the registration of Dongfang Paper’s capital under its name within

the proper time limits set forth under PRC law.

In connection with the consummation of the restructuring transactions described

below, Dongfang Holding directed the trustees to return the shares of Dongfang Paper to their original shareholders, and the original

Dongfang Paper shareholders entered into certain agreements with Baoding Shengde Paper Co., Ltd.

(“Baoding Shengde”)

to transfer the control of Dongfang Paper over to Baoding Shengde.

24, 2009, the Company consummated a number of restructuring transactions pursuant to which it acquired all of the issued and outstanding

shares of Shengde Holdings Inc., a Nevada corporation.

Shengde Holdings Inc.

was incorporated in the State of Nevada on February

On June 1, 2009, Shengde Holdings Inc.

incorporated Baoding Shengde, a limited liability company organized under the laws of the PRC.

Because Baoding Shengde is a wholly-owned subsidiary of Shengde Holdings, Inc., it is regarded as a wholly foreign-owned entity under PRC law.

Effective June 24, 2009 Baoding Shengde entered into a number of contractual arrangements with HBOP and the original shareholders of HBOP, which were amended on February 10, 2010, pursuant to which Baoding Shengde acts as the management company for HBOP, and HBOP conducts the principal operations of the business.

The contractual agreements, as amended, effectively transferred the preponderance of the economic benefits of HBOP over to Baoding Shengde, and Baoding Shengde assumed effective control and management over HBOP.

The contractual agreements, as amended, include the following:

Exclusive Technical Service and Business Consulting Agreement

The exclusive technical service and business consulting agreements, entered into by and between Baoding Shengde and HBOP, provides that Baoding Shengde shall provide exclusive technical, business and management consulting services to HBOP, in exchange for service fees including a fee equivalent to 80% of HBOP’s total annual net profits.

The agreement is terminable upon mutual written agreement.

Call Option Agreement

The call option agreement, entered into by and between Baoding Shengde, HBOP and the shareholders of HBOP, provides that the shareholders of HBOP irrevocably grant to Baoding Shengde an option to purchase all or part of each shareholder’s equity interest in HBOP.

The exercise price for the options shall be RMB1 yuan for each of the shareholders’ equity interests, or if at any time there are PRC laws regulating the minimum price of such options, then to the extent permitted under PRC Law.

The call option agreement contains covenants from HBOP and its shareholders that they will refrain from taking certain actions without Baoding Shengde’s consent that would materially affect HBOP’s operations and asset value, including (i) supplementing or amending its articles of association or bylaws, (ii) changing HBOP’s registered capital or shareholding structure, (iii) selling, transferring, mortgaging or disposing of any interests in HBOP’s assets or income, or encumbering HBOP’s assets or income in a way that would approve a security interest on such assets, (iv) incurring or guaranteeing any debts not incurred in its normal business operations, (v) entering into any material contract or urging HBOP management to dispose of any HBOP assets, unless it is within the company’s normal business operations;

25, 2009, and holds a wholly-owned subsidiary, Baoding Shengde, a limited liability company organized under the laws of the PRC

on June 1, 2009.

Because Baoding Shengde is a wholly-owned subsidiary of Shengde Holdings Inc., it is regarded as a wholly foreign-owned

entity under PRC law.

Effective June 24,

2009, Baoding Shengde, Dongfang Paper and the original shareholders of Dongfang Paper entered into a number of contractual arrangements,

as subsequently amended on February 10, 2010, pursuant to which Baoding Shengde acts as the management company for Dongfang Paper,

and Dongfang Paper conducts the principal operations of the business.

The contractual arrangements, as amended, effectively transferred

the preponderance of the economic benefits of Dongfang Paper to Baoding Shengde, and Baoding Shengde assumed effective control

and management over Dongfang Paper.

The contractual arrangements, as amended, include the following:

(i) Exclusive Technical Service and Business Consulting

The exclusive

technical service and business consulting agreement, entered into by and between Baoding Shengde and Dongfang Paper, provides that

Baoding Shengde shall provide exclusive technical, business and management consulting services to Dongfang Paper, in exchange for

service fees including a fee equivalent to 80% of Dongfang Paper’s total annual net profits.

The agreement is terminable

upon mutual written agreement.

(ii) Call Option Agreement

The call option agreement,

entered into by and between Baoding Shengde, Dongfang Paper and the shareholders of Dongfang Paper, provides that the shareholders

of Dongfang Paper irrevocably grant to Baoding Shengde an option to purchase all or part of each shareholder’s equity interest

in Dongfang Paper.

The exercise price for the options shall be RMB yuan for each of the shareholders’

equity interests, or

if at any time there are PRC laws regulating the minimum exercise price of such options, then to the extent permitted under PRC

The call option agreement contains covenants from Dongfang Paper and its shareholders that they will refrain from taking certain

actions without Baoding Shengde’s consent that would materially affect Dongfang Paper’s operations and asset value,

including (i) supplementing or amending its articles of association or bylaws, (ii) changing Dongfang Paper’s registered

capital or shareholding structure, (iii) selling, transferring, mortgaging or disposing of any interests in Dongfang Paper’s

assets or income, or encumbering Dongfang Paper’s assets or income in a way that would approve a security interest on such

assets, (iv) incurring or guaranteeing any debts not incurred in its normal business operations, (v) entering into any material

contract or urging Dongfang Paper management to dispose of any Dongfang Paper assets, unless it is within the company’s normal

business operations;

(vi) providing any loan or guarantee to any third party;

(vii) appointing or removing any management personnel or directors that can be changed upon HBOP shareholder approval;

(viii) declaring or distributing any dividends to the stockholders.

The agreement will remain effective until Baoding Shengde or its designees have acquired 100% of the equity interests of HBOP underlying the options.

Share Pledge Agreement

The share pledge agreement entered into by and between Baoding Shengde, HBOP and the shareholders of HBOP, provides that the HBOP shareholders will pledge all of their equity interests in HBOP to Baoding Shengde as security for their obligations under the other management agreements described in this section.

Specifically, Baoding Shengde is entitled to dispose of the pledged equity interests in the event that the HBOP shareholders or HBOP fails to pay the service fees to Baoding Shengde pursuant to the exclusive technical service and business consulting agreement or fails to perform their other obligations under the other management agreement.

The agreement contains promises from HBOP’s shareholders that they will refrain from taking certain actions without Baoding Shengde’s prior written consent, such as transferring or assigning their equity interests, or creating or permitting the creation of any pledges which may have an adverse effect on the rights or benefits of Baoding Shengde under the agreement.

The HBOP shareholders also promise to comply with the laws and regulations relevant to the pledges under the agreement and to facilitate in good faith the protection of the ability of Baoding Shengde to exercise its rights under the agreement.

The terms of the share pledge agreement shall remain in effect until all the obligations under the other management agreements have been fulfilled, whether or not the terms of the other management agreements have expired.

Proxy Agreement

The proxy agreement, entered into by and between Baoding Shengde, HBOP and the shareholders of HBOP, provides that the HBOP shareholders shall irrevocably entrust a designee of Baoding Shengde with such shareholder’s voting rights and the right to represent such shareholder to exercise such shareholder’s rights at any shareholder’s meeting of HBOP or with respect to any shareholder action to be taken in accordance with the laws and HBOP’s Articles of Association.

The terms of the agreement are binding on the parties for as long as the HBOP shareholders continue to hold any equity interest in HBOP.

An HBOP shareholder will cease to be a party to the agreement once it transfers its equity interests with the prior approval of Baoding Shengde.

On June 24, 2009, Zhao Tianqing, the sole shareholder of Shengde Holdings Inc., assigned to Orient Paper, for good and valuable consideration, 100 shares representing 100% of the issued and outstanding shares of Shengde Holdings Inc.

As a result of this assignment and the restructuring transactions described above, Shengde Holdings Inc., Baoding Shengde, and HBOP became directly and indirectly controlled by Orient Paper, and HBOP continued to function as the Company’s operating entity.

In addition to controlling the operations and beneficial ownership of HBOP, Baoding Shengde also acquired a digital photo paper production line in an asset acquisition transaction as of November 25, 2009 and began conducting business in the PRC.

As part of the restructuring transaction described above, Baoding Shengde also entered into a loan agreement with the HBOP shareholders on June 24, 2009.

Because of Company’s decision to fund future business expansions through Baoding Shengde instead of HBOP, such loan agreement was terminated on February 10, 2010.

The $10,000,000 loan contemplated under the loan agreement was never made prior to its termination.

The parties believe the termination of the loan agreement does not in itself compromise the effective control of the Company over HBOP and its businesses in the PRC.

The following diagram sets forth the current corporate structure of Orient Paper:

HBOP, founded in 1996, engages mainly in production and distribution of products such as corrugating medium paper, offset printing paper, writing paper and other paper and packaging related products.

HBOP uses recycled paper as its primary raw material and has its corporate offices in Baoding, PRC.

HBOP's main products include various specifications of:

(i) corrugating medium paper, (ii) medium-grade offset printing paper, (iii) high-grade offset printing paper, and (iv) writing paper.

As of March 10, 2010 Baoding Shengde has began operations of its digital photo paper plant, also in Baoding City, PRC.

Our principal executive offices are located at Science Park, Juli Road, Xushui County, Baoding City, Hebei Province, People’s Republic of China.

(vii) appointing or removing any management personnel

or directors that can be changed upon Dongfang Paper shareholder approval;

(viii) declaring or distributing any dividends to the

stockholders.

The agreement remains effective until Baoding Shengde or its designees have acquired 100% of the equity interests

of Dongfang Paper underlying the options.

(iii) Share Pledge Agreement

The share pledge agreement

entered into by and between Baoding Shengde, Dongfang Paper and the shareholders of Dongfang Paper, provides that the Dongfang

Paper shareholders will pledge all of their equity interests in Dongfang Paper to Baoding Shengde as security for their obligations

under the other management agreements described in this section.

Specifically, Baoding Shengde is entitled to dispose of the pledged

equity interests in the event that the Dongfang Paper shareholders or Dongfang Paper fails to pay the service fees to Baoding Shengde

pursuant to the exclusive technical service and business consulting agreement or fails to perform their other obligations under

the other management agreement.

The agreement contains covenants from Dongfang Paper’s shareholders that they will refrain

from taking certain actions without Baoding Shengde’s prior written consent, such as transferring or assigning their equity

interests, or creating or permitting the creation of any pledges which may have an adverse effect on the rights or benefits of

Baoding Shengde under the agreement.

The Dongfang Paper shareholders also promise to comply with the laws and regulations relevant

to the pledges under the agreement and to facilitate in good faith the protection of the ability of Baoding Shengde to exercise

its rights under the agreement.

The terms of the share pledge agreement remains in effect until all the obligations under the other

management agreements have been fulfilled, whether or not the terms of the other management agreements have expired.

(iv) Proxy Agreement

The proxy agreement,

entered into by and between Baoding Shengde, Dongfang Paper and the shareholders of Dongfang Paper, provides that the Dongfang

Paper shareholders shall irrevocably entrust a designee of Baoding Shengde with such shareholder’s voting rights and the

right to represent such shareholder to exercise his or her rights at any shareholder’s meeting of Dongfang Paper or with

respect to any shareholder action to be taken in accordance with the laws and Dongfang Paper’s Articles of Association.

terms of the agreement are binding on the parties for as long as the Dongfang Paper shareholders continue to hold any equity interest

in Dongfang Paper.

An Dongfang Paper shareholder will cease to be a party to the agreement once it transfers its equity interests

with the prior approval of Baoding Shengde.

On June 24, 2009,

Zhao Tianqing, the sole shareholder of Shengde Holdings Inc., assigned to the Company, for good and valuable consideration, 100

shares representing 100% of the issued and outstanding shares of Shengde Holdings Inc.

As a result of this assignment and the restructuring

transactions described above, Shengde Holdings Inc., Baoding Shengde, and Dongfang Paper became directly and indirectly controlled

by the Company, and Dongfang Paper continued to function as the Company’s operating entity.

In addition to controlling

the operations and beneficial ownership of Dongfang Paper, Baoding Shengde also acquired a digital photo paper production line

(including two photo paper coating lines and ancillary equipment) in an asset acquisition transaction on November 25, 2009 and

began directly conducting business in the PRC.

We suspended production of photo paper in June 2016 and now are upgrading the production

line to produce more competitive photo paper products.

We expect to resume our digital photo paper production in the near future.

An agreement was entered

into among Baoding Shengde, Dongfang Paper and the shareholders of Dongfang Paper on December 31, 2010, reiterating that Baoding

Shengde is entitled to the distributable profit of Dongfang Paper, pursuant to the above mentioned Exclusive Technical Service

and Business Consulting Agreement.

In addition, Dongfang Paper and the shareholders of Dongfang Paper agreed that they would not

declare any of Dongfang Paper’s unappropriated earnings, including any earnings of Dongfang Paper from its establishment

to 2010 and thereafter, as dividend.

The following diagram sets forth the current corporate

structure of IT Tech Packaging:

100% ownership

Controlled by contractual arrangements

Recent Developments

March 2021 Public

1, 2021, the Company offered and sold to the public investors an aggregate of 29,277,866 shares of common stock and

14,638,933 warrants to purchase up to 14,638,933 shares of common stock in a firm commitment underwritten public offering

for gross proceeds of approximately $21.9 million.

The purchase price for each share of common stock and accompanying warrant

sold in the offering was $0.75.

The warrants are exercisable commencing on March 1, 2021 at an exercise price of $0.75 and

will expire on March 1, 2026.

In the event of a stock split, stock dividend, combination, subsequent right offering or

reclassification of the outstanding shares of Common Stock, the exercise price and the number of shares issuable upon

exercise of the warrants shall be proportionately adjusted.

The Company intends to use the net proceeds from the offering for

general corporate and working capital purposes.

January 2021 Public

On January 20, 2021,

the Company offered and sold to certain institutional investors an aggregate of 26,181,818 shares of common stock and 26,181,818

warrants to purchase up to 26,181,818 shares of common stock in a best-efforts public offering for gross proceeds of approximately

$14.4 million.

The purchase price for each share of common stock and the corresponding warrant sold in the offering was $0.55.

The warrants are exercisable commencing on January 20, 2021 at an exercise price of $0.55 and will expire on January 20, 2026.

In the event of a stock split, stock dividend, combination, subsequent right offering or reclassification of the outstanding shares

of Common Stock, the exercise price and the number of shares issuable upon exercise of the warrants shall be proportionately adjusted.

The Company intends to use the net proceeds from the offering for general corporate and working capital purposes.

Cogenerating Project

In November 2020,

we completed inviting bids for the 75 tonne per hour biomass boiler procurement for our biomass cogeneration project.

well-known enterprises in the biomass industry participated in tendering opening bids.

In February 2021, we completed evaluation

on the bidding proposals and announced that Tai Shan Group Co., Ltd., a top manufacturer in the biomass industry in China, has

Installation of the boilers is expected to commence in the near future.

We expect to participate in the bidding process

for urban central heating projects.

Summary of Risk Factors

Investing in our securities

involves significant risks and uncertainties.

You should carefully consider all of the information in this prospectus before making

an investment in our securities.

Below please find a summary of the principal risks we face, organized under relevant headings.

These risks are discussed more fully in the section titled “Risk Factors.”

Risks Related to Our Business

Risks and uncertainties

related to our business include, but are not limited to, the following:

● Our business, financial condition and results of operations

may be materially adversely affected by global health epidemics, including the recent COVID-19 outbreak;

● In order to comply with PRC regulatory requirements,

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

● Because we rely on the consulting services agreement

with Dongfang Paper for essentially all of our revenue and cash flows, any difficulty for Dongfang Paper to pay consulting fees

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

● If the PRC government determines that our agreements

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

● Our arrangements with Dongfang Paper and its shareholders

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

● The exercise of our option to purchase part or all

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

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

by Dongfang Paper that conflict with our interests;

● We are dependent on certain key personnel and loss

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

● Our certificates, permits, and licenses related to our paper making operations are subject to

governmental control and renewal and failure to obtain renewal will cause all or part of our operations to be

● Compliance with environmental regulations is expensive,

and noncompliance may result in adverse publicity and potentially significant monetary damages and fines or suspension of our

business operations.

● Our failure to protect our intellectual property rights

may undermine our competitive position, and external infringements of our intellectual property rights may adversely affect our

● We may be subject to intellectual property infringement

claims or other allegations, which may materially and adversely affect our business, financial condition and prospects;

● We may have to bear unanticipated tax liabilities which

may cause serious adverse effects to our financial conditions and business operations.

Risks Related to Doing Business in the PRC

We face risks and uncertainties

related to doing business in China in general, including, but not limited to, the following:

● Changes in the policies of the PRC government could

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

● The PRC laws and regulations governing our current

business operations are sometimes vague and uncertain.

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

● A slowdown, inflation or other adverse developments

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

● Governmental control of currency conversion may affect

the value of your investment and the fluctuation of the Renminbi may harm your investment;

● Failure to comply with PRC regulations relating to

the establishment of offshore special purpose companies by PRC residents may materially adversely affect us;

● The PRC’s legal and judicial system may not adequately

protect our business and operations and the rights of foreign investors;

● It may be difficult for overseas regulators to conduct

investigation or collect evidence within China;

● The current tensions in international trade and rising

political tensions, particularly between U.S.

and China, may adversely impact our business, financial condition, and results of

Risks Related to Our Corporate Structure

We are also subject

to risks and uncertainties related to our corporate structure, including, but not limited to, the following:

● Our current corporate structure and business operations

may be affected by the newly enacted Foreign Investment Law;

● Any failure by our consolidated VIEs or their shareholders

to perform their obligations under our contractual arrangements with them would have a material adverse effect on our business;

● We may lose the ability to use and enjoy assets held

by our consolidated VIEs that are material to the operation of our business if the entity goes bankrupt or becomes subject to

a dissolution or liquidation proceeding.

General Risks Related to Our Common Stock

In addition to the risks

described above, we are subject to general risks and uncertainties related to our common stock, including, but not limited to,

the following:

● If we fail to comply with Section 404 of the Sarbanes-Oxley Act

of 2002 in a timely manner, our business could be harmed and our stock price could decline;

● Our common stock may be affected by limited trading

volume and may fluctuate significantly;

● If we become directly subject to the scrutiny involving

listed Chinese companies, we may have to expend significant resources to investigate and/or defend the matter, which could

harm our business operations, stock price and reputation.

Impact of COVID-19 on Our Operations

and Financial Performance

Outbreaks of epidemic,

pandemic, or contagious diseases such as COVID-19, could have an adverse effect on our business, financial condition, and results

of operations.

The spread of COVID-19 has resulted in the World Health Organization declaring the outbreak of COVID-19 as

a global pandemic.

Substantially all of our revenues and workforce are concentrated in China.

In response to the intensifying efforts

to contain the spread of COVID-19, the Chinese government took a number of actions, which included extending the Chinese New Year

holiday, quarantining individuals suspected of having COVID-19, asking residents in China to stay at home and to avoid public gathering,

among other things.

During the early part of 2020, COVID-19 caused temporary closure of our CMP production, and as a result,

our revenue of CMP decreased by 49.89 % in the first quarter of 2020.

It is, however, still unclear how the pandemic will evolve

going forward, and we cannot assure you whether the COVID-19 pandemic will again bring about significant negative impact on

our business operations, financial condition and operating results, including but not limited to negative impact to our total revenues.

While we have resumed

business operations, there remain significant uncertainties surrounding the COVID-19 outbreak and its further development

as a global pandemic.

Hence, the extent of the business disruption and the related impact on our financial results and outlook

for 2021 cannot be reasonably estimated at this time.

The extent to which the COVID-19 impacts our results will depend on

future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning

the severity of the coronavirus and the actions taken globally to contain the coronavirus or treat its impact, among others.

insurance coverage may not provide protection for all costs that may arise from all such possible events.

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 engage in production

and distribution of three categories of paper products:

corrugating medium paper, offset printing paper, tissue paper products

and non-medical face masks.

Our principal executive offices are located at Science

Park, Juli Road, Xushui District, Baoding City, Hebei Province, People’s Republic of China.

Our telephone number is (86) 312-869-8215.

Our website is located at http://www.orientpaperinc.com.

Our website is located

at http://www.itpackaging.cn.

Manufacturing Process

Our current products generally undergo two stages of manufacturing:

(1) creating pulp from recycled paper products, and (2) treating the pulp and molding it into the desired type of paper product.

A brief overview of the pulp and papermaking process is described below.

The recycled waste paper is first sorted by hand and machine, and then broken down and beaten or smashed into small pieces using water and mechanical energy.

It is then put through a course screening drum, followed by a fine screening drum in order to produce different grades of pulp.

In order to purify the pulp further, an approach flow system is used to filter out any impurities or inconsistencies, such as sand, in the pulp.

Bleaching agents are added to lighten the color of the pulp.

The pulp is then sieved removing the excess water and molded into size.

The moisture content is further reduced by applying hydraulic pressure to the pulp.

The pulp then enters the drying section where it is run over heated cylinders.

The dried paper is then coated with a mixture of clay, white pigment, and binder to produce a surface on which ink can sit without being fully absorbed, enabling crisper, more consistent print quality.

The paper goes through a process called calendaring, which flattens and smoothes the paper into long sheets.

The paper is then wound onto a reel that is mounted in a roll-slitting machine for rewinding, during which cutters are used to cut the paper into the desired widths.

Upon completion, the rolls are fitted with sleeves, labeled, and then moved to quality control before shipment or storage.

Digital Photo Paper Making

The manufacturing process for making digital photo paper involves multiple steps of coating, drying and calendaring.

The major raw material, digital photo base paper, is loaded into the main production line for (1) coating, (2) drying, (3) calendaring, (4) recoating, (5) drying, and (6) reeling for finished products.

Many of the products that we will be selling through our digital photo paper division at Baoding Shengde come in A-4 size sheets.

We have special cutting machine to take reels of digital photo paper rolls and cut the paper into customer-specified sizes before packaging for shipment.

Corrugating Medium Paper and Offset Printing Paper

Our current products

(excluding tissue paper products) generally undergo two stages of manufacturing:

(1) creating pulp from recycled paper products,

and (2) treating the pulp and molding it into the desired types of paper products.

A brief overview of the pulp and papermaking

process is provided below.

The recycled waste

paper is first sorted by machine, and then broken down and beaten or smashed into small pieces using water and mechanical energy.

It is then put through a course screening drum, followed by a fine screening drum to separate different grades of pulp, a process

that we refer as “concentration”.

In order to purify the pulp further, an approach flow system is used to filter out

any impurities or inconsistencies, such as sand, in the pulp.

sieved to remove the excess water and molded into a specific size.

The moisture content is further reduced by applying hydraulic

pressure to the pulp.

The pulp then enters the drying section where it is rolled over by heated cylinders.

The dried paper is

then coated with a mixture of clay, white pigment and binder to produce a surface on which ink can sit without being fully absorbed,

enabling crisper, more consistent print quality.

The paper goes through

a process called calendaring, which flattens and smoothens the paper into long sheets.

The paper is then wound onto a reel that

is mounted in a roll-slitting machine for rewinding, during which cutters are used to cut the paper into the desired widths.

completion, the rolls are fitted with sleeves and labeled, and then sent to quality control before shipment or storage.

Base Tissue Paper

While we make tissue paper products, we currently purchase

paper pulp from suppliers and use it to manufacture base tissue paper directly.

Corrugating medium paper

Corrugating medium paper is used in the manufacturing of cardboards and comprises approximately 62% of our total paper production quantities and roughly 42% of our total revenue for the year ended December 31, 2009.

Raw materials used in the production of corrugating medium paper include recycled paper board and certain supplementary agents.

Medium and high-grade offset printing paper

Offset printing paper is used for offset printing.

Our medium-grade and high-grade offset printing paper comprises approximately 23% and 6% of our total paper production quantities, respectively.

Medium and high-grade offset printing paper also account for 35% and 12% of our total sales revenue for the year ended December 31, 2009.

The offset printing paper we manufacture is typically coated and brightened.

Raw materials used in the production of offset printing paper include recycled white scrap paper, wood pulp, fluorescent whitening agent, sizing agent and pulvis talc.

Writing paper

Writing paper is suitable for printing and writing with ink on both sides, without the ink bleeding or striking through.

Raw materials used in the production of writing paper include recycled text book paper and fluorescent whitening agent.

During the year ended December 31, 2009, writing paper accounts for 9% of our total production quantities and 11% of our total sales revenue.

Digital photo paper

Starting year 2010, Baoding Shengde will be producing digital photo papers that is high quality, cast-coating, and water-proof.

These digital photo papers may be sold to advertising companies which use photo-quality paper for multiple-color printing or local photo studios for production of special event printouts or personal home printing use.

Corrugating medium

paper, or CMP is used in the manufacturing of cardboard.

Since the launch of our new Paper Machine (“PM6”) production

line in December 2011, corrugating medium paper has become a major product of the Company.

For the year ended December 31, 2020,

corrugating medium paper comprised approximately 86.61% of our total paper production quantities and roughly 78.42% of our total

Raw materials used in the production of corrugating medium paper include recycled paper board (or Old Corrugating Cardboard

or “OCC,”

as it is commonly referred to in the United States) and certain supplementary agents.

In January 2013, we

suspended the operation of our PM1 production line for renovation, which was then used to produce corrugating medium paper.

May 2014, we launched the commercial production of a renovated PM1 production line.

The renovated PM1 production line produces

light-weight corrugating medium paper with a specification of 40 to 80 grams per square meter (“g/s/m”).

light-weight corrugating medium paper products have a wide range of commercial applications.

For example, they can be used as a

construction material for wall and floor insulation or to manufacture moisture-proof packaging materials for the transportation

of books and magazines by the publishing industry.

It can also be used as corrugating medium to make corrugating cardboard for

packaging that requires light-weight boxes.

The manufacturing process of light-weight corrugating medium paper is similar to that

of the regular corrugating medium paper and also uses recycled paper boards as a major source of raw material.

We now have two

corrugating medium paper production lines, PM6 and PM1.

We refer to products produced from the PM6 production line as Regular CMP

and products produced from the PM1 production line as Light-Weight CMP.

Offset printing paper

is used for offset printing in the publishing industry.

Offset printing paper comprised approximately 8.96% of our total paper

production quantities and approximately 12.15% of our total sales revenue for the year ended December 31, 2020.

Raw materials used

in making offset printing paper include recycled white scrap paper, fluorescent whitening agent and sizing agent.

have two production lines, PM2 and PM3, for the production of offset printing paper.

Tissue Paper Products

the commercial production of tissue paper products in Wei County Industry Park in June 2015.

We process base tissue paper

purchased from long-term cooperative third party and produce finished tissue paper products, including toilet paper, boxed

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

marketed and sold under the Dongfang Paper brand.

In December 2018 and November 2019, we completed the construction,

installation and test of operation of PM8 and PM9, respectively, and commercially launched tissue paper production of PM8 and

PM9 at such time.

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.

Tissue paper products comprised

approximately 4.43% of our total paper production quantities and approximately 8.34% of our total sales revenue for the year

ended December 31, 2020.

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.

In January 2021, the Company

announced it has submitted an application for the license for its new single-use surgical masks from local

food and drug administration in Hebei province.

Market for our Products

The PRC Paper Making Industry

According to a general survey by the China Paper Association, in 2008, there were approximately 3,500 paper and board manufacturers in the People’s Republic of China, with a total output of 79.8 million tons, up 8.57% from 73.5 million tons in 2007.

Total domestic consumption was 79.35 million tons in 2008, up 8.85% from 72.9 million tons a year before.

Compared with year 2000, output in 2008 had increased by approximately 161.64% and consumption grew by approximately 121.96%.

The output of paper and paper board maintained an average growth rate of approximately 12.8% during the 2000-2008 time frame, while consumption increased at an annual rate of 10.5%, both higher than the GDP growth rate of the same period.

The growth rate is expected to continue.

According to the China Paper Association, the People’s Republic of China is currently ranked second in terms of output and consumption of paper and paper board products.

It is expected to become the world’s largest paper making and consumption market by 2015.

2008 Annual Report of the Paper Making Industry, China Paper Association

We believe that the burgeoning market provides many interesting opportunities for us.

Greater affluence and urbanization of China has led to wider access to higher education, increased shopping facilities and advertising, all of which have in turn increased demand for and increased the variety of paper and packaging products available for consumption in China (PriceWaterhouseCoopers, “Paper and Packing Market in China:

China Risks and Rewards,” September 2005).

We are pursuing opportunities in several higher-grade paper products, such as digital photo paper, that we believe will experience high growth and that we can address with our manufacturing expertise.

We also expect the demand for corrugating medium paper from our geographic territory to grow as the regional economy and manufacturing activities improve and recover from the 2008-2009 global financial crisis.

Industry Consolidation

Prior to 1988, the paper and pulp industry in China was comprised of numerous small-scale production enterprises, many of which used low-tech production processes that were highly pollutive.

In 1988, in an effort to reduce pollution, the National Environmental Protection Administration issued Interim Measures on the Administration of Water Pollutants Discharge Permits, requiring all companies discharging pollution into the water as a direct or indirect byproduct of production to adhere to certain caps on pollution discharge.

In 1996, China’s State Council issued “Decisions on Environmental Protection Issues”, setting forth strict rules and regulations intended to reduce pollution, including a directive for the closure of all paper plants with an annual output of less than 50,000 tons.

Since 1997, the PRC government has closed at least 7,000 pulp and paper mills (PriceWaterhouseCoopers, “Paper and Packing Market in China:

China Risks and Rewards,” September 2005);

however, the industry still remains largely fragmented.

Recognizing that China constitutes one of the largest markets for paper consumption in the world with potential for continued expansion, the PRC government continues its efforts to consolidate, modernize, and promote the environmental sustainability of the industry.

In its 11 th Five Year Plan, the PRC government projected that by 2010, production capacity would reach 90 million tons (“China’s government to control pulp, papermaking growth,” PaperAge, November 5, 2007).

We generally sell our products to companies making cardboards (in the case of packaging products like corrugating medium paper) and to printing companies (in the case of cultural paper products such as offset printing and writing paper).

Of the more than 100 customers we serve, the largest customers are Hebei Tianpurun Printing Company Limited, Baoding Huatai Printing Company Limited, Beijing Huafumei Paper Sales Company Limited, Baoding Hengyi Printing Company Limited and Mancheng Wenzhai Printing Company Limited.

None of these customers individually comprised more than 10% of our revenue.

For the year ended December 31, 2009, HBOP’s top 10 customers were as follows:

Major customers and revenue generated for the year ended December 31, 2009

Hebei Tianpurun Printing Company Limited

Baoding Huatai Printing Company Limited

Beijing Huafumei Paper Sales Company Limited

Baoding Hengyi Printing Company Limited

Mancheng Wenzhai Printing Company Limited

Baoding Times Printing Company Limited

Baoding Morning Light Printing Company Limited

Beijing Yuewei Culture Development Company Limited

Shanghai Hengxin Paper Company Limited

Hebei Marching Paper Products & Packaging Company Limited

For the year ended December 31, 2008, HBOP’s top 10 customers were as follows:

Major customers and revenue generated for the year ended December 31, 2008

Beijing People’s Fine Arts Publishing House

Beijing Qiuhao Printing Company Limited

Baoding Binghe Printing Company Limited

Beijng Yutian Planet Books Company Limited

Baoding Dadi Colour Printing Company Limited

Baoding Xida Printing Company Limited

Beijing Yuewei Cultural Development Company Limited

Baoding Xinmin Printing Company Limited

China Lucky Offset Group Integrated Services Company

Baoding Huatai Printing Company Limited

Marketing Strategy

We target corporate customers in the mid- to high-end paper markets, where products such as corrugating medium paper and mid- to high-grade offset printing paper have potential for high volume growth.

Our primary market has been the northern China region, especially in the province of Hebei.

Expand Production Capacity

In the fiscal year ended December 31, 2009, we had a production capacity of approximately 280,000 tons.

In order to meet domestic demand for paper, which is currently exceeding domestic supply in the case of corrugating medium paper, we plan to increase our production capacity in the coming years.

We acquired a digital photo paper production facility in December 31, 2009 in an asset acquisition transaction for a total purchase price of approximately $13.6 million.

The capacity of the digital photo paper facility is 2,500 tons per year.

to the 2019 China Paper Industry Annual Report, issued by the China Paper Association, there were approximately 2,700 paper

and paper board manufacturers (down from 3,700 in 2010) in China, with a total output of 107.65 million tonnes, up by 3.16%

from 104.35 million tonnes in 2018.

Total domestic consumption was 107.04 million tonnes in 2019, up by 2.54% from 104.39

million tonnes in 2018.

with 2010, output in 2019 increased by approximately 3.16% and consumption grew by approximately 2.54%.

The output of paper

and paper board maintained an average growth rate of approximately 1.68% during the ten-year period from 2010 to 2019, while

consumption increased at an average annual rate of 1.73%.

The growth is expected to continue.

It is estimated that China

currently has the largest paper and paper board products output and consumption in the world.

(Data source:

Report of China Paper Manufacturing, May 2020, China Paper Association)

2019Annual Report of China’s

Paper Industry, May 2020, China Paper Association

Corrugating medium

paper production in China totaled 22.20 million tonnes in 2019, a 5.46% increase from 2018.

Consumption of corrugating medium paper

in China amounted to 23.74 million tonnes in 2019, an increase of 7.28% as compared to 2018.

Uncoated offset

printing paper production in China totaled 17.80 million tonnes in 2019, a 1.71% increase from 2018.

Consumption of uncoated offset

printing paper in China amounted to 17.49 million tonnes in 2019, a decrease of 0.11% as compared to 2018.

The paper making industry

in China is concentrated in the east coast provinces.

The largest paper production capacities by province for 2018 and 2019 (the

most recent year for which relevant information is available) are summarized in the table below.

The three provinces with largest

capacities showed moderate increases in paper production capacities;

provinces with smaller capacities, such as, Chongqing, Hubei

and Fujian, showed noticeable increases as well.

2018 Capacity

2019 Capacity

Data Sources:

2019 Annual Report of China’s

Paper Industry, May 2020, China Paper Association

generally sell our corrugating medium paper to companies making corrugating cardboards and offset printing paper to printing

Our largest customer is a packaging company in Tianjin City.

Our total corrugating medium and offset printing

paper revenue in 2020 was primarily derived from customers in Tianjin, Hebei Province and Shandong Province.

year ended December 31, 2020, five major customers who individually accounted for more than 5% of our total sales revenue are

(USD$, net of

Company A (Baoding)

Company B (Tianjin)

Company C (Tianjin)

Company D (Hebei)

Company E(Shandong)

Total Major Customers

our top-ten customers of 2020 are also in the top-ten customer list in 2019, representing 78.6% of the 2019 top-ten customer

Target Market

We target corporate

customers in the middle range of the marketplace, where, with solid quality and competitive pricing, we see potential for high

volume growth for corrugating medium paper and offset printing paper.

Our primary market has been the region of North China, especially

in the province of Hebei.

Our Production Lines

During the year ended

December 31, 2020, we had six PM production lines in operation and are in the process of launching one more that are designated

These production lines include the followings:

Paper Product

(tonnes/year)

Status as of December 31, 2020

Corrugating Medium

Dongfang Paper

In production

Offset Printing Paper

Dongfang Paper

In production

Offset Printing Paper

Dongfang Paper

In production

Digital Photo Paper

Baoding Shengde

Suspended in June 2016 due to low market

Digital Photo Paper

Baoding Shengde

Suspended in June 2016 due to low market

Corrugating Medium

Baoding Shengde

Dongfang Paper***

In production

Specialty paper

Dongfang Paper

Under renovation and preparing for launch by the

Dongfang Paper

In production

Dongfang Paper

In production.

Dongfang Paper

In construction

Paper machines under renovation, under construction, or in

the planning stage.

PM6 is funded and owned by Baoding Shengde;

ancillary facilities

that support the PM6 operation are built and owned by Dongfang Paper.

31, 2009, we acquired a digital photo paper production line, including two coating lines that are designated as PM4 and PM5 and

ancillary equipment, for a total purchase price of approximately $13.6 million.

We suspended production of photo paper in June

In order to meet the

growing domestic demand for paper, which we believe currently exceeds domestic supply in the case of corrugating medium paper,

especially in the region of North China, we installed a corrugating medium paper production line (PM6) with a designed capacity

of 360,000 tonnes per year.

We completed the installation of the PM6 production line in November 2011 and began commercial production

in December 2011.

We have implemented

a plan to renovate one of the old production lines that has been idle since the end of 2007.

We previously made paper with anti-counterfeit

features from that production line.

When the renovation is completed, we intend to use the renovated production line to produce

high-profit margin specialty papers.

Our current plan is to complete the renovation project, put in place a new production and

marketing team and launch the renovated production line as PM7 by the end of 2021.

November 27, 2012, we signed a 15-year lease relating to approximately 49.4 acres of land in the Economic Development Zone in

Wei County, Hebei Province, China for the purpose of developing a new tissue paper production plant.

We planned to build two

tissue paper production lines, each with 15,000 tonnes/year capacity, and other packaging facilities and infrastructures on

the leased land.

In December 2012, we signed a contract with an equipment contractor in Shanghai to build PM8, the first of

our two tissue paper production lines in Wei County.

In December 2018 and November 2019, we completed the construction,

installation and test of operation of PM8 and PM9, respectively and commercially launched tissue paper productions of PM8 and

PM9 at such time.

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.

We voluntarily renovated

our 150,000 tonnes/year corrugating medium paper PM1 in anticipation of increased regulatory concerns on energy efficiencies as

well as to improve the quality of our corrugating medium products.

Rather than converting PM1 to a regular corrugating medium paper

machine, we decided in 2013 that, based on the market conditions and our waste water treatment capability, the better option was

to convert PM1 to produce Light-Weight CMP with a specification of 40 to 80 grams per square meter (“g/s/m”) with a

designed capacity of 60,000 tonnes/year.

We started the renovation in January 2013 and launched commercial production of the renovated

PM1 production line in May 2014.

Raw Materials and Principal Suppliers

The supplies used in our production processes are comprised mainly of recycled paper board and recycled white scrap paper, both of which are readily available items for which there are multiple sources.

We also purchase coal and chemical agents from nearby suppliers.

Although we do not anticipate difficulties in obtaining necessary supplies, ongoing inflationary pressures could lead to an increase in our costs of raw materials and production, which we may pass on to our customers.

Our main suppliers are Xushui County Dongfang Trading Company Limited, Beijing Jianshun Fanya Resource Renewable Company Limited, Baoding Tianhe Coal Industries Company, Qingdao Shengda Pulp & Paper Company Limited, and Baoding Ranhua Dye and Chemical Company.

We sign one-year and three-to-four-year contracts with these suppliers.

Although we have supplier contracts with our suppliers, these contracts do not lock-in the purchase price of our raw materials or provide hedge against the fluctuation in the market price of these raw materials.

For the year ended December 31, 2009, we had three major suppliers which primarily accounted for 37%, 32% and 13% of total purchases.

For the year ended December 31, 2008, we had three major suppliers which primarily accounted for 50%, 12%, and 11% of total purchases.

For the year ended December 31, 2009, HBOP’s top 5 suppliers were as follows:

Suppliers and purchase amount for the year ended December 31, 2009

Xushui County Dongfang Trading Company Limited

Beijing Jianshun Fanya Resource Renewable Company Limited

Baoding Tianhe Coal Industries Company

Qingdao Shengda Pulp & Paper Company Limted

Baoding Ranhua Dye and Chemical Company

For the year ended December 31, 2008, HBOP’s top 5 suppliers were as follows:

Suppliers and purchase amount for the year ended December 31, 2008

Xushui County Dongfang Trading Company Limited

Beijing Chinabase Star Paper Company Limited

Hebei Dingxing Material Recycling Station

Baoding Tianhe Coal Industries Company

Beijing Heerwang Industrial Material Company Limited

HBOP's main competitors are:

Chenming Paper Group Limited;

Huatai Group Limited;

Nine Dragons Paper (Holdings) Limited;

Sun Paper Group Limited;

and Zhonghua Paper Co., Ltd.

In addition to these competitors there are numerous smaller family operations in Hebei and neighboring provinces serving the greater-Beijing and Tianjin areas printing company customers or competing with us for our corrugating medium paper market in Hebei.

A number of our competitors are larger public entities with larger capacities, broader customer bases and greater financial resources than those available to us.

The business of our primary competitors is briefly described below:

Chenming Paper Group, Ltd.

(“Chenming”), based in Shandong Province (located in northeast China), produces primarily newsprint paper and art paper (high quality, heavy, two-side coated printing paper).

Chenming is believed to be the first company to have all three types of public listings available in China:

renminbi A-shares and foreign currency B-shares in Shenzhen, the smaller of the mainland’s two stock exchanges, and H-shares in Hong Kong.

Chenming has a production capacity of 4 million tons/yr for its coated wood-free paper product and is believed to rank among the top 500 enterprises in China.

The supplies used

in our production processes are comprised mainly of recycled paper board and unprinted recycled white scrap paper, both of which

are ready-to-use items and available from multiple domestic and foreign sources.

We currently purchase all of our recycled paper

supplies from some domestic recycling stations and do not rely on imported recycled paper.

We also purchase coal and chemical agents

from nearby suppliers.

Ongoing inflationary pressures and higher demand for recycled paper could lead to an increase in our costs

of raw materials and production, which we may or may not be able to pass to our customers.

We sign annual raw

materials supplier contracts with our suppliers.

Although we have contracts with our suppliers, these contracts do not lock-in

the purchase price of our raw materials or provide hedge against the fluctuation in the market price of these raw materials.

the year ended December 31, 2020, we had two large suppliers which accounted for approximately 72% and 12% of our total purchases,

respectively.

For the year ended December 31, 2020, two major suppliers

who individually accounted for more than 5% of our total purchase are as follows:

(USD$, net of

Company A (Baoding)

Company B (Baoding)

Total Major Suppliers

Dongfang Paper’s

main competitors are:

Chenming Paper Group Limited, Huatai Group Limited, Nine Dragons Paper (Holdings) Limited and Sun Paper Group

A number of our competitors are public entities with larger capacities, broader customer bases and greater financial resources

than those available to us.

The businesses of our primary competitors are briefly described below:

Paper Group, Ltd.

(“Chenming”), based in Shandong Province (located in northeast China), produces primarily news

print paper and art paper (high quality, heavy and two-side coated printing paper).

Chenming is believed to be the first

company to have listed on all three stock exchanges in China:

Renminbi A-shares and foreign currency B-shares in Shenzhen,

the smaller of the mainland’s two stock exchanges, and H-shares in Hong Kong.

Chenming has annual production capacity

of 8.5 million tonnes for its coated wood-free paper product and is believed to rank among the top 500 enterprises in

Huatai Group, Ltd.

(“Huatai”), based in Shandong Province (located in the northern part of the eastern coastal region of China), primarily produces newsprint, fine paper, special printing papers, coated board, and tissue paper.

Huatai is the first Shandong papermaker to publicly list its stock and has become a famous brand in China.

Its annual paper production volume is estimated to have reached 2.0 million tons.

Nine Dragons Paper (Holdings) Limited (“ND Paper”), based in Guangdong Province (located in southern China), is the largest paper manufacturer in China and primarily produces kraft paper and high-strength corrugating medium paper.

ND Paper has reported that in September 2009, the company’s two corrugating medium production lines in the city of Tianjin came into operation, boosting ND Paper's annual total production capacity in Tianjin area to 800,000 tons and making the company the largest high-strength corrugating medium paper manufacturer in China.

Sun Paper Group, Ltd., based in Shandong Province (located in the northern part of the eastern coastal region of China), primarily produces card paper, whiteboard paper, and art paper.

It also produces alkaline peroxide mechanical pulp, sourced in part from woodchips harvested by the company’s poplar plantations.

The company has reported that it has an annual production capacity of approximately 2.5 million tons and has been listed on the Shenzhen Stock Exchange since 2006.

Zhonghua Paper Co., Ltd., based in Zhejiang Province (located in eastern China), primarily produces card paper and whiteboard paper.

With an annual production capacity of 500,000 tons, it is purported to be the largest and most progressive coated whiteboard paper manufacturer in China.

With the exceptions of Chenming on cultural paper and ND Paper on corrugating medium paper, which potentially constitute direct competition against our products in Beijing/Tianjin/greater Hebei markets, we believe that we face indirect competition from the above-listed companies, either because we produce different types of paper products, or for those products that do overlap, because the transportation costs and storage costs make them difficult to compete effectively with us in our geographic area.

(“Huatai”), based in Shandong Province (located in the northern part of the eastern coastal region of China), primarily

produces newsprint, fine paper, special printing paper, coated board and tissue paper.

Huatai is the first Shandong papermaker

to publicly list its stock and has become a famous brand in China.

Its annual paper production is estimated to have reached 4 million

Nine Dragons Paper

(Holdings) Limited (“ND Paper”), based in Guangdong Province (located in southern China), is the largest paper manufacturer

in China and primarily produces kraft paper and high-strength corrugating medium paper with annual capacity of 13 million tonnes.

ND Paper has reported that it has five production lines in the city of Tianjin with a total designed capacity of 2.15 million tonnes,

producing products such as kraft paper, high strength corrugating medium paper and grey-back duplex board.

Group, Ltd., based in Shandong Province, primarily produces card paper, whiteboard paper and art paper.

It also produces

alkaline peroxide mechanical pulp, sourced in part from wood chips harvested by the company’s poplar plantations.

company has reported that it has an aggregate annual production capacity of paper and pulp of approximately 5.7 million

tonnes and has been listed on the Shenzhen Stock Exchange since 2006.

With the exceptions

of Chenming and ND Paper, which may compete directly with us in the offset printing paper market and the corrugating medium paper

market, respectively, in the Beijing/Tianjin/greater Hebei regions, we believe that we face only indirect competition from the

above-listed companies, either because we have a different product assortment from these companies, or because, to the extent they

do offer products similar to ours, the transportation costs and storage costs make it difficult for these companies to compete

effectively with us on pricing.

Our Competitive Edge

Regional advantage (northern China).

We believe that HBOP is the largest papermaking enterprise in headquartered in Hebei Province.

Our proximity to large urban centers in northern China, Beijing and Tianjin, gives us a large market in which to sell our products.

There are other paper manufacturers that are also located in Hebei Province (and close to metropolitan Beijing and Tianjin areas).

Most of these other manufacturers are small in scale and are unable to compete with us effectively.

We do compete with other large cultural paper manufacturers for Beijing printing company customers.

We believe we do have cost and other advantages over our larger competitors.

Cost advantage .

Unlike some of our out-of-province competitors who have to set up interim warehouse and ship products from their production base to such interim warehouses close to the Beijing customers, because we are approximately 60 miles (100 kilometers) from Beijing, the cultural center of China and our largest target market, there is no need for us to set up interim warehouses.

While we don’t separately pay for transportation cost on raw material purchases, the transportation cost included in the raw material purchase price from our waste paper recycler suppliers is lower than the transportation cost paid by our competitors in the province of Shandong.

We also enjoy lower transportation cost in the purchase of coal, a major source of energy used in the production process.

By the same token, our customers pay trucking companies to pick up theirs ordered goods from our Baoding finished good warehouse.

The trucking cost our customers pay to haul in our paper is also lower than what they pay if they have to pick up goods from offsite locations away from Beijing.

advantage (Northern China) .

We believe that Dongfang Paper is one of the leading papermaking enterprises in Hebei

Our proximity to large urban centers in northern China, Beijing and Tianjin, gives us access to a large market to

sell our products.

There are other paper

manufacturers that are also located in Hebei Province (and close to metropolitan Beijing and Tianjin areas), but most of these

other manufacturers are small in scale and unable to compete with us effectively.

We also compete with other large printing paper

manufacturers for Beijing printing company customers.

We believe that we have cost and geographical advantages over these larger

Unlike some of our out-of-province competitors who must set up interim warehouses and ship products from their

production base to such interim warehouses close to their customer base in Beijing, there is no need for us to set up interim

warehouses, because we are approximately 60 miles (100 kilometers) from Beijing, the cultural center of China and our largest

target market.

While we do not separately pay for transportation cost on raw material purchases, the transportation cost

included in the raw material purchase prices from our recycled paper suppliers is lower than the transportation cost paid by

our competitors in the province of Shandong.

We also enjoy lower transportation costs for coal, a major source of energy used

in our production process.

Similarly, our customers pay lower transportation cost to pick up their orders from our finished

goods warehouse in Baoding than what they would pay if they had to pick up goods from locations further away from Beijing.

Tianjin, another large urban center, is also approximately 60 miles from our facilities.

Baoding city itself is also home to numerous printing and packaging companies.

We therefore have lower freight costs and other associated costs of sales, enabling us to charge lower prices, if necessary, for our products to our customers.

In addition to providing timely customers services, the close proximity to the sources of raw materials from the cities of Beijing and Tianjin also enable us to have dynamic, long-term relationships with our suppliers.

Currently domestic recycled paper still cost less than imported recycled paper.

Because we are able to buy all recycled papers from Beijing and Tianjin, rather than from the United States or Japan, our purchase lead time is shortened.

The result of the geographical advantage is a more flexible inventory purchase policy and better inventory management.

We are also able to maintain low raw materials inventory level at the time of declining prices, thereby optimizing the purchase price and production cost.

Baoding city itself is also home to

numerous printing and packaging companies.

Our geographical advantage and easy access to low-cost raw materials allow us to

implement a more flexible inventory purchase policy, lower our purchase prices and inventory management expenses and reduce

our production cost.

As such, we have lower freight costs and other associated costs of sales, which enable us to charge

lower prices, if necessary, for our products.

Additionally, because we buy all recycled paper raw materials from Beijing and

Tianjin, rather than from the United States or Japan, our purchase lead time is shorter as compared to manufacturers who rely

on imported recycled paper.

Research and Development

Our R&D activities are carried out by a task force led by a group of 5 senior managers (in charge of product development and quality control) and joined by a group of selected engineers and technicians.

The Company charged the time spent on the R&D projects (manufacturing waste discharge recycling and digital photo paper manufacturing) to R&D expenses and incurred $30,130 and $30,546 in R&D expenses for the years ended December 31, 2008 and 2009, respectively.

Our R&D efforts have resulted in our capability to manufacture digital photo papers.

R&D activities are carried out by a task force led by a group of senior managers (in charge of product development and

quality control) and by a group of selected engineers and technicians.

The Company charged the time spent on the R&D

projects (manufacturing waste discharge recycling, digital photo paper and tissue paper manufacturing) to R&D expenses.

Our R&D efforts in 2020 has focused on evaluating and developing new products that are in the pipeline for 2020 and

included developing and improving the manufacturing process of Light-Weight CMP and the production and packaging technology

of tissue paper.

One of our production

lines, PM7, is under renovation.

Since the fourth quarter of 2010, we have spent approximately $1.57 million in machine parts and

new components to renovate this production line, with which we expect to produce certain specialty papers, including wood-grain

deco and furniture paper, wallpaper and paper with security features (for anti-counterfeiting purposes).

While we are optimistic

about the prospect of the specialty papers, we cannot guarantee the launch of the specialty paper production (which is tentatively

scheduled by the end of 2020) or the success of such renovation.

Intellectual Property

HBOP has registered one trademark with the Trademark Bureau under the State of Administration for Industry & Commerce, which remains effective through April 6, 2014:

Fax paper, thermal paper, blueprint paper, sensitized paper, spectrum sensitized paper, blueprint cloth, photographic paper, cyanotyping solution, diazo paper

company has registered nine trademarks with the Trademark Bureau under the State of Administration for Industry &

Certificate No.

Fax paper, thermal paper, blueprint paper, sensitized paper, spectrum sensitized paper, blueprint cloth, photographic paper, cyanotype solution, diazo paper

Dongfang Paper

April 7, 2014 through April 6, 2024

Orient Paper owns the rights to the internet domain name, www.orientpaperinc.com.

Toilet paper, handkerchief tissues, tissues, paper napkins, paper mats, beer mats, paper place mats, printing paper (including offset paper, newsprint, books paper, bond paper, plate paper and halftone paper), coated paper

Dongfang Paper

December 28, 2014 through December 27, 2024

Toilet paper, handkerchief tissues, tissues for makeup remover, paper napkin, tissues, paper duster cloth, paper face towels, paper table cloth, paper tablecloths, drawer liner (with or without flavor)

Dongfang Paper

December 28, 2014 through December 27, 2024

Xuan Paper (for traditional Chinese painting and calligraphy), Paper, tissue paper, watercolor paper, writing paper, printing publications, ink, painting brush, packaging plastic film, color box,

Baoding Shengde

July 28, 2017 through July 27, 2027

Drying blueprint solution, diazo paper, photographic paper, sensitive paper, blueprint paper, blueprint canvas, spectral photographic plate, heliographic paper

Baoding Shengde

June 14, 2011 through June 13, 2021

Paper table cover, paper pinafore, drawer lining (with flavor or not)

Hebei Tengsheng

November 21, 2016 through November 20, 2026

paper, paper handkerchief, paper napkin, facial paper, grained paper, cardboard, white board, container board, kraft liner,

corrugated medium paper (board)

Hebei Tengsheng

January 7, 2016 through January 6, 2026

Paper, tissue paper, paper handkerchief, paper napkin, facial paper, paper billboard, cleansing tissue, packaging paper or plastic bag (envelop, sachet), carton, paper box

Hebei Tengsheng

July 14, 2017 through July 13, 2027

Coasters, paper table cover, paper costers, cleansing paper

Hebei Tengsheng

February 28, 2016 through February 27, 2026

IT Tech Packaging has registered the internet domain

name, http://www.itpackaging.cn.

Government Regulation

The testing, approval, manufacturing, labeling, advertising and marketing, post-approval safety reporting, and export of our products are extensively regulated by governmental authorities in the PRC.

We are also subject to various other regulations and permit systems by the Chinese government.

These regulations and their impact on our business are set forth in more detail below.

The testing, approval,

manufacturing, labeling, advertising and marketing, post-approval safety reporting and export of our products are extensively regulated

by governmental authorities in the PRC.

We are also subject to various other regulations and permit requirements by the Chinese

These regulations and their impact on our business are set forth in more details below.

Environmental Regulation

Our operations and facilities are subject to environmental laws and regulations stipulated by the national and the local environment protection bureaus in the PRC.

Since the implementation of the State Council’s “Decisions on Environmental Protection Issues” in 1996, the PRC paper industry has subject to rigorous environmental standards.

We believe that we are one of the few major paper manufacturers in Hebei Province to obtain a Pollution Discharge Permit, which enables us to operate in compliance with PRC environmental regulations.

We were first issued the permit in September 1996 and since we have remained in line with the PRC’s restrictions on carbon dioxide and sulfur oxide byproducts, have successfully renewed the permit each year.

Our operations

and facilities are subject to environmental laws and regulations stipulated by the national and the local environment protection

bureaus in the PRC.

Since the implementation

of the State Council’s “Decisions on Environmental Protection Issues”

in 1996, the PRC paper industry has been

subject to more rigorous environmental standards.

Effective January 1, 2015, a new law promulgated by the National People’s

Congress of the People’s Republic of China makes certain violations of the environmental laws a criminal offense.

that we are one of the few major paper manufacturers in Hebei Province that have obtained a Pollution Discharge Permit.

received the permit in September 1996 and, we have successfully renewed the permit each year by complying with applicable environmental

requirements.

Waste Water Treatment

HBOP uses a multi-level water recycling process.

Waste water from the pulping process is fed into collection pools, where it is divided into two parts, namely water and recovered pulp fiber.

The latter is returned into the pulping process.

Chemical agents are added to the waste water, and the waste water is fed into a biogas reactor and filtering pools, producing purified water and depositing sludge.

The purified water is released and the sludge is pumped into a sludge pool, condensed and dehydrated.

We then use the sludge as an ingredient in the manufacture of corrugating medium paper.

We maintain controls at our production facilities on a 24-hour basis to facilitate compliance with environmental rules and regulations.

We are not aware of any investigations, prosecutions, disputes, claims or other proceedings in respect of environmental protection, nor have we been subject to any action by any environmental administration authorities of the PRC.

To our knowledge, our operations meet or exceed the existing requirements of the PRC.

As of March 26, 2010, we have approximately 600 full time employees.

The Company provides private insurance coverage for any workplace accidents and injuries for all operators of paper milling machinery in the workshops.

These employees are organized into a labor union under the labor laws of the PRC and can bargain collectively with us.

Dongfang Paper uses

a multi-level water recycling process.

Waste water from the pulping process is fed into collection pools, where it is divided into

two parts, water and recovered pulp fiber.

The latter is returned to the pulping process.

Chemical agents are

added to the waste water, and the waste water is fed into a biogas reactor and filtering pools, producing purified water and depositing

Most of the purified water is recycled to produce corrugating medium paper and the sludge is pumped into a sludge pool,

condensed and dehydrated.

We then use the sludge as a raw material in the manufacture of corrugating medium paper.

We maintain computerized

controls at our production facilities on a 24-hour basis to monitor compliance with environmental rules and regulations.

not aware of any environmental investigations, prosecutions, disputes, claims or other environmental proceedings, nor have we been

subject to any action by any environmental administration authorities of the PRC.

To our knowledge, our operations meet or exceed

the existing environmental requirements of the PRC.

Human Capital Resources

Employee Profiles

As of December 31,

2020, we have approximately 333 full time employees, all of whom were based in PRC.

As of December 31, 2020, approximately 24.3%

of our current workforce is female and 75.7% male.

These employees are organized into a labor union under the labor laws of the

PRC and have collective bargain power against us.

We generally maintain good relations with our employees and the labor union.

Executive Offices

Our executive offices in the PRC are located at Science Park, Juli Road, Xushui County, Baoding City, Hebei Province, People’s Republic of China 072550.

Our telephone and facsimile number is 00-86-312-8698215/8698212.

Risk Factors.

Risks Relating to our Business

In order to comply with PRC regulatory requirements, we operate our businesses through companies with which we have contractual relationships but in which we do not have controlling ownership.

If the PRC government determines that our agreements with these companies are not in compliance with applicable regulations, our business in the PRC could be materially adversely affected.

We do not have direct or indirect equity ownership of HBOP which operates all our business in China.

At the same time, however, we have entered into contractual arrangements with HBOP and its individual owners pursuant to which we received an economic interest in, and exert a controlling influence over HBOP, in a manner substantially similar to a controlling equity interest.

Although we believe the restructuring transaction and our current business operations are in compliance with the current laws in China, we cannot be sure that the PRC government would view our operating arrangements to be in compliance with PRC regulations that may be adopted in the future.

If we are determined not to be in compliance, the PRC government could levy fines, revoke our business and operating licenses, require us to discontinue or restrict our operations, restrict our right to collect revenues, require us to restructure our business, corporate structure or operations, impose additional conditions or requirements with which we may not be able to comply, impose restrictions on our business operations or on our customers, or take other regulatory or enforcement actions against us that could be harmful to our business.

As a result, our business in the PRC could be materially adversely affected.

We rely on contractual arrangements with HBOP for our operations, which may not be as effective in providing control over these entities as direct ownership.

Our operations and financial results are dependent on HBOP in which we have no equity ownership interest and must rely on contractual arrangements to control and operate the businesses of HBOP.

These contractual arrangements are not as effective in providing control over HBOP as direct ownership.

For example, HBOP may be unwilling or unable to perform their contractual obligations under our commercial agreements, including payment of consulting fees under the Exclusive Technical Service and Business Consulting Agreement as they become due.

Consequently, we will not be able to conduct our operations in the manner currently planned.

In addition, HBOP may seek to renew their agreements on terms that are disadvantageous to us.

Although we have entered into a series of agreements that provide us with substantial ability to control HBOP, we may not succeed in enforcing our rights under them insofar as our contractual rights and legal remedies under Chinese law are inadequate.

In addition, if we are unable to renew these agreements on favorable terms when these agreements expire, or to enter into similar agreements with other parties, our business may not be able to operate or expand, and our operating expenses may significantly increase.

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

We operate our businesses in China though HBOP.

Our chairman, CEO and 34.4% shareholder, Zhenyong Liu owns 93.26% of the equity interest in HBOP.

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

We cannot assure you that when conflicts of interest arise, he will act in the best interests of our company or that any conflict of interest will be resolved in our favor.

These conflicts may result in management decisions that could negatively affect our operations and potentially result in the loss of opportunities.

Our arrangements with HBOP and its shareholders may be subject to a transfer pricing adjustment by the PRC tax authorities which could have an adverse effect on our income and expenses.

We could face material and adverse tax consequences if the PRC tax authorities determine that our contracts with HBOP and its shareholders were not entered into based on arm’s length negotiations.

Although our contractual arrangements are similar to other companies conducting similar operations in China, if the PRC tax authorities determine that these contracts were not entered into on an arm’s length basis, they may adjust our income and expenses for PRC tax purposes in the form of a transfer pricing adjustment.

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

The exercise of our option to purchase part or all of the equity interests in HBOP under the Call Option Agreement might be subject to approval by the PRC government.

Our failure to obtain this approval may impair our ability to substantially control HBOP and could result in actions by HBOP that conflict with our interests.

Our Call Option Agreement with HBOP and its shareholders gives our Chinese subsidiary, Baoding Shengde or its designated entity or natural person, the option to purchase all or part of the equity interests in HBOP.

The option may not be exercised by Baoding Shengde if the exercise would violate any applicable laws and regulations in China or cause any license or permit held by, and necessary for the operation of HBOP, to be cancelled or invalidated.

Under the laws of China, if a foreign entity, through a foreign investment company that it invests in, acquires a domestic related company, China’s regulations regarding mergers and acquisitions may technically apply to the transaction.

If these regulations apply, an examination and approval of the transaction by China’s Ministry of Commerce (“MOFCOM”), or its local counterparts would be required.

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

Since the scope of business activities (making of digital photo paper and other cultural paper products) as defined in the business license of Baoding Shengde does not involve the the MOFCOM approval and monitoring, we do not believe at this time that an approval or an appraisal is required for Baoding Shengde to exercise its option to acquire HBOP.

In light of the different views on this issue, however, it is possible that the central MOFCOM office in Beijing will issue a standardized opinion imposing the approval and appraisal requirement.

If we are not able to purchase the equity of HBOP, then we will lose a substantial portion of our ability to control HBOP and our ability to ensure that HBOP will act in our interests.

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

HBOP commenced its current line of business operations in 1996 and received its initial Pollution Discharge Permit in September 1996, which must be renewed every year for HBOP to stay in business.

Although we have never had problem renewing the Pollution Discharge Permit, we cannot guarantee automatic renewal every year.

Our operating history may not provide a meaningful basis on which to evaluate its business.

We cannot assure you that HBOP will maintain its profitability or that we will not incur net losses in the future.

We expect that HBOP’s operating expenses will increase as it expands.

Any significant failure to realize anticipated revenue growth could result in significant operating losses.

We will continue to encounter risks and difficulties frequently experienced by companies at a similar stage of development, including our potential failure to:

raise adequate capital for expansion and operations;

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

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

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

maintain adequate control of our expenses;

anticipate and adapt to changing conditions in paper markets in which we operate as well as the impact of any changes in government regulations, mergers and acquisitions involving our competitors, technological developments and other significant competitive and market dynamics.

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

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

Through HBOP, we compete in a highly developed market with companies that have significantly greater experience and history in our industry.

If we do not compete effectively, we could lose market share and experience falling prices, adversely affecting our financial results.

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

There is also the possibility that competitors will be able to offer additional products, services, lower prices, or other incentives that we cannot or will not offer or that will make our products less profitable.

We cannot assure you that we will be able to compete effectively with current or future competitors or that the competitive pressures we face will not harm our business.

Baoding Shengde does not have any operating history and has never competed in the digital photo paper market.

We will be conducting the digital photo paper business through our wholly-owned subsidiary Baoding Shengde, which has never had any experience competing in the Chinese digital photo paper market.

Although we reasonably believe that we are able to compete effectively with our high quality digital photo paper products, Baoding Shengde has no industry experience in the past and our digital photo paper business may fail.

If HBOP fails to comply with covenants in its loan agreements, its lenders may allege a breach of a covenant and seek to accelerate the loan or exercise other remedies, which could strain our cash flow and harm our business, liquidity and financial condition.

HBOP received loans from commercial banks to fund its operations.

Typically, these loans are made pursuant to customary loan agreements which contain representations and warranties about its business, financial covenants to which HBOP must adhere and other negative covenants in respect of its operations.

Under some of these agreements, HBOP may be required to obtain the consent of its lenders prior to entering into its contractual arrangement with us but HBOP did not receive such prior consent.

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

We intend to secure a waiver from our lenders in this regard, but cannot assure you that we will successfully do so.

If we cannot obtain such a wavier and HBOP’s lenders declare it to be in default under the loan agreements, they may accelerate HBOP’s indebtedness to them which would negatively affect our cash flows and business operations.

We may not be able to effectively control and manage the growth of HBOP.

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

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

Failure to satisfy such increased demands could interrupt or adversely affect our operations and cause delay in production and delivery of our paper products, as well as administrative inefficiencies.

We, through our subsidiaries, may engage in future acquisitions that could dilute the ownership interests of our stockholders and cause us to incur debt and assume contingent liabilities.

We, through our subsidiaries, may review acquisition and strategic investment prospects that we believe would complement the current product offerings of HBOP, augment its market coverage or enhance its technical capabilities, or otherwise offer growth opportunities.

From time to time we review investments in new businesses and we, through our subsidiaries, expect to make investments in, and to acquire, businesses, products, or technologies in the future.

We expect that when we raise funds from investors for any of these purposes we will be either the issuer or the primary obligor while the proceeds will be forwarded to HBOP.

In the event of any future acquisitions, we could:

issue equity securities which would dilute current stockholders’ percentage ownership;

incur substantial debt;

assume contingent liabilities;

expend significant cash.

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

Moreover, even if through our subsidiaries, we do obtain benefits in the form of increased sales and earnings, there may be a lag between the time when the expenses associated with an acquisition are incurred and the time when we recognize such benefits.

Acquisitions and investment activities also entail numerous risks, including:

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

unanticipated costs associated with the acquisition or investment transaction;

the diversion of management’s attention from other business concerns;

adverse effects on existing business relationships with suppliers and customers;

risks associated with entering markets in which HBOP has no or limited prior experience;

the potential loss of key employees of acquired organizations;

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

We cannot ensure that we will be able to successfully integrate any businesses, products, technology, or personnel that we might acquire in the future and our failure to do so could have a material adverse effect on our and/or HBOP’s business, operating results and financial condition.

We are responsible for the indemnification of our officers and directors.

Our Articles of Incorporation provides for the indemnification and/or exculpation of our directors, officers, employees, agents and other entities which deal with us to the maximum extent provided, and under the terms provided, by the laws and decisions of the courts of the state of Nevada.

Since we do not hold any indemnificationinsurance, these indemnification provisions could result in substantial expenditures, which we may be unable to recoup, which could adversely affect our business and financial conditions.

Zhenyong Liu, our Chairman of the Board and Chief Executive Officer, Winston C.

Yen, our Chief Financial Officer, Dahong Zhou, our Secretary, and Drew Bernstein, Wenbing Christopher Wang, Zhaofang Wang, and Fuzeng Liu, our directors, are key personnel with rights to indemnification under our Articles of Incorporation.

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

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

Zhenyong Liu, our Chief Executive Officer and Chairman of the Board, Winston C.

Yen, our Chief Financial Officer, Dahong Zhou, our Secretary, and Li Han, HBOP’s General Engineer, Gengqi Yang, HBOP’s General Sales Manager, Li Wang, HBOP’s Quality Control Manager and Manhua Zhang, Baoding Shengde’s Chief Engineer perform key functions in the operation of our business.

There can be no assurance that Orient Paper or HBOP will be able to retain these officers after the term of their employment contracts expire.

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

We do not carry key man life insurance for any of our key personnel or personnel nor do we foresee purchasing such insurance to protect against a loss of key personnel and the key personnel.

We are dependent upon the services of Mr.

Liu for the continued growth and operation of our company because of his experience in the industry and his personal and business contacts in the PRC.

Liu has entered into an employment agreement with Baoding Shengde Paper Co., Ltd., our wholly owned subsidiary and a PRC company, and that we have no reason to believe that Mr.

Liu will discontinue his services with us or HBOP, the interruption or loss of his services would adversely affect our ability to effectively run our business and pursue our business strategy as well as our results of operations.

We may not be able to hire and retain qualified personnel to support our growth and if we are unable to retain or hire these personnel in the future, our ability to improve our products and implement our business objectives could be adversely affected.

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

Competition for senior management and senior personnel in the PRC is intense, the pool of qualified candidates in the PRC is very limited, and we may not be able to retain the services of our senior executives or senior personnel, or attract and retain high-quality senior executives or senior personnel in the future.

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

If we fail to increase our brand recognition, we may face difficulty in obtaining new customers and business partners.

We believe that establishing, maintaining and enhancing our brand in a cost-effective manner is critical to achieving widespread acceptance of our current and future products and services and is an important element in our effort to increase our customer base and obtain new business partners.

We believe that the importance of brand recognition will increase as competition in our market develops.

Some of our potential competitors already have well-established brands in paper industry.

Successful promotion of our brand will depend largely on our ability to maintain a sizeable and active customer base, our marketing efforts and ability to provide reliable and useful products and services at competitive prices.

Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we will incur in building our brand.

If we fail to successfully promote and maintain our brand, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new customers or retain our existing customers to the extent necessary to realize a sufficient return on our brand-building efforts, in which case our business, operating results and financial condition, would be materially adversely affected.

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

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

These factors include:

the costs of paper products and development;

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

capital expenditure for equipment;

marketing and promotional activities and other costs;

changes in our pricing policies, suppliers and competitors;

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

changes in operating expenses;

increased competition in the paper markets;

other general economic and seasonal factors.

We face risks related to product liability claims.

We presently do not maintain product liability insurance.

We face the risk of loss because of adverse publicity associated with product liability lawsuits, whether or not such claims are valid.

We may not be able to avoid such claims.

Although product liability lawsuits in the PRC are rare, and we have not, to date, experienced significant failure of our products, there is no guarantee that we will not face such liability in the future.

This liability could be substantial and the occurrence of such loss or liability may have a material adverse effect on our business, financial condition and prospects.

We face risks relating to difficulty in defending intellectual property rights from infringement.

Our success depends on protection of our current and future technology and products and our ability to defend our intellectual property rights.

We have filed for trademark protection for one name and brand of our products which is “Shuangxing” sold in the PRC.

However, it is possible for our competitors to develop similar competitive products even though we have taken steps to protect our intellectual property.

If we fail to protect our intellectual property adequately, competitors may manufacture and market products similar to ours.

We expect to file patent applications seeking to protect newly developed technology and products in various countries, including China.

Some patent applications in the PRC are maintained in secrecy until the patent is issued.

Because the publication of discoveries tends to follow their actual discovery by many months, we may not be the first to invent, or file patent applications on any of our discoveries.

Patents may not be issued with respect to any of our patent applications and existing or future patents issued to or licensed by us may not provide competitive advantages for our products.

Patents that are issued may be challenged, invalidated or circumvented by our competitors.

Furthermore, our patent rights may not prevent our competitors from developing, using or commercializing products that are similar or functionally equivalent to our products.

We also rely on trade secrets, non-patented proprietary expertise and continuing technological innovation that we shall seek to protect, in part, by entering into confidentiality agreements with licensees, suppliers, employees and consultants.

These agreements may be breached and there may not be adequate remedies in the event of a breach.

Disputes may arise concerning the ownership of intellectual property or the applicability of confidentiality agreements.

Moreover, our trade secrets and proprietary technology may otherwise become known or be independently developed by our competitors.

If patents are not issued with respect to products arising from research, we may not be able to maintain the confidentiality of information relating to these products.

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

In addition to our dependence upon wood pulp, recycled white scrap paper and paperboard costs, our operating results depend on the availability and pricing of energy and other raw materials, including chemical agents and coal.

An interruption in the supply of supplemental chemical agents could cause a material disruption at our mill in Baoding.

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

At present, our raw materials are purchased from a number of suppliers, typically pursuant to a long-term contract, of which the two largest suppliers account for over 68% of all purchases.

If any of these contracts were to be terminated for any reason, or not renewed upon expiration, or if market conditions were to substantially change creating a significant increase in the price of coal, we may not be able to find alternative, comparable suppliers or suppliers capable of providing coal to us on terms or in amounts satisfactory to us.

As a result of any of these events, our business, financial condition and operating results could suffer.

A material disruption at one of our manufacturing facilities could prevent us from meeting customer demand, reduce our sales, and/or negatively affect our net income.

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

maintenance outages;

prolonged power failures;

an equipment failure;

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

a chemical spill or release;

closure because of environmental-related concerns;

explosion of a boiler;

the effect of a drought or reduced rainfall on our water supply;

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

fires, floods, earthquakes, hurricanes, or other catastrophes;

terrorism or threats of terrorism;

labor difficulties;

What changed 10-K/A

Item 1. Business