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Item 8. Financial Statements and Supplementary Data

2021-04-19 compared with 2011-09-26 · 1321 added, 655 removed, 109 unchanged (95% of the section changed)

Financial Statements and Supplementary Data

Our audited financial statements for the fiscal years ended December 31, 2009 and 2008, together with the report of the independent certified public accounting firm thereon and the notes thereto, are presented beginning at page F-1.

ORIENT PAPER, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Income and Comprehensive Income

Consolidated Statements of Stockholder’s Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Orient Paper, Inc.

We have audited the accompanying consolidated balance sheets of Orient Paper, Inc.

(“the Company”) as of December 31, 2009 and 2008, and the related consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows for each the two years in the period ended December 31, 2009.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated September 26, 2011, expressed an unqualified opinion thereon.

/s/ BDO Limited

Hong Kong, September 26, 2011

ORIENT PAPER, INC.

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2009 AND 2008

Our audited financial

statement for the fiscal year ended December 31, 2020 and 2019, together with the report of the independent certified public accounting

firms thereon and the notes thereto, are presented beginning at page F-1.

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders of

Tech Packaging, Inc.

on the Financial Statements

We have audited the accompanying

consolidated balance sheets of IT Tech Packaging, Inc.

(the Company) as of December 31, 2020, and 2019, and the related

consolidated statements of income (loss) and comprehensive income (loss), changes in stockholders’

equity, and cash

flows for each of the years in the two-year period ended December 31, 2020, and the related notes (collectively referred to

as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the

financial position of the Company as of December 31, 2020, and 2019, and the results of its operations and its cash flows for

each of the years in the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted

in the United States of America.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on

the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company

Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance

with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but

not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to

error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from

the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) related to the accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,

subjective, or complex judgments.

The communication of the critical audit matter does not alter in anyway our opinion on the financial

statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical

audit matters or on the accounts or disclosures to which they relate.

The critical audit matter related to the Company’s property,

plant and equipment.

The principal considerations in determining that this was a critical audit matter was that the Company had a substantial

amount of property, plant, and equipment, and the carrying value of such assets are subject to estimation, which involves judgment.

plant and equipment may be placed into service at varying times, and their ability to contribute to the generation of cash flows is impacted

by multiple factors.

The audit engagement team addressed this critical accounting matter by reviewing the Company’s accounting policies,

and perform extended procedures including physical inspection, corroborated with enquiry, examination of contracts, and independent analysis

via recalculation of depreciation and impairment testing.

The engagement team’s testing provided adequate evidence to support our

audit opinion and to mitigate the risk of material misstatement to an acceptable level.

The accounts that are affected by this critical

audit matter is property plant and equipment, and the related depreciation that is allocated into cost of sales, and impairment expense,

Public Accountants

have served as the Company’s auditor since March 25, 2018.

Mateo, California

March 23, 2021, except for Note 12, as to which the date is April 19,

TECH PACKAGING, INC.

BALANCE SHEETS

OF DECEMBER 31, 2020 AND 2019

Current Assets

Cash and cash equivalents

Cash and bank balances

Restricted cash

Accounts receivable, net of allowance for doubtful accounts of $41,977 and nil as of December 31, 2009 and 2008, respectively

Prepaid expense and other receivable

Accounts receivable (net of allowance for doubtful accounts of $34,391 and $59,922 as of December 31, 2020 and December 2019, respectively)

Prepayments and other current assets

Due from related parties

Total current assets

Prepayment on property, plant and equipment

Finance lease right-of-use assets, net

Property, plant, and equipment, net

Value-added tax recoverable

Deferred tax asset non-current

LIABILITIES AND STOCKHOLDERS' EQUITY

1 unchanged sentence

Short-term bank loans

Current portion of long-term loans from credit union

Lease liability

Accounts payable

Advance from customers

Due to related parties

Accrued payroll and employee benefits

2 unchanged sentences

Total current liabilities

Loan from credit union

Loans from related parties

Total liabilities

Loans from credit union

Deferred gain on sale-leaseback

Lease liability - non-current

Derivative liability

Total liabilities (including amounts of the consolidated VIE without recourse to the Company of $17,950,224 and $19,558,568 as of December 31, 2020 and 2019, respectively)

Commitments and Contingencies

Stockholders' Equity

Common stock, 500,000,000 shares authorized, $0.001 par value per share, 14,875,715 and 11,275,497 shares issued and outstanding as of December 31, 2009 and 2008, respectively

Common stock, 500,000,000 shares authorized,

$0.001 par value per share, 28,535,816 and 22,054,816 shares issued and outstanding as of December 31, 2020 and December 31,

2019, respectively

Additional paid-in capital

Statutory earnings reserve

Accumulated other comprehensive income

Accumulated other comprehensive income (loss)

Retained earnings

1 unchanged sentence

Total Liabilities and Stockholders' Equity

The accompanying notes to financial statements are an integral part of these balance sheets.

ORIENT PAPER, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

Year Ended December 31,

accompanying notes to consolidated financial statements.

IT TECH PACKAGING, INC.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

AND COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED DECEMBER 31, 2020

Cost of sales

Selling, general and administrative expenses

Income from Operations

(Loss) Income from Operations

Other Income (Expense):

Interest income

Subsidy income

Interest expense

Income before Income Taxes

Other Comprehensive Income

Loss on change in derivative liability

(Loss) Income before Income Taxes

Tax Benefit (Provision for Income Taxes)

Net (Loss) Income

Other Comprehensive Income (Loss)

Foreign currency translation adjustment

Total Comprehensive Income

Earnings Per Share

Basic Earning per Share

Fully Diluted Earning per Share

Weighted Average Number of Shares

Outstanding - Basic

Outstanding - Fully Diluted

The accompanying notes to financial statements are an integral part of these statements.

ORIENT PAPER, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

Total Comprehensive Income (Loss)

(Loss) Earnings Per Share:

Basic and Diluted (Loss) Earnings per Share

Outstanding –

Basic and Diluted

TECH PACKAGING, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’

THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Comprehensive

Income (loss)

Balance at December 31, 2018

Common stock issued for services

$ (3,263,952 )

$ 112,573,614

$ 166,549,915

Issuance of shares to Weitian

Foreign currency translation adjustment

Transfer to Statutory Earnings Reserve

Net income for the year

Balance at December 31, 2019

Employee stock compensation

Common stock issued for services

Issuance of common stock to a director(Note 7)

Issuance of common stock for cash

Warrants issued for services

$ (6,057,537 )

$ 114,794,796

$ 165,995,062

Issuance of shares to officer and directors

Issuance of shares

Issuance of shares to a consultant

Foreign currency translation adjustment

Transfer to Statutory Earnings Reserve

Net income for the year

Balance at December 31, 2020

The accompanying notes to financial statements are an integral part of these statements.

ORIENT PAPER, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

Year Ended December 31,

$ 109,240,794

$ 175,080,174

accompanying notes to consolidated financial statements.

TECH PACKAGING, INC.

STATEMENTS OF CASH FLOWS

THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Cash Flows from Operating Activities:

1 unchanged sentence

Depreciation and amortization

Impairment on accounts receivable

Issuance of warrants for services

Issuance of stock for services

Loss on derivative liability

Allowances for obsolete inventories, net

(Recovery from) Allowance for bad debts

Share-based compensation and expenses

Gain on acquisition of a subsidiary

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses & other receivables

Prepayments and other current assets

Accounts payable

Accrued payroll and related expenses

Advance from customers

Notes payable

Related parties

Accrued payroll and employee benefits

Other payables and accrued liabilities

3 unchanged sentences

Purchases of property, plant and equipment

Proceeds from sale of property, plant and equipment

Acquisition of a subsidiary

Net Cash Used in Investing Activities

Cash Flows from Financing Activities:

Loans from related parties

Repayment of short term loans

Proceeds from long-term and credit union loans

Proceeds from common stock issued in private placement, net

Restricted cash

Net Cash Provided by Financing Activities

Proceeds from issuance of shares and warrants, net

Repayments of related party loans

Proceeds from short term bank loans

Proceeds from credit union loans

Repayment of bank loans

Payment of capital lease obligation

Net Cash Provided by (Used in) Financing Activities

Effect of Exchange Rate Changes on Cash and Cash Equivalents

Net Increase in Cash and Cash Equivalents

Cash and Cash Equivalents - Beginning of Period

Cash and Cash Equivalents - End of Period

Net (Decrease) Increase in Cash and Cash Equivalents

Cash, Cash Equivalents and Restricted Cash - Beginning of Year

Cash, Cash Equivalents and Restricted Cash - End of Year

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest

Cash paid for interest, net of capitalized interest cost

Cash paid for income taxes

Supplemental Disclosure of significant non-cash transactions:

Issuance of 1,250,000 shares of common stock for consultancy services

Issuance of 3,750 shares of common stock for staff compensation

Issuance of 297,294 shares of common stock for legal and consultancy services

Issuance of 1,204,340 shares of common stock to a director (Note 7)

Issuance of 11,500 shares of common stock for directors’ compensation

Issuance of warrants for consultancy services

The accompanying notes to financial statements are an integral part of these statements.

ORIENT PAPER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Cash and bank balances

Restricted cash

Total cash, cash equivalents and restricted cash shown in the statement of cash flows

accompanying notes to consolidated financial statements.

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Organization and Business Background

Orient Paper, Inc.

(“Orient Paper” or “the Company”) was incorporated under the laws of the State of Nevada on December 9, 2005, under the name of Carlateral, Inc.

Carlateral, Inc.

started its business by providing financing services specializing in subprime title loans, secured primarily using automobiles (and also boats, recreational vehicles, machinery, and other equipment) as collateral.

Hebei Baoding Orient Paper Milling Company Limited (“HBOP”) was organized on March 10, 1996, under the laws of the People’s Republic of China (“PRC”).

HBOP engages mainly in the production and distribution of paper products such as corrugating medium paper, offset printing paper and writing paper.

HBOP also has capability to produce other paper and packaging-related products, such as plastic paper and craft paper.

HBOP uses recycled paper as its primary raw material.

Dongfang Zhiye Holding Limited (“Dongfang Holding”) was formed on November 13, 2006, under the laws of the British Virgin Islands, and is an investment holding company.

As such, Dongfang Holding does not generate any financial or operating transactions.

On July 16, 2007, Dongfang Holding entered into an agreement to acquire the equity ownership of HBOP and placed all the equity interest in trust with Mr.

Zhenyong Liu, Mr.

Xiaodong Liu, and Mr.

Shuangxi Zhao (the original equity owners of HBOP), pursuant to a trust agreement executed as of the same date.

Under the terms of the trust agreement, the original equity owners 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 equity interest.

In connection with the consummation of the restructuring transactions on June 24, 2009 as described below, Dongfang Holding directed its trustee to return its equity ownership in HBOP to their original equity owners.

On October 29, 2007, Orient Paper entered into an Agreement and Plan of Merger (“Merger Agreement”) with (i) Orient Paper wholly owned subsidiary, CARZ Merger Sub, Inc., (ii) Dongfang Holding, and (iii) all shareholders of Dongfang Holding (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).

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

via a share exchange, with Dongfang Holding as the surviving entity.

In exchange for their shares in Dongfang Holding, the Dongfang Holding shareholders received an aggregate of 7,450,497 newly-issued shares of Orient Paper’s common stock, $0.001 par value, which 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, has the controlling right on Dongfang Holding’s operating company subsidiary, HBOP, pursuant to the terms of the trust agreement.

HBOP, the entity through which the Company operates its business currently has no subsidiaries, either wholly- or partially-owned.

Prior to the completion of the reverse merger, Orient Paper only had limited operations (since its incorporation on December 9, 2005).

On December 21, 2007, the name of the Company was changed from Carlateral, Inc.

to Orient Paper, Inc.

in order to better reflect the current business plan subsequent to the reverse merger.

Accordingly, the reverse merge has been recorded as a recapitalisation of Orient Paper.

To ensure proper compliance of the Company’s control over the ownership and operations of HBOP with certain PRC regulations, on June 24, 2009, the Company entered into a series of contractual agreements (the “Contractual Agreements”) with HBOP and the original equity owners of HBOP via its wholly owned subsidiary Shengde Holdings, Inc.

(“Shengde Holdings”,) a Nevada corporation and Baoding Shengde Paper Co., Ltd.

(“Baoding Shengde”), a wholly foreign-owned enterprise in the PRC with a registered capital of $10,000,000.

Baoding Shengde is 100% owned by Shengde Holdings.

Prior to February 10, 2010, the Contractual Agreements included (i) Exclusive Technical Service and Business Consulting Agreement, which generally 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;

(ii) Loan Agreement, which provides that Baoding Shengde will make a loan in the aggregate principal amount of $10,000,000 to the original equity owners of HBOP in exchange for each such shareholder agreeing to contribute all of its proceeds from the loan to the registered capital of HBOP;

(iii) Call Option Agreement, which generally provides, among other things, that the original equity owners of HBOP irrevocably grant to Baoding Shengde an option to purchase all or part of each owner’s equity interest in HBOP.

The exercise price for the options shall be RMB1 for each of the owners’ equity interests;

(iv) Share Pledge Agreement, which provides that the original equity owners of HBOP will pledge all of their equity interests in HBOP to Baoding Shengde as security for their obligations under the other agreements described in this section.

Specifically, Baoding Shengde is entitled to dispose of the pledged equity interests in the event that the original equity owners of HBOP breach their obligations under the loan agreement or HBOP fails to pay the service fees to Baoding Shengde pursuant to the Exclusive Technical Service and Business Consulting Agreement;

and (v) Proxy Agreement, which provides that the original equity owners of HBOP shall irrevocably entrust a designee of Baoding Shengde with such shareholder’s voting rights and the right to represent such shareholder to exercise such owner’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 original equity owners of HBOP continue to hold any equity interest in HBOP.

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

As the Company had controlled HBOP since July 16, 2007 through Dongfang Holding trust until June 24, 2009, and continues to control HBOP through Baoding Shengde and the Contractual Agreements, the execution of the Contractual Agreements is considered as a business combination under common control.

During the year ended December 31, 2009, Baoding Shengde did not provide any consulting services to HBOP in respect of the Exclusive Technical Service and Business Consulting Agreement.

An agreement was also entered into among Baoding Shengde, HBOP and HBOP shareholders on December 31, 2010, reiterating that Baoding Shengde is entitled to 100% of the distributable profit of HBOP, pursuant to the above mentioned contractual agreements.

In addition, HBOP and its equity shareholders shall not declare any of HBOP’s unappropriated earnings as dividend, including the unappropriated earnings of HBOP from its establishment to 2010 and thereafter.

ORIENT PAPER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Orient Paper has no equity interest in HBOP.

However, through the agreements described above Orient Paper is found to be the primary beneficiary of HBOP and is deemed to have the effective control over HBOP’s operations and financial affairs, resulting in HBOP being deemed the subsidiary of Orient Paper in accordance with Topic 810- Consolidation of the Accounting Standards Codification (the “ASC”) issued by the Financial Accounting Standard Board (the “FASB”) (formerly FASB Interpretation No.

(FIN) 46R, Consolidation of Variable Interest Entities ).

On February 10, 2010, Baoding Shengde and HBOP’s original equity owners entered into a Termination of Loan Agreement to terminate the above $10,000,000 Loan Agreement.

Because of the Company’s decision to fund future business expansions through Baoding Shengde instead of HBOP, the $10,000,000 loan contemplated was never made prior to the point of 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.

As of December 31, 2009, details of the Company’s subsidiaries and variable interest entities are as follows:

Incorporation or

Establishment

Tech Packaging, Inc.

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

Through the steps described immediately 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.”.

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 into us.

We were the surviving entity.

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

a new NYSE symbol, “ITP,”

and a new CUSIP number, 46527C100, at such time.

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.

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.

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.

Shengde Holdings Inc was incorporated in the State of Nevada

on February 25, 2009.

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.

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

ensure proper compliance of the Company’s control over the ownership and operations of Dongfang Paper with certain PRC regulations,

on June 24, 2009, the Company entered into a series of contractual agreements (the “Contractual Agreements”) with

Dongfang Paper and Dongfang Paper Equity Owners via the Company’s wholly owned subsidiary Shengde Holdings Inc (“Shengde

Holdings”) a Nevada corporation and Baoding Shengde Paper Co., Ltd.

(“Baoding Shengde”), a wholly foreign-owned

enterprise in the PRC with an original registered capital of $10,000,000 (subsequently increased to $60,000,000 in June 2010).

Baoding Shengde is mainly engaged in production and distribution of digital photo paper and single-use face masks and is 100%

owned by Shengde Holdings.

Prior to February 10, 2010, the Contractual Agreements included (i) Exclusive Technical Service and

Business Consulting Agreement, which generally 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;

(ii) Loan Agreement, which provides that Baoding Shengde will make a loan in the aggregate principal

amount of $10,000,000 to Dongfang Paper Equity Owners in exchange for each such shareholder agreeing to contribute all of its

proceeds from the loan to the registered capital of Dongfang Paper;

(iii) Call Option Agreement, which generally provides, among

other things, that Dongfang Paper Equity Owners irrevocably grant to Baoding Shengde an option to purchase all or part of each

owner’s equity interest in Dongfang Paper.

The exercise price for the options shall be RMB1 which Baoding Shengde should

pay to each of Dongfang Paper Equity Owner for all their equity interests in Dongfang Paper;

(iv) Share Pledge Agreement, which

provides that Dongfang Paper Equity Owners will pledge all of their equity interests in Dongfang Paper to Baoding Shengde as security

for their obligations under the other agreements described in this section.

Specifically, Baoding Shengde is entitled to dispose

of the pledged equity interests in the event that Dongfang Paper Equity Owners breach their obligations under the Loan Agreement

or Dongfang Paper fails to pay the service fees to Baoding Shengde pursuant to the Exclusive Technical Service and Business Consulting

and (v) Proxy Agreement, which provides that Dongfang Paper Equity Owners shall irrevocably entrust a designee of Baoding

Shengde with such shareholder’s voting rights and the right to represent such shareholder to exercise such owner’s

rights at any equity owners’

meeting of Dongfang Paper or with respect to any equity owner action to be taken in accordance

with the laws and Dongfang Paper’s Articles of Association.

The terms of the agreement are binding on the parties for as

long as Dongfang Paper Equity Owners continue to hold any equity interest in Dongfang Paper.

An Dongfang Paper Equity Owner will

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

Company had controlled Dongfang Paper since July 16, 2007 through Dongfang Holding and the trust until June 24, 2009 and continued

to control Dongfang Paper through Baoding Shengde and the Contractual Agreements, the execution of the Contractual Agreements

is considered as a business combination under common control.

February 10, 2010, Baoding Shengde and the Dongfang Paper Equity Owners entered into a Termination of Loan Agreement to terminate

the above-mentioned $10,000,000 Loan Agreement.

Because of the Company’s decision to fund future business expansions through

Baoding Shengde instead of Dongfang Paper, the $10,000,000 loan contemplated was never made prior to the point of termination.

The parties believe the termination of the Loan Agreement does not in itself compromise the effective control of the Company over

Dongfang Paper and its businesses in the PRC.

An agreement was also entered into among

Baoding Shengde, Dongfang Paper and the Dongfang Paper Equity Owners on December 31, 2010, reiterating that Baoding Shengde is

entitled to 100% of the distributable profit of Dongfang Paper, pursuant to the above- mentioned Contractual Agreements.

Dongfang Paper and the Dongfang Paper Equity Owners shall not declare any of Dongfang Paper’s unappropriated earnings as

dividend, including the unappropriated earnings of Dongfang Paper from its establishment to 2010 and thereafter.

On June 25, 2019, Dongfang Paper entered

into an acquisition agreement with shareholder of Hebei Tengsheng Paper Co., Ltd.

(“Hebei Tengsheng”), a limited liability

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

Upon full payment of

the consideration in the amount of RMB 320 million (approximately $45 million), Hebei Tengsheng will gain control over substantial

parcels of land that under the possession of Hebei Tengsheng.

Company has no direct equity interest in Dongfang Paper.

However, through the Contractual Agreements described above, the Company

is found to be the primary beneficiary (the “Primary Beneficiary”) of Dongfang Paper and is deemed to have the effective

control over Dongfang Paper’s activities that most significantly affect its economic performance, resulting in Dongfang

Paper being treated as a controlled variable interest entity of the Company in accordance with Topic 810 - Consolidation of the

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

The revenue generated from Dongfang Paper for the years ended December 31, 2020 and 2019 was accounted for 98.91% and 100% of

the Company’s total revenue, respectively.

Dongfang Paper also accounted for 90.70% and 91.01% of the total assets of the

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

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

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

Incorporation

Incorporation or

or Establishment

Establishment

Percentage of

Principal Activity

1 unchanged sentence

November 13, 2006

Investment holding, inactive as of December 31, 2009

Inactive investment holding

Shengde Holdings

4 unchanged sentences

Paper production and distribution

Variable interest entity:

Variable interest entity (“VIE”):

Dongfang Paper

March 10, 1996

Paper production and distribution

(2) Significant Accounting Policies

Basis of Consolidation

The consolidated financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), and include the assets, liabilities, revenues, expenses and cash flows of all subsidiaries and variable interest entities.

All significant inter-company balances, transactions and cash flows are eliminated on consolidation.

Foreign Currency Translation

The Company accounts for foreign currency translation pursuant to ASC Topic 830, Foreign Currency Matters (formerly SFAS No.

52, Foreign Currency Translation ).

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

Under ASC Topic 830-30, all assets and liabilities are translated into United States dollars using the current exchange rate at the end of each fiscal period.

The current exchange rates used by the Company as of December 31, 2009 and 2008 to translate the Chinese RMB to the U.S.

Dollars are 6.83720:1 and 6.81663:1, respectively.

Revenues and expenses are translated using the average exchange rates prevailing throughout the respective years at 6.84088:1 and 6.93722:1 for the years ended December 31, 2009 and 2008, respectively.

Translation adjustments are included in other comprehensive income (loss).

ORIENT PAPER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

The functional currency of Orient Paper, Dongfang Holding and Shengde Holdings is United States dollars.

Monetary assets and liabilities denominated in currencies other than United States dollars are translated into United States dollars at the rates of exchange ruling at the balance sheet date.

Translation in currencies other than United States dollars are converted into United States dollars at the applicable rates of exchange prevailing the transactions occurred.

Dongfang Paper is treated as a 100% controlled

variable interest entity of the Company.

uncertainties in the PRC legal system could cause the Company’s current ownership structure to be found to be in violation

of any existing and/or future PRC laws or regulations and could limit the Company’s ability, through its subsidiary, to

enforce its rights under these contractual arrangements.

Furthermore, shareholders of the VIE may have interests that are different

than those of the Company, which could potentially increase the risk that they would seek to act contrary to the terms of the

aforementioned agreements.

addition, if the current structure or any of the contractual arrangements were found to be in violation of any existing or future

PRC law, the Company may be subject to penalties, which may include, but not be limited to, the cancellation or revocation of

the Company’s business and operating licenses, being required to restructure the Company’s operations or being required

to discontinue the Company’s operating activities.

The imposition of any of these or other penalties may result in a material

and adverse effect on the Company’s ability to conduct its operations.

In such case, the Company may not be able to operate

or control the VIE, which may result in deconsolidation of the VIE.

The Company believes the possibility that it will no longer

be able to control and consolidate its VIE will occur as a result of the aforementioned risks and uncertainties is remote.

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Company has aggregated the financial information of Dongfang Paper in the table below.

The aggregate carrying value of Dongfang

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

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

Current Assets

Cash and bank balances

Restricted cash

Accounts receivable

Prepayments and other current assets

Due from related parties

Total current assets

Prepayment on property, plant and equipment

Finance lease right-of-use assets, net

Property, plant, and equipment, net

Deferred tax asset non-current

Current Liabilities

Short-term bank loans

Current portion of long-term loans from credit union

Lease liability

Accounts payable

Advance from customers

Due to related parties

Accrued payroll and employee benefits

Other payables and accrued liabilities

Income taxes payable

Total current liabilities

Loans from credit union

Lease liability - non-current

Total liabilities

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Company and its consolidated subsidiaries are not required to provide financial support to the VIE, and no creditor (or beneficial

interest holders) of the VIE have recourse to the assets of Company unless the Company separately agrees to be subject to such

There are no terms in any agreements or arrangements, implicit or explicit, which require the Company or its subsidiaries

to provide financial support to the VIE.

However, if the VIE does require financial support, the Company or its subsidiaries may,

at its option and subject to statutory limits and restrictions, provide financial support to the VIE.

Basis of Presentation and Significant Accounting Policies

of Consolidation

consolidated financial statements of the Company are prepared in accordance with accounting principles generally accepted in the

United States of America (“US GAAP”), and include the assets, liabilities, revenues, expenses and cash flows of all

subsidiaries and variable interest entity.

All significant inter-company balances, transactions and cash flows are eliminated

on consolidation.

Currency Translation

Company accounts for foreign currency translation pursuant to ASC Topic 830, Foreign Currency Matters .

The functional currency

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

Monetary assets and liabilities denominated

in currencies other than RMB are translated into RMB at the rates of exchange ruling at the balance sheet date.

Transactions in

currencies other than RMB are converted into RMB at the applicable rates of exchange prevailing the transactions occurred.

gains and losses are recognized in the consolidated statements of income.

The functional currency of IT Tech Packaging and Shengde

Holdings is United States dollars.

Monetary assets and liabilities denominated in currencies other than United States dollars

are translated into United States dollars at the rates of exchange ruling at the balance sheet date.

Translation in currencies

other than United States dollars are converted into United States dollars at the applicable rates of exchange prevailing when

the transactions occurred.

Transaction gains or losses are recognized in the consolidated statement of income.

Use of Estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of December 31, 2009, and 2008, and revenues and expenses for the years ended December 31, 2009, and 2008.

The most significant estimates relate to allowance for uncollectible accounts receivable, inventory valuation, useful lives of property, plant and equipment, valuation allowance for deferred tax assets and contingencies.

Under ASC Topic 830-30, all assets and

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

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

Dollars are 6.5249:1,

and 6.9762:1, respectively.

Revenues and expenses are translated using the average exchange rates prevailing throughout the respective

years at 6.8941:1 and 6.8948:1 for the years ended December 31, 2020, and 2019, respectively.

Translation adjustments are included

in other comprehensive income (loss).

preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions

that affect the reported amounts of assets and liabilities as of December 31, 2020, and 2019, and revenues and expenses for the

years ended December 31, 2020, and 2019.

The most significant estimates relate to allowance for uncollectible accounts receivable,

inventory valuation, useful lives and impairment for property, plant and equipment, valuation allowance for deferred tax assets

and contingencies.

Actual results could differ from those estimates made by management.

Cash and Cash Equivalents

For purposes of reporting within the statements of cash flows, Orient Paper considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents.

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

accounts receivable are recorded on shipment of products to customers.

The trade receivables are all without customer collateral

and interest is not accrued on past due accounts.

Periodically, management reviews the adequacy of its provision for doubtful

accounts based on historical bad debt expense results and current economic conditions using factors based on the aging of its

accounts receivable.

Trade accounts receivable are recorded on shipment of products to customers.

The trade receivables are not collateralized and interest is not accrued on past due accounts.

Periodically, management reviews the adequacy of its provision for doubtful accounts based on historical bad debt expense results and current economic conditions using factors based on the aging of its accounts receivable.

Additionally, the Company may identify additional allowance requirements based on indications that a specific customer may be experiencing financial difficulties.

Additionally, the Company may identify additional allowance requirements based on indications that a specific

customer may be experiencing financial difficulties.

Actual bad debt results could differ materially from these estimates.

As of December 31, 2009, and 2008, the balance of allowance for doubtful accounts was $41,977 and nil, respectively.

While management uses the best information available upon which to base estimates, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used for the purposes of analysis.

Inventories consist principally of raw materials (e.g., recycled paper, pulp and coal) and finished goods, and are stated at the lower of cost (average cost method) or market.

of December 31, 2020, and 2019, the balance of allowance for doubtful accounts was $34,391 and $59,922, respectively;

movement of the provision of the doubtful accounts is as below.

While management uses the best information available upon which

to base estimates, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions

used for the purposes of analysis.

Allowance of doubtful accounts

Opening balance

Provision (Reversal) for the year

Exchange difference

Closing balance

consist principally of raw materials and finished goods, and are stated at the lower of cost (average cost method) or market.

Cost includes labor, raw materials, and allocated overhead.

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost less accumulated depreciation and any impairment losses.

Major renewals, betterments, and improvements are capitalized to the asset accounts while replacements, maintenance, and repairs, which do not improve or extend the lives of the respective assets, are expensed to operations.

At the time property, plant, and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation or amortization accounts are relieved of the applicable amounts.

Gains or losses from retirements or sales are credited or charged to operations.

The Company depreciates property, plant, and equipment using the straight-line method as follows:

Provision in inventories were $nil and $75,719 for the years ended

December 31, 2020, and 2019, respectively.

Plant, and Equipment

plant, and equipment are stated at cost less accumulated depreciation and any impairment losses.

Major renewals, betterments,

and improvements are capitalized to the asset accounts while replacements, maintenance, and repairs, which do not improve or extend

the lives of the respective assets, are expensed to operations.

At the time property, plant, and equipment are retired or otherwise

disposed of, the asset and related accumulated depreciation or amortization accounts are relieved of the applicable amounts.

or losses from retirements or sales are credited or charged to operations.

Construction-in-progress

is stated at cost and capitalized as expenses are incurred or as payments are made pursuant to relevant construction contracts.

Contract retention is recorded as accrued liability.

Construction in progress is not depreciated until project completion and

the constructed property being placed in service, at which time the capitalized balance will be transferred to appropriate account

of property, plant and equipment.

Company depreciates property, plant, and equipment using the straight-line method as follows:

Land use right

2 unchanged sentences

Machinery and equipment

ORIENT PAPER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Long-Lived Assets

The Company evaluates the recoverability of long-lived assets and the related estimated remaining useful lives when events or circumstances lead management to believe that the carrying value of an asset may not be recoverable and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount.

In such circumstances, those assets are written down to estimate fair value.

For the years ended December 31, 2009 and 2008, no events or circumstances occurred for which an evaluation of the recoverability of long-lived assets was required.

Fair Value of Financial Instruments

The Company estimates the fair value of financial instruments using the available market information and valuation methods.

Considerable judgment is required in estimating fair value.

Accordingly, the estimates of fair value may not be indicative of the amounts that the Company could realize in a current market exchange.

As of December 31, 2009 and 2008, the carrying value of the Company’s financial instruments approximated at their fair value.

Statutory Reserves

According to the laws and regulations in the PRC, the Company is required to provide for certain statutory funds, namely, reserve fund by an appropriation from net profit after taxation but before dividend distribution based on the local statutory financial statements of the PRC subsidiary and variable interest entity prepared in accordance with the PRC accounting principles and relevant financial regulations.

The Company’s wholly owned subsidiary and variable interest entity in the PRC are required to allocate at least 10% of its net profit to the reserve fund until the balance of such fund has reached 50% of its registered capital.

Appropriations of additional reserve fund are determined at the discretion of its directors.

The reserve fund can only be used, upon approval by the relevant authority, to offset accumulated losses or increase capital.

For the years ended December 31, 2009 and 2008, Orient Paper made transfers to this reserve fund in the amounts of $1,363,387 and $1,316,163, respectively.

Employee Benefit Plan

Full time employees of the PRC entities participate in a government mandated multi-employer defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance and other welfare benefits are provided to employees.

Chinese labor regulations require the Company to accrue for these benefits based on certain percentages of the employees’ salaries.

The total provision for such employee benefits was $29, 283 and nil for the years ended December 31, 2009 and 2008.

Revenue Recognition Policy

The Company recognizes revenue when goods are shipped, when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist, and collectability is reasonably assured.

Typical shipment term for all customers is FOB Shipping Point.

Goods are considered shipped and delivered when customer’s truck picks up goods at our finished goods inventory warehouse.

Shipping Cost

Substantially all customers use their own trucks or hire commercial trucking companies to pick up goods from the Company.

The Company usually incurs no shipping cost for delivery of goods to customers.

For those rare situations where products are not shipped utilizing customer specified shipping services, the Company charges customers a shipping fee which is included in net revenues and was not material.

Freight-in and handling costs incurred by the Company with respect to purchased goods are recorded as a component of inventory cost and charged to cost of sales when the inventory items are sold.

The Company expenses all advertising and promotion costs as incurred.

The Company incurred $439 and $216 of advertising and promotion costs for the years ended December 31, 2009 and 2008, respectively.

Lease Obligations

All non-cancellable leases with an initial term greater than one year are categorized as either capital or operating leases.

Assets recorded under capital leases are amortized according to the same depreciation methods employed for property, plant and equipment or over the term of the related lease, if shorter.

ORIENT PAPER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

The Company accounts for income taxes pursuant to ASC Topic 740, Income Taxes (formerly SFAS No.

109 Accounting for Income Taxes).

Income taxes are provided on an asset and liability approach for financial accounting and reporting of income taxes.

of long-lived asset

Company reviews the carrying value of long-lived assets to be held and used when events and circumstances warrants such a review.

The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is

separately identifiable and is less than its carrying value.

In that event, a loss is recognized based on the amount by which

the carrying value exceeds the fair market value of the long-lived asset and intangible assets.

Fair market value is determined

primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved.

Losses on long-lived assets

and intangible assets to be disposed are determined in a similar manner, except that fair market values are reduced for the cost

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

to the laws and regulations in the PRC, the Company is required to provide for certain statutory funds, namely, a reserve fund

by an appropriation from net profit after taxation but before dividend distribution based on the local statutory financial statements

of the PRC subsidiary and variable interest entity prepared in accordance with the PRC accounting principles and relevant financial

of the Company’s wholly owned subsidiary and variable interest entity in the PRC are required to allocate at least 10% of

its net profit to the reserve fund until the balance of such fund has reached 50% of its registered capital.

Appropriations of

additional reserve fund are determined at the discretion of its directors.

The reserve fund can only be used, upon approval by

the relevant authority, to offset accumulated losses or increase capital.

the years ended December 31, 2020, and 2019, IT Tech Packaging made transfers of $nil to this reserve fund.

As a result of net

loss in fiscal year 2019 and 2018 of Baoding Shengde, no statutory reserves were provided for the year ended December 31, 2020,

The Company’s variable interest entity Dongfang Paper, the statutory reserve account of which has been fully funded

for 50% of its registered capital in the amount of RMB 75,030,000 (or approximately $11,811,470) since December 31, 2010, did

not make any transfer to statutory reserves during the years ended December 31, 2020, and 2019.

time employees of the PRC entities participate in a government mandated multi-employer defined contribution plan pursuant to which

certain pension benefits, medical care, unemployment insurance and other welfare benefits are provided to employees.

provision for such employee benefits was $nil for the years ended December 31, 2020, and 2019.

Company adopted ASC Topic 606, Revenue from Contracts with Customers , and all subsequent ASUs that modified ASC 606 on

April 1, 2017 using the full retrospective method which requires the Company to present the financial statements for all periods

as if Topic 606 had been applied to all prior periods.

The company derives revenue principally from producing and sales of paper

Revenue from contracts with customers is recognized using the following five steps:

Identify the contract(s) with a customer;

Identify the performance obligations in the

Determine the transaction price;

Allocate the transaction price to the performance

obligations in the contract;

Recognize revenue when (or as) the entity satisfies

a performance obligation.

contract contains a promise (or promises) to transfer goods or services to a customer.

A performance obligation is a promise (or

a group of promises) that is distinct.

The transaction price is the amount of consideration a company expects to be entitled from

a customer in exchange for providing the goods or services.

The unit of account for revenue recognition

is a performance obligation (a good or service).

A contract may contain one or more performance obligations.

Performance obligations

are accounted for separately if they are distinct.

A good or service is distinct if the customer can benefit from the good or service

either on its own or together with other resources that are readily available to the customer, and the good or service is distinct

in the context of the contract.

Otherwise, performance obligations are combined with other promised goods or services until the

Company identifies a bundle of goods or services that is distinct.

Promises in contracts which do not result in the transfer of

a good or service are not performance obligations, as well as those promises that are administrative in nature, or are immaterial

in the context of the contract.

The Company has addressed whether various goods and services promised to the customer represent

distinct performance obligations.

The Company applied the guidance of ASC Topic 606-10-25-16 through 18 in order to verify which

promises should be assessed for classification as distinct performance obligations.

The Company’s revenue is primary

derived from sales of paper products.

The Company recognizes revenue when goods are delivered, when a formal arrangement exists,

the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist, and collectability

is reasonably assured.

Goods are considered delivered when customer’s truck picks up goods at the Company’s finished

goods inventory warehouse.

Substantially

all customers use their own trucks or hire commercial trucking companies to pick up goods from the Company.

The Company usually

incurs no shipping cost for delivery of goods to customers.

For those rare situations where products are not shipped utilizing

customer specified shipping services, the Company charges customers a shipping fee which is included in net revenues and was not

Freight-in and handling costs incurred by the Company with respect to purchased goods are recorded as a component of

inventory cost and charged to cost of sales when the inventory items are sold.

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Company expenses all advertising and promotion costs as incurred.

The Company incurred $nil of advertising and promotion costs

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

and development costs

and development costs are expensed as incurred and included in selling, general and administrative expenses.

Research and development

expenses incurred $69,208 and $74,825 for the years ended December 31, 2020, and 2019, respectively.

costs attributable directly to the acquisition, construction or production of qualifying assets which require a substantial period

of time to be ready for their intended use or sale, are capitalized as part of the cost of those assets.

Income earned on temporary

investments of specific borrowings pending their expenditure on those assets is deducted from borrowing costs capitalized.

other borrowing costs are recognized in interest expenses in the period in which they are incurred.

A government subsidy is not recognized

until there is reasonable assurance that:

(a) the enterprise will comply with the conditions attached to the grant;

and(b)the grant

will be received.

When the Company receives government subsidies but the conditions attached to the grants have not been fulfilled,

such government subsidies are deferred and recorded under other payables and accrued expenses, and other long-term liability.

classification of short-term or long-term liabilities is depended on the management’s expectation of when the conditions

attached to the grant can be fulfilled.

For the years ended December 31, 2020, and 2019, the Company received government subsidies

of $220,478 and $261,136, which are recognized as subsidy income in the consolidated statements of income in that fiscal year.

Company accounts for income taxes pursuant to ASC Topic 740, Income Taxes.

Income taxes are provided on an asset and liability

approach for financial accounting and reporting of income taxes.

Any tax paid by subsidiaries during the year is recorded.

Current tax is based on the profit or loss from ordinary activities adjusted for items that are non-assessable or disallowable for income tax purpose and is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date.

ASC Topic 740 also requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carryforwards.

ASC Topic 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets.

tax is based on the profit or loss from ordinary activities adjusted for items that are non-assessable or disallowable for income

tax purpose and is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date.

740 also requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the

financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax

losses and tax credit carry-forwards.

ASC Topic 740 additionally requires the establishment of a valuation allowance to reflect

the likelihood of realization of deferred tax assets.

Realization of deferred tax assets, including those related to the U.S.

net operating loss carryforwards, are dependent upon future earnings, if any, of which the timing and amount are uncertain.

The Company adopted ASC Topic 740-10-05, Income tax , (formerly FASB Interpretation No.

48 Accounting for Uncertainty in Income Taxes- an interpretation of FASB Statement No.

109), which provides guidance for recognizing and measuring uncertain tax positions, it prescribes a threshold condition that a tax position must meet for any of the benefits of the uncertain tax position to be recognized in the financial statements.

It also provides accounting guidance on derecognizing, classification and disclosure of these uncertain tax positions.

The Company’s policy on classification of all interest and penalties related to unrecognized tax is, if any, as a component of income tax provisions.

Value Added Tax

Both the PRC subsidiaries and variable interest entity of the Company are subject to value added tax (“VAT”) imposed by PRC government on its purchase and sales of goods.

The output VAT is charged to customers who purchase goods from the Company and the input VAT is paid when it purchases goods from its vendors.

VAT rate is 17% in general, depending on the types of products purchased and sold.

The input VAT can be offset against the output VAT.

Debit balance of VAT payable represents a credit against future collection of output VAT instead of a receivable.

Comprehensive Income (Loss)

The Company presents comprehensive income (loss) in accordance with ASC Topic 220, Comprehensive Income (formerly SFAS No130, Reporting Comprehensive Income ).

ASC Topic 220 states that all items that are required to be recognized under accounting standards as components of comprehensive income (loss) be reported in the consolidated financial statements.

The components of comprehensive income were the net income for the periods and the foreign currency translation adjustments.

Earnings Per Common Share

Basic earnings per share is computed by dividing the net income attributable to the common stockholders by the weighted average number of shares of common stock outstanding during the period.

Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

Share-Based Compensation

The Company uses the fair value recognition provision of ASC Topic 718, Compensation-Stock Compensation (formerly named as SFAS 123(R)) , which requires the Company to expense the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments over the vesting period.

The Company also applies the provisions of ASC Topic 505-50, Equity Based Payments to Non-Employees (formerly named as EITF 96-18) to account for stock-based compensation awards issued to non-employees for services.

Such awards for services are recorded at either the fair value of the consideration received or the fair value of the instruments issued in exchange for such services, whichever is more reliably measurable.

ORIENT PAPER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Fair Value Measurements

The Company has adopted ASC Topic 820, Fair Value Measurements and Disclosures , (formerly SFAS No.157, Fair Value Measurements ) which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements.

It does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information.

Its establishes a three-level valuation hierarchy of valuation techniques based on observable and unobservable inputs, which may be used to measure fair value and include the following:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities;

net operating loss carry-forwards, are dependent upon future earnings, if any, of which the timing and amount are uncertain.

Company adopted ASC Topic 740-10-05, Income Tax , which provides guidance for recognizing and measuring uncertain tax positions,

it prescribes a threshold condition that a tax position must meet for any of the benefits of the uncertain tax position to be

recognized in the financial statements.

It also provides accounting guidance on derecognizing, classification and disclosure of

these uncertain tax positions.

Company’s policy on classification of all interest and penalties related to unrecognized income tax positions, if any, is

to present them as a component of income tax expense.

the PRC subsidiary and variable interest entity of the Company are subject to value added tax (“VAT”) imposed by the

PRC government on its purchase and sales of goods.

The output VAT is charged to customers who purchase goods from the Company

and the input VAT is paid when the Company purchases goods from its vendors.

VAT rate is 17% (before May 1, 2018), 16% (after

May 1, 2018) and 13% (after April 1, 2019) in general, depending on the types of products purchased and sold.

The input VAT can

be offset against the output VAT.

Debit balance of VAT payable represents a credit against future collection of output VAT instead

of a receivable due from government.

Comprehensive

Income (Loss)

Company presents comprehensive income (loss) in accordance with ASC Topic 220, Comprehensive Income .

ASC Topic 220 states

that all items that are required to be recognized under accounting standards as components of comprehensive income (loss) be reported

in the consolidated financial statements.

The components of comprehensive income (loss) were the net income for the years and

the foreign currency translation adjustments.

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Basic earnings per share is computed by

dividing the net income attributable to the common stockholders by the weighted average number of shares of common stock outstanding

during the period.

Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased

to include the number of additional common shares that would have been outstanding if the potential common shares had been issued

and if the additional common shares were dilutive.

There were no potentially dilutive securities that were in-the-money that were

outstanding during the years ended December 31, 2020.

Company uses the fair value recognition provision of ASC Topic 718, Compensation-Stock Compensation, which requires the

Company to expense the cost of employee services received in exchange for an award of equity instruments based on the grant date

fair value of such instruments over the vesting period.

Company also applies the provisions of ASC Topic 505-50, Equity Based Payments to Non-Employees to account for stock-based

compensation awards issued to non-employees for services.

Such awards for services are recorded at either the fair value of the

consideration received or the fair value of the instruments issued in exchange for such services, whichever is more reliably measurable.

Value Measurements

Company has adopted ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework

for measuring fair value in GAAP, and expands disclosures about fair value measurements.

It does not require any new fair

value measurement, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify

the source of the information.

It establishes a three-level valuation hierarchy of valuation techniques based on observable

and unobservable inputs, which may be used to measure fair value and include the following:

1 - Quoted prices in active markets for identical assets or liabilities.

2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or

quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement.

(3) Inventories

Raw material inventory includes mainly recycled paper, coal and pulp.

Finished goods include mainly products of offset printing paper and corrugating medium paper.

Inventories consisted of the following as of December 31, 2009 and 2008:

or other inputs that are observable or can be corroborated by observable

market data for substantially the full term of the assets or liabilities.

3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets

or liabilities.

Classification

within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement.

Company estimates the fair value of financial instruments using the available market information and valuation methods.

judgment is required in estimating fair value.

Accordingly, the estimates of fair value may not be indicative of the amounts that

the Company could realize in a current market exchange.

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

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

bank loans and balance due to related parties, approximate at their fair values because of the short maturity of these instruments;

while loans from credit union approximates at their fair value as the interest rates thereon are close to the market rates of

interest published by the People’s Bank of China.

Derivative liabilities are measured at fair value on a recurring

Non-Recurring

Fair Value Measurements

The Company reviews long-lived assets for

impairment annually or more frequently if events or changes in circumstances indicate the possibility of impairment.

For the continuing

operations, long-lived assets are measured at fair value on a nonrecurring basis when there is an indicator of impairment, and

they are recorded at fair value only when impairment is recognized.

For discontinued operations, long-lived assets are measured

at the lower of carrying amount or fair value less cost to sell.

The fair value of these assets was determined using models with

significant unobservable inputs which were classified as Level 3 inputs, primarily the discounted future cash flow.

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Cash

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

materials inventory includes mainly recycled paper and coal.

Finished goods include mainly products of corrugating medium paper

and offset printing paper.

Inventories consisted of the following as of and December 31, 2020, and 2019:

Raw Materials

Recycled paper board

Recycled printed paper

Recycled white scrap paper

Other raw materials

Base paper and other raw materials

Semi-finished Goods

Finished Goods

Total inventory, gross

Inventory reserve

Total inventory, net

Prepayments and other current assets

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

Prepaid land lease

Prepayment for purchase of materials

Value-added tax recoverable

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Property, plant and equipment

As of December 31, 2009 and 2008, property, plant, and equipment consisted of the following:

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

Property, Plant, and Equipment:

Land use right

Land use rights

Building and improvements

Machinery and equipment

Less accumulated depreciation and amortization

Construction in progress

accumulated depreciation and amortization

Property, Plant and Equipment, net

The land use right of state-owned land represents land located in China with Lease terms of 50 years expiring in 2053.

ORIENT PAPER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Property, plant and equipment with net values of $17,813,861 and $10,745,831 have been pledged for short-term bank loans of HBOP as of December 31, 2009 and 2008, respectively.

Depreciation and amortization of property, plant and equipment was $3,510,082, and $3,179,592 during the year ended December 31, 2009 and 2008, respectively.

ORIENT PAPER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

(5) Prepaid expenses and other receivable

Prepaid expenses and other receivable consisted of the following:

Prepayment to service providers

Prepaid stock warrant compensation to a service provider

As of December 31, 2020, and December 31,

2019, land use rights represented two parcel of state-owned lands located in Xushui District of Hebei Province in China, with lease

terms of 50 years expiring from 2061 to 2066.

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

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

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

of December 31, 2020, and 2019, certain property, plant and equipment of Dongfang Paper with net values of $2,349,796 and $3,935,270,

respectively, have been pledged pursuant to a long-term loan from credit union of Dongfang Paper.

Land use right of Dongfang Paper

with net values of $6,010,359 and $5,757,546, respectively, as of December 31, 2020 and 2019 was pledged for the bank loan from

Bank of Industrial & Commercial Bank of China.

Land use right of Hebei Tengsheng with net value of $5,560,146 and $5,200,452,

respectively, as of December 31, 2020 and 2019 was pledged for a long-term loan from credit union of Baoding Shengde.

land use right of Hebei Tengsheng with net value of $8,614,194 and $8,056,930, respectively, as of December 31, 2020 and 2019

was pledged for another long-term loan from credit union of Baoding Shengde.

Short-term bank loans ”

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

and amortization of property, plant and equipment was $15,793,854 and $15,304,039 for the years ended December 31, 2020, and 2019,

respectively.

No Impairment loss was recorded for the years ended December 31, 2020, and 2019.

Financing with Sale-Leaseback

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

Ltd.(“TLCL”) on August 6, 2020, for a total financing proceeds in the amount of RMB 16 million (approximately

US$2.5 million).

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

(approximately US$2.5 million).

Concurrent with the sale of equipment, Hebei Tengsheng leases back the equipment sold to TLCL

for a lease term of three years.

At the end of the lease term, Hebei Tengsheng may pay a nominal purchase price of RMB 100

(approximately $15) to TLCL and buy back the Leased Equipment.

The Leased Equipment in amount of $2,349,452 was recorded as

right of use assets and the net present value of the minimum lease payments was recorded as lease liability and calculated

with TLCL’s implicit interest rate of15.6% per annum and stated at $567,099 at the inception of the lease on August 17,

Hebei Tengsheng made payments due according

to the schedule.

As of December 31, 2020, the balance of Leased Equipment net of amortization was $2,397,653.

The lease liability

was $536,959 and its current portion in the amount of $182,852 as of December 31, 2020.Amortization of the Leased Equipment was

$51,574 for the year ended December 31, 2020.

Total interest expense for the sale lease back arrangement was $28,083 for the year

ended December 31, 2020.

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

The deferred gain is amortized over

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

future minimum lease payments of the capital lease as of December 31, 2020 were as follows:

unearned discount

Current portion lease liability

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Loans Payable

Short-term bank loans

Industrial & Commercial Bank of China

United Commerical Bank (China) Limited

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

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

Total short-term bank loans

Industrial & Commercial Bank of China provided two loans, amount of $1,901,363 and $877,552 as of December 31, 2009 and $1,907,100 and $880,200 as of December 31, 2008, which are secured by certain manufacturing equipment of the Company.

The interest is payable monthly at a fixed rate of 6.372% and 5.841% per annum for year ended December 31, 2009 and 7.8% and 6.7% per annum for the year ended December 31, 2008.

These loans carried forward from the year ended December 31, 2008 have been renewed during 2009 and the entire principal is due and payable at maturity on January 20, 2010 and June 30, 2010, respectively.

The loan matured on January 20, 2010 was repaid on the due date.

Loan payable to Huaxia Bank was guaranteed by a third party guarantying company, Hebei Small-Medium Enterprise Credit Guarantee Service Center, with a guarantee fee of 2.4% of the outstanding balance.

The interest is payable monthly at 9.828% per annum.

The entire principal was due and payable at maturity on March 5, 2009, when the bank granted the Company a one-month grace period for negotiating interest rates and terms for renewing the loan.

The Company subsequently decided not to renew the Huaxia Bank loan and arranged for the guarantying company to provide the Company with a one-month bridge loan to pay off the bank loan in April 2009.

The guarantying company bridge loan carried interest at 0.933% per month.

On April 30, 2009, the Company made a payment in the amount of $1,266,557, including $21,307 of interest to settle the whole loan with the guaranting company.

As at December 31, 2008, the Company had short-term credit facility provided by the United Commercial Bank (China) Limited, included a revolving credit facility of $2,000,000 and a non-revolving import loan facility of $816,976.

The credit facility is secured by the Company’s building, land use rights, and equipment and is personally guaranteed by the Company’s Chief Executive Officer and the Director.

The short-term credit facility was expired on January 23, 2009, which was extended to June 30, 2009 via a Short-Term Credit Facility Extension Agreement.

The credit facility did expire on June 30, 2009 and as at December 31, 2009, the Company has no other credit facility with the bank.

Interest is paid monthly with a floating rate indexed to 5% plus the three-month LIBOR as of December 31, 2009 and 2008.

On August 20, 2009, the Company and United Commercial Bank (China) Limited entered into a Short-Term Loan Deferred Payment Agreement (the “Deferred Payment Agreement.”) Under the Deferred Payment Agreement, the Company agrees to repay the principal amount according to a payment schedule during the period from August 31, 2009 to June 30, 2010.

The details of the payment schedule is as below.

Repayment Date

August 31, 2009

September 15, 2009

September 30, 2009

October 31, 2009

November 30, 2009

ORIENT PAPER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

On December 20,

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

The working capital loan was secured by the Land use right of Dongfang Paper as collateral for the benefit of the

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

The loan was repaid on December 14, 2020.

On December 11,

2020, the Company entered into a working capital loan agreement with the ICBC, with a balance of $6,435,348 as of December

The working capital loan was secured by the Land use right of Dongfang Paper as collateral for the benefit of the

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

The loan will be due and repaid at various installments by

December 7, 2021.

January 31, 2010

February 28, 2010

March 31, 2010

April 30, 2010

June 30, 2010

Based on above repayment schedule, the installment of $300,000 should be repaid on December 31, 2009.

However, because the bank did not sent out the Notice of Payment on time, the installment was not repaid by the Company until after the year ended December 31, 2009.

As of December 31, 2009 and 2008, short-term borrowing comprised secured bank loans of $4,273,750 and $5,611,702 respectively, and unsecured bank loans of $nil and $1,246,950 respectively.

The secured loans were secured by the Company’s property, plant and equipment of $17,813,861 and $10,745,831, respectively.

The average short-term borrowing rates for the years ended December 31, 2009, and 2008, were approximately 6.21% and 7.93%, respectively.

The credit facility agreement includes certain covenants that require the Company to maintain (1) the equity to debt (including contingent liabilities) ratio at no less than 50%, and (2) its current ratio at no less than 100%.

The Company was in compliance with these covenants as of December 31, 2009.

Long-term loan from credit union

As of December 31, 2009 and 2008, loan payable to Rural Credit Cooperative of Xushui County, amounted $1,942,315 and $1,948,176 respectively.

The loan is guaranteed by an unrelated third party company.

The entire principal is due and payable at maturity on September 16, 2011.

Interest is paid monthly at the rate of 0.774% per month.

Future maturities of short term and long term loans payable were as follows as of December 31, 2009:

The total interest expenses for the short-term bank loans and long-term loan for the years ended December 31, 2009 and 2008 were $621,863 and $532,847, respectively.

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

of December 31, 2020, there were guaranteed short-term borrowings of $6,435,348 and unsecured bank loans of $nil.

As of December

31, 2019, there were guaranteed short-term borrowings of $6,163,814 and unsecured bank loans of $nil.

average short-term borrowing rates for the years ended December 31, 2020, and 2019 were approximately 4.79% and 4.93%, respectively.

loans from credit union

of December 31, 2020, and 2019, loans payable to Rural Credit Union of Xushui County, amounted to $9,594,017 and $8,973,367, respectively.

Rural Credit Union of Xushui District Loan 1

Rural Credit Union of Xushui District Loan 2

Rural Credit Union of Xushui District Loan 3

Rural Credit Union of Xushui District Loan 4

Current portion of long-term loans from credit union

Long-term loans from credit union

of Dec 31, 2020, the Company’s long-term debt repayments for the next five years were as follows:

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

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

The loan is guaranteed by an independent

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

On November 6, 2018, the loan was renewed

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

As of December

31, 2020, and 2019, total outstanding loan balance was $1,318,028 and $1,232,763, respectively, Out of the total outstanding loan

balance, current portion amounted were $214,563 and $143,345 as of December 31, 2020, and 2019, respectively, which are presented

as current liabilities in the consolidated balance sheet and the remaining balance of $1,103,465 and $1,089,418 are presented

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

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

On June 21, 2018, the loan

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

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

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

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

As of December 31, 2020, and 2019, the total outstanding loan balance was $3,831,476 and $3,583,613, respectively.

total outstanding loan balance, current portion amounted were $337,169 and $172,013 as of December 31, 2020, and 2019 respectively,

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

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

On April 17, 2019, the Company entered

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

installments from August 21, 2019 to April 16, 2021.

The loan is secured by Hebei Tengsheng with its land use right as collateral

for the benefit of the credit union.

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

As of December

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

Out of the total outstanding

loan balance, current portion amounted were $2,452,145 and $1,146,756 as of December 31, 2020 and 2019, respectively, which are

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

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

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

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

The loan is secured by Hebei Tengsheng

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

Interest payment is due monthly and bears a fixed rate

of 7.56% per annum.

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

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

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

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

respectively.

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

and $831,732, respectively.

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Related Party Transactions

Zhenyong Liu is the director, principal stockholder and chief executive officer of the Company.

He loaned money to HBOP for working capital purposes over a period of time.

On July 24, 2008, the term of the loan changed from payable on demand to a period of three years, maturing on July 23, 2011, with no interest bearing.

On August 31, 2009, Orient Paper, HBOP, and Mr.

Liu entered into a tri-party Debt Assignment and Assumption Agreement, under which Orient Paper agreed to assume the loan of $4,000,000 due from HBOP to Mr.

Concurrently, Orient Paper issued 1,204,340 shares of restricted common stock to Mr.

Liu at the market price of $3.32132 per share.

As of December 31, 2009 and 2008, net amount due to Mr.

Liu were $2,136,242 and $6,157,104, respectively.

On December 31, 2009, a new loan agreement was entered into between Mr.

Liu and HBOP to replace the prior loan agreement.

Under the new agreement, the loan of Mr.

Liu is interest bearing and the interest rate is determined by reference to the People's Bank of China, starting from January 1, 2010, and the balance is wholly repayable on December 31, 2012.

ORIENT PAPER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

On August 1 and August 5, 2008, two members of the Board of Directors of HBOP loaned money to the Company for working capital purposes.

The amount owed bears interest with reference to the borrowing rate offered by the People's Bank of China and is due on July 31 and August 4, respectively, 2011.

As of December 31, 2009 and 2008, the loan amount is $1,974,492 and $1,980,450, respectively, to HBOP.

The average interest rate for both the year ended December 31, 2009 and 2008 was 7.56% per annum.

Interest expenses paid to the two directors were $106,565 and $61,616 for the year ended December 31, 2009 and 2008, respectively.

See Note (13) Subsequent Events for the repayment of both HBOP Director loans in August 2011.

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

January 1, 2013, Dongfang Paper and Mr.

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

extended the maturity date further to December 31, 2015.

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

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

Approximately $392,855 and $367,441 of interest were outstanding to

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

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

December 10, 2014, Mr.

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

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

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

During the year of 2016,

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

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

In February 2018, the company paid off

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

As of December 31, 2020, and 2019, approximately $45,978 and $43,003

of interest were outstanding to Mr.

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

current liabilities in the consolidated balance sheet.

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

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

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

The advances or funding under the agreement are due three years

from the date each amount is funded.

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

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

On July 13, 2015, an unsecured amount of $4,324,636

was drawn from the facility.

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

In February 2018,

the company repaid $1,507,432 to Mr.

Zhenyong Liu.

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

Zhenyong Liu agreed

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

On November 23, 2018, the company

repaid $3,768,579 to Mr.

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

In December 2019, the company paid off the remaining

balance, together with interest of 94,636.

As of December 31, 2020, and 2019, the outstanding interest was $210,635 and $197,009,

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

balance sheet.

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

Zhenyong Liu were $nil.

The interest expense incurred for such

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

The accrued interest owe

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

payables and accrued liabilities.

of December 31, 2020, and 2019, amount due to shareholder are $727,433 and $483,433, respectively, which represents funds from

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

The amount is due on demand with interest free.

of Headquarters Compound Real Properties to a Related Party

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

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

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

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

respectively.

Sales of the LUR and the Industrial Buildings were completed in year 2013.

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

for its original use for a term of up to three years, with an annual rental payment of approximately $145,052 (RMB1,000,000).

The lease agreement expired in August 2016.

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

with Hebei Fangsheng, who agreed to extend the lease term for another four years in total, with the same rental payment as original

lease agreement.

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Other payables and accrued liabilities

Other payables and accrued liabilities consist of the following:

payables and accrued liabilities consist of the following:

Accrued electricity

Value-added tax payable

(9) Common Stock

Issuance of shares

In April 2008, the Company issued to three consultants 1,250,000 shares of common stock for services rendered during the year 2008 under the 2008 Equity Incentive Plan (“Equity Incentive Plan”).

The shares issued to the three consultants were measured at the market price of the grant date.

As at December 31, 2009 and 2008, there were no shares available for future grants under the Equity Incentive Plan.

On May 1, 2009, the Company appointed Mr.

Yen as the Chief Financial Officer.

As part of the compensation, the Company should issue 5,000 shares of common stock to Mr.

Yen, within the initial one-year term of employment, with 1,250 shares vesting quarterly starting May 10, 2009.

As of December 31, 2009, the Company issued 3,750 shares, which has been charged to earnings with corresponding credit to equity at the market price of the vested date.

On June 24, 2009, the Company entered into an escrow agreement with Xushui District Dongfang Trading Limited Company, Sichenzia Ross Friedman Ference LLP (“SRFF”) and Barron Partner, LP to establish an escrow fund of $500,000 for the purposes of paying for its U.S.

legal, audit and investment relations services costs.

In connection with the first payment of past legal fees out of the escrow fund, the Company’s Board of Directors resolved to issue 15,000 shares of common stock to SRFF as part of the payment for certain past legal services.

The shares were valued at the market price of the service completion date and recorded under general and administrative expenses with corresponding credit to equity account.

As of December 31, 2009, the escrow fund balance was $29,105 which was recorded as Restricted Cash.

On August 15, 2009, the Company entered into a Consulting Agreement with Chinamerica Holdings, Ltd.

(“CA”) to appoint CA as an exclusive consultant to the Company for providing various advisory services relating to capitalization strategy, upgrading the Company’s stock listing and financial communication and assisting the Company in a $5,000,000 private placement transaction that was closed on October 7, 2009.

In consideration of the services and upon completion of the private placement, the Company agreed to issue 282,294 shares of common stock to CA.

The Board of Directors passed a resolution on November 12, 2009 to issue these shares, which were measured at the service completion date.

The management assessed that 80% (or 225,835 shares) of the total value should be allocated to the cost of issuing stock with respect to the private placement and the other 20% (or 56,459 shares) related value was allocated to other consulting services.

The cost related to the consultancy service was charged to earnings with corresponding credit to equity while the cost in connection to the private placement was considered as a reduction of the proceeds from the private placement and debited to equity account directly with corresponding credit entry to the equity account for the same amount.

As mentioned under Related Party Transactions, on August 31, 2009 Orient Paper, HBOP, and Mr.

Liu entered into a tri-party Debt Assignment and Assumption Agreement, under which Orient Paper issued 1,204,340 shares of restricted common stock to Mr.

Liu at $3.32132 per share, market price of the agreement date.

ORIENT PAPER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

On October 7, 2009, the Company entered into a Securities Purchase Agreement with Access America Fund, LP, Renaissance US Growth Investment Trust Plc, RENN Global Entrepreneurs Funds, Inc., Premier RENN Entrepreneurial Fund Limited, Pope Investments II, LLC and Steve Mazur (collectively, the “Buyers”) to sell to the Buyers 2,083,333 shares of the Company’s common stock for an aggregate purchase price of $5,000,000 (the “Private Placement”).

The Private Placement was closed on October 7, 2009.

As of December 31, 2009, the proceeds has been received and recorded in equity account.

In connection with the Private Placement, the Company entered into the Registration Rights Agreement with the Buyers and agreed to file with the SEC a registration statement on Form S-1 Registration Rights Agreement covering the resale of all of the 2,083,333 shares of common stock sold to the Buyers within 90 days of the closing of the Financing.

If a registration statement is not filed by the prescribed date, the Company will be subject to liquidated damages provisions as stated in the Registration Rights Agreement.

As stated under the Subsequent Events, on March 15, 2010, the Company and the Buyers entered into a Waiver Agreement for the Buyers to temporarily waive their registration rights and the liquidated damages, subject to certain conditions.

Please refer to Subsequent Events for details.

On October 28, 2009, the Company appointed Mr.

Drew Bernstein, Mr.

Wenbing Christopher Wang and Ms.

Zhaofang Wang as independent directors.

As part of the compensation, the Company issued 7,500 shares and 4,000 shares of common stocks to Mr.

Bernstein and Mr.

Wang, respectively.

These shares were valued at the market price of the grant date.

The cost of the shares issued has been recorded as general and administrative expenses with corresponding credit to equity account.

Reverse Stock Split

On September 21, 2009, the Board of Directors and majority shareholders approved an amendment to the Articles of Incorporation of the Company to effect a one-for-four (1:4) reverse split of the issued and outstanding shares of the Company’s common stock without changing the par value of the stock (“Reverse Split”).

At the time of the Reverse Split, holders of outstanding shares of common stock received one share of post-Reverse Split common stock for each four shares of pre-Reverse Split common stock held as of the close of business on the date the Amendment is filed.

No fractional shares of common stock will be issued in connection with the Reverse Split.

All fractional share amounts resulting from the Reverse Split will be rounded up to the next whole new share.

In connection with the Reverse Split, the Company’s Board of Directors, in its sole discretion, may provide special treatment to shareholders to preserve round lot holders (i.e., holders owning at least 100 shares) after the Reverse Split.

The Reverse Split became effective on November 5, 2009.

All information in the accompanying consolidated financial statements and related notes regarding number of shares, the share prices and basic and fully diluted earning per share prior to September 21, 2009 have been retroactively restated to account for the change.

Issuance of warrants

On July 23, 2009, the Company entered into an agreement with CCG Investor Relations Partners LLC (“CCG”), who should provide service related to investor relationship activities for the Company for one year starting from July 24, 2009.

In consideration for CCG’s service and a cash payment of $7,000 per month, at the same date, the Company issued a warrant to CCG to purchase 25,000 shares of the Company’s common stock at the price of $4.00 per share.

The warrant is exercisable for two years after grant and has a “cashless” exercise provision and a piggyback registration right.

The value of the warrant issued for the service should be measured at the service completion date according to ASC Topic 505-50 (formerly EITF 96-18).

As the service has not completed as of December 31, 2009, the fair value of the warrants was estimated using the Black-Scholes option pricing model with the following assumptions:

Accrued interest to a related party

Payable for purchase of equipment

Accrued commission to salesmen

Accrued bank loan interest

Derivative Liabilities

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

Derivatives and Hedging, and hedging, ”

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

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

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

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

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

to calculate the fair value as of December 31, 2020.

The Black-Scholes model requires six basic data inputs:

the exercise or strike

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

the future, and the dividend rate.

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

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

The following weighted-average assumptions

were used in the December 31, 2020:

Expected term

Expected average volatility

Expected dividend yield

Risk-free interest rate

Expected life (years)

Fair value per share of the warrant granted during the year

From above estimate, the total fair value for the warrant was approximately $230,190 which has been credited to additional paid-in capital and amortized over the servicing period of 1 year since July 24, 2009.

For the year ended December 31, 2009, the company charged $115,095 to earnings and the remaining cost of the warrant issued was recorded as prepaid expenses under current assets.

The fair value of the warrant will be measured at every quarter end.

ORIENT PAPER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

During the year ended December 31, 2009, no warrant has been exercised and as of December 31, 2009, the outstanding warrant was exercisable for 25,000 shares at a price of $4.00 per share.

See Subsequent Event for details of CCG’s exercise of all warrants on January 26, 2010.

Make Good Securities Escrow Agreement

In connection to the Private Placement carried out on 7 October 2009, the Company entered into a Make Good Securities Escrow Agreement with the Buyers of the Private Placement and Mr.

Liu, the Company’s Chief Executive Officer and a major shareholder.

As an inducement for the Buyers to enter and consummate the Private Placement, Mr.

Liu agreed to place 750,000 shares of common stock (the “Escrow Shares”) into escrow for the benefit of the Buyers in the event the Company fails to achieve the following financial performance thresholds for the 12-month periods ended December 31, 2009 (“2009”) and December 31, 2010 (“2010”):

The 2009 Performance Threshold shall equal or exceed the Company’s 2009 Net Income (as defined in accordance with the United States GAAP and subject to carve-outs of certain loss or expense) of $10,000,000 and the 2010 Performance Threshold shall equal or exceed the Company’s 2010 Net Income (as defined in accordance with the United States GAAP and subject to carve-outs of certain loss or expense) of $18,000,000.

Pursuant to the agreement, no 2009 or 2010 escrow shares should be transferred to any Buyer in the event the Company fails to achieve the 2009 or 2010 Performance Threshold by less than 10%.

The number of escrow shares to be transferred to Buyer shall be equivalent to the percentage by which the Company missed the 2009 or 2010 Performance Threshold.

For example, if the Company were to miss the 2009 Performance Threshold by 15%, 112,500 shares of common stock should be transferred to the Buyers.

During the period that the shares are held under escrow (the “Period”), Mr.

Liu, as the original shareholder of the escrow shares retains all rights of ownership, including voting rights and the right to receive any dividends that may be declared during the Period.

Liu’s right to receive the shares from the escrow is not dependent upon his employment.

As of December 31, 2009, the Company has achieved the financial performance threshold for 2009.

See Note (13) Subsequent Events for details of the final settlement of the Company’s 2010 Performance Threshold with the Buyers.

0.17% - 0.24%

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the changes in the derivative liabilities during the year ended December 31, 2020:

Fair Value Measurements Using Significant Observable Inputs (Level 3)

Balance at December 31, 2019

Addition of new derivatives recognized as warrant

Addition of new derivatives recognized as loss on derivatives

Change in fair value of derivative liability

Balance at December 31, 2020

following table summarizes the loss on derivative liability included in the income statement for the year ended December 31, 2020

and 2019, respectively.

Day one loss due to derivative liabilities as warrant

Loss on change in fair value of derivative liability

of common stock to investors

On August 27, 2014, the Company issued 1,562,500

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

warrant was sold at a price of $1.60.

On April 29, 2020, the Company and certain institutional

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

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

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

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

The purchase price for each share of Common Stock and the

corresponding warrant was $0.7425.

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

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

January 12, 2016, the Company granted an aggregate of 1,133,916 shares of common stock under its compensatory incentive plans

to nine officers, directors and employees of and a consultant when the stock was at $1.25 per share, as compensation for their

services in the past years, of which 168,416 shares of common stock were granted under the 2012 Incentive Stock Plan and 965,500

shares were granted under the 2015 Omnibus Equity Incentive.

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

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

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

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

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

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

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

Total fair value of the

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

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

of common stock to a consultant

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

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

to January 2, 2021.

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

Total fair value of the shares

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

of common stock to a consultant

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

the aggregate of 21,000 shares of common stock for investor relations consulting service rendered from November 2, 2020 to November

21,000 shares of common stock were issued to this consultant on November 30, 2020.

Total fair value of the shares of

common stock issued was calculated at $14,700 at $0.7 per share.

to the 2020 Purchase Agreement, the Company agreed to sell to such investors an aggregate of 4,400,000 shares of common stock

and warrants to purchase up to 4,400,000 shares of the Common Stock in a concurrent private placement.

The exercise price of the

warrant is $0.7425 per share.

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

and six months from the date of issuance till November 4, 2025.

The Company classified warrant as liabilities and accounted for

the issuance of the Warrants as a derivative.

summary of stock warrant activities is as below:

Outstanding and exercisable at beginning of the period

Issued during the period

Exercised during the period

Cancelled or expired during the period

Outstanding and exercisable at end of the period

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

following table summarizes information relating to outstanding and exercisable warrants as of December 31, 2020.

intrinsic value is the sum of the amounts by which the quoted market price of the Company’s stock exceeded the exercise

price of the warrants at December 31, 2020 for those warrants for which the quoted market price was in excess of the exercise

price (“in-the-money”

There is no intrinsic value of the warrants as of December 31, 2020.

Earnings Per Share

As of December 31, 2009 and 2008, basic and diluted net income per share calculated in accordance are reconciled as follows:

Basic income per share

Net Income for the year – numerator

the years ended December 31, 2020, and 2019, basic and diluted net income per share are calculated as follows:

Year Ended December 31,

Basic (loss) income per share

Net (loss) income for the year - numerator

$ (5,554,002 )

Weighted average common stock outstanding - denominator

Net income per share

Diluted income per share

Net Income for the year – numerator

Net (loss) income per share

Diluted (loss) income per share

Net (loss) income for the year - numerator

$ (5,554,002 )

Weighted average common stock outstanding - denominator

1 unchanged sentence

Weighted average common stock outstanding - denominator

Diluted income per share

ORIENT PAPER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

(11) Income Taxes

United States

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

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

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

Pursuant to the PRC New Enterprise Income Tax Law, Enterprise Income Tax is generally imposed at a statutory rate of 25%.

The provision for income taxes for the year ended December 31, 2009 and 2008 was as follows:

Diluted (loss) income per share

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

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

federal tax and state

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

On December 22, 2017, the U.S.

enacted the Tax Cuts and Jobs Act (the

“2017 TCJA Act”), which significantly changed U.S.

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

statutory federal income tax rate from the highest rate of 35% to 21% effective January 1, 2018, while also imposing a deemed

repatriation tax on deferred foreign income which requires companies to pay a one-time transition tax on previously

unremitted earnings of non-U.S.

subsidiaries that were previously tax deferred and creates new taxes on certain foreign

sourced earnings.

The SEC staff issued Staff Accounting Bulletin (SAB) 118, which provides guidance on accounting for

enactment effects of the 2017 TCJA.

SAB 118 provides a measurement period of up to one year from the 2017 TCJA’s

enactment date for companies to complete their accounting under ASC 740.

In accordance with SAB 118, to the extent that a

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

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

If a company cannot determine a

provisional estimate to be included in its financial statements, it should continue to apply ASC 740 on the basis of the

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

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

Company’s non-U.S.

subsidiaries.

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

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

paid on such earnings.

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

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

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

However, the Company is continuing to gather additional

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

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

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

The 2017 TCJA’s transition tax is payable

over eight years beginning in 2018.

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

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

Pursuant to the PRC New Enterprise

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

provisions for income taxes for the years ended December 31, 2020, and 2019 were as follows:

Provision for Income Taxes

Current Tax Provision U.S.

Current Tax Provision PRC

Deferred Tax Provision

Total Provision for Income Taxes

Orient Paper, Inc.

was incorporated in the United States and has incurred aggregate net operating losses of approximately $ 1,235,962 and $504,412 for income tax purposes for the year ended December 31, 2009 and 2008.

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

These carry forwards will expire, if not utilized, through 2028 and 2027.

Management believes that the realization of the benefits from these losses, which generally would generate a deferred tax asset if it can be expected to be utilized in the future, appears not more than likely due to the Company’s limited operating history and continuing losses for United States income tax purposes.

Accordingly, the Company has provided a 100% valuation allowance on the deferred tax asset benefit to reduce the asset to zero.

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

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

Deferred tax assets - current

Allowance for doubtful accounts

Deferred tax assets - non current

Net Operating Loss Carryover for U.S.

income tax purposes

Deferred Tax Provision PRC

Total Provision for (Deferred tax benefit)/ Income Taxes

$ (1,101,858 )

In addition to the reversible future PRC income tax

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

Company was incorporated in the United States and incurred net operating losses of approximately $2,508,797 and $0 for U.S.

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

The net operating loss carried forward may be available to reduce

future years’

taxable income.

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

December 31, 2020, management believed that the realization of all the U.S.

income tax benefits from these losses, which generally would

generate a deferred tax asset if it can be expected to be utilized in the future, appears not more than likely due to the Company’s

limited operating history and continuing losses for United States income tax purposes.

Accordingly, As of December 31, 2020, the Company

provided a 100% valuation allowance on the U.S.

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

for the PRC income tax purposes.

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

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

Deferred tax assets (liabilities)

Depreciation and amortization of property, plant and equipment

Impairment of property, plant and equipment

Miscellaneous

Net operating loss carryover of PRC company

Total deferred tax assets

Valuation allowance

Net Operating Loss Carryover for U.S.

income tax purposes

The following table reconciles the U.S.

statutory rates to the Company's effective tax rate as:

statutory rate

Foreign income not recognized in the U.S.

PRC statutory income tax rate

Expenses not deductible for PRC tax purposes

Total deferred tax assets, net

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

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

PRC Statutory rate

Effect of different tax jurisdiction

Effect of expenses not deductible for PRC tax purposes

(Over) Under-provision in previous year

Change in valuation allowance

Effective income tax rate

tax purposes, the Company has cumulative undistributed earnings of foreign subsidiaries of approximately $ 27,927,894 and $12,307,038 as of December 31, 2009 and 2008, respectively, which are included in consolidated retained earnings and will continue to be indefinitely reinvested in international operations.

Accordingly, no provision has been made for U.S.

deferred taxes related to future repatriation of these earnings, nor is it practicable to estimate the amount of income taxes that would have to be provided if we concluded that such earnings will be remitted to the U.S.

in the future.

ORIENT PAPER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

As mentioned under Significant Accounting Policies, the Company has adopted ASC Topic 740-10-05, Income Taxes (former FIN 48, Accounting for Uncertainty in Income Taxes) .

To date, the adoption of this interpretation has not impacted the Company’s financial condition, results of operations, or cash flows.

The Company performed self-assessment and the Company’s liability for income taxes includes the liability for unrecognized tax benefits, interest and penalties which relate to tax years still subject to review by taxing authorities.

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

The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes.

Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period.

Until December 31, 2009, the management considered that the Company had no uncertain tax positions affecting its consolidated financial position and results of operations or cash flows, and will continue to evaluate for the uncertain position in future.

There are no estimated interest costs and penalties provided in the Company’s consolidated financial statements for the years ended December 31, 2009 and 2008, respectively.

The Company’s uncertain tax positions are related to tax years that remain subject to examination by the relevant tax authorities and the major one is the China Tax Authority.

The open tax year for examination in PRC is 5 years.

During the years ended December 31, 2020, and 2019, the effective

income tax rate was estimated by the Company to be 19.4% and 48.4%, respectively.

As of December 31, 2017, except for the one-time transition

tax under the 2017 TCJA which imposes a U.S.

tax liability on all unrepatriated foreign E&Ps, the Company does not believe that its

future dividend policy and the available U.S.

tax deductions and net operating losses will cause the Company to recognize any other substantial

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

Nor does it believe that the amount of the repatriation

of the VIE’s earnings and profits for purposes of paying dividends will change the Company’s position that its PRC subsidiary

Baoding Shengde and the VIE, Dongfang Paper are considered or are expected to be indefinitely reinvested offshore to support our future

capacity expansion.

If these earnings are repatriated to the U.S.

resulting in U.S.

taxable income in the future, or if it is determined

that such earnings are to be remitted in the foreseeable future, additional tax provisions would be required.

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

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

financial position, results of operations, or cash flows.

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

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

subject to review by taxing authorities.

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

in the PRC is usually 5 years.

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

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

Any such adjustment could be material to the

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

for the given period.

As of December 31, 2020and 2019, management considered that the Company had no uncertain tax positions affecting

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

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

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

The Company’s tax positions related to open tax years are subject

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

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Incentive Plans

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

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

(the “2011 ISP”) as previously adopted by the Board of Directors on July 5, 2011.

Under the 2011 ISP, the Company

may grant an aggregate of 375,000 shares of the Company’s common stock to the Company’s directors, officers, employees

or consultants.

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

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

as compensation for their services in the past years.

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

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

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

Under the 2012 ISP, the Company

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

or consultants.

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

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

(b) determine in good faith the fair

market value of the stock covered by any grant;

restrictions, terms and conditions to be included in such grants;

and (d) make all other determinations necessary or advisable

for the 2012 ISP’s administration.

On December 31, 2013, the Compensation Committee granted restricted common shares of

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

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

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

Incentive Stock Plan

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

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

Under the 2015 ISP, the Company

may grant an aggregate of 1,500,000 shares of the Company’s common stock to the directors, officers, employees and/or consultants

of the Company and its subsidiaries.

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

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

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

Total fair value of the stock

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

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

and employees of the Company, which were granted under the 2015 ISP.

Total fair value of the shares of common stock granted was

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

Incentive Stock Plan

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

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

(the “2019 ISP”).

Under the 2019 ISP, the Company

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

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

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

under the 2019 ISP.

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

at $0.60 per share.

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Commitments and Contingencies

Operating Lease

Orient Paper leases 32.95 acres of land from a local government through a real estate lease with a 30-year term, which expires on December 31, 2031.

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

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

The lease requires an annual rental payment of approximately $17,406

(RMB120,000).

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

Future minimum lease payments are as follows:

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

Fangsheng agrees to lease the Industrial Buildings back to the Company at an annual rental of $145,052 (RMB1,000,000), for a total

term of up to five years.

minimum lease payments are as follows:

Total operating lease payments

Environmental Remediation

In accordance with the real estate lease dated January 2, 2002, HBOP will be obligated to return the land to its condition prior to the lease.

As such, Orient Paper should accrue the cost estimated to return the land to its prior condition over the 30-year life of the lease.

On March 15, 2010, an amendment to the original January 2, 2002 lease was signed and removed the obligation of HBOP to return the land to its condition prior to the lease.

The management of the Company thus considered that HBOP bear no liabilities under such real estate lease as of December 31, 2009 and 2008.

ORIENT PAPER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

(13) Subsequent Events

Waiver of Registration Rights and Suspension of Liquidated Damages

As of January 6, 2010, the Company has been in breach of certain obligations under the October 7, 2009 Registration Rights Agreement and was subject to the liquidated damages provisions under the same agreement.

Under the Registration Rights Agreement, which was entered into by the Company and the Buyers of the October 7, 2009 private placement, the Company is obligated to file a registration statement to register the Buyers’ shares within 90 days of October 7, 2009.

Nevertheless, the Company has decided to postpone the registration of the Buyers’ shares until after the closing of the next financing transaction.

On March 15, 2010, the Company and the Buyers entered into a Waiver Agreement for the Buyers to waive their registration rights and the liquidated damages, subject to the conditions that Buyers will be titled to exercise all their rights and remedies under Securities Purchase Agreement and Registration Rights Agreement after fourteen days of completion of the secondary public offering or in the event the Company issues more than 3,000,000 shares of common stock at an offering price per share of less than $12.

Exercise of Warrants

On January 26, 2010, CCG Investors Relations Partners LLC, holder of some 25,000 units of warrants issued by the Company on July 23, 2009, exercised all of their cashless warrants and received 16,597 shares of common stock of the Company.

April 2010 Public Offering

On March 31, 2010, the Company entered into an Underwriting Agreement with Roth Capital Partners, LLC (the “Underwriter”), under which the Company agreed to sell the Underwriter an aggregate of 3,000,000 shares of common stock with an option for the Underwriter to purchase an additional 450,000 shares to cover its over-allotment within 45 days of the date of the Underwriting Agreement.

All of these shares, which are offered to the public at $8.25 per share by the Underwriter, are issued and sold to the Underwriter at $7.7962 per share net of discounts and commissions.

The first closing for the sale of 3,000,000 shares was closed on April 6, 2010.

The Underwriter exercised its option for the purchase of the additional 450,000 shares on April 14, 2010.

Purchase of Major Equipment

On April 9, 2010, the Company entered into a definitive equipment purchase agreement (the “Equipment Purchase Agreement") with a paper machine manufacturer to purchase a new corrugating medium paper production equipment with an annual production capacity of 360,000 tons for RMB 190.0 million (approximately $27.8 million).

The construction of the new corrugating medium paper production equipment, along with other auxiliary facilities, is expected to be completed in the third quarter of 2011.

Make Good Supplement Agreement

The Company achieved the financial performance threshold for 2009 under the October 7, 2009 Make Good Agreement.

For 2010, the Company’s net income determined in accordance with the US GAAP for the year 12-month period ended December 31, 2010 was $15,551,536, which failed the 2010 Performance Threshold of $18 million by more than 10%.

However, the Buyers and the Company have agreed to reduce the 102,019 Escrow Shares that are otherwise transferable to the Buyers by 50% to 51,011 Escrow Shares pursuant to a carve-out term under Article 1.6 (vii) of the Make Good Securities Escrow Agreement for items that are “whatsoever beyond the Company’s reasonable control,” including part of the $1,041,452 of 2010 legal and professional fees related to (1) the internal independent investigation conducted by the Company’s Audit Committee during 2010 in response to certain allegations against the Company and its financial positions and operations, and (2) defending the shareholder class action lawsuit filed on August 6, 2010.

The delivery of the transferable escrowed shares was made on June 30, 2011 and had no effect on the Company’s financial statements.

Repayment of Related Party Loans

On August 1 and August 4, 2011, the Company paid off principal balances with accrued interest of two loans owed to two members of the Board of Directors of HBOP, who decided not to renew their loan with the Company upon maturity of these loans.

The principal payoff in the amounts of RMB 6,000,000 Yuan and RMB 7,500,000 Yuan were approximately $933,126 and $1,166,407 based on the exchange rates on August 1 and August 4, 2011, respectively.

Pending Litigations

On August 20, 2010, the Company was served notice of a stockholder class action lawsuit filed on August 6, 2010 in the U.S.

District Court for the Central District of California against the Company, certain current and former officers and directors of the Company, and Roth Capital Partners, LLP.

The complaint in the lawsuit, Mark Henning v.

Orient Paper et al., CV-10-5887 RSWL (AJWx), alleges, among other claims, that the Company issued materially false and misleading statements and omitted to state material facts that rendered its affirmative statements misleading as they related to the Company’s financial performance, business prospects, and financial condition, and that the defendants failed to prevent such statements from being issued or corrected.

The complaint seeks, among other relief, compensatory damages and plaintiff’s counsel’s fees and experts’ fees.

Henning purports to sue on his own behalf and on behalf of a class consisting of the Company’s stockholders (other than the defendants and their affiliates).

One group of three shareholders with a total alleged loss of approximately $150,000 has filed a motion to be appointed as lead plaintiff and has been so appointed by the court.

The Company and the defendant officers and directors have retained the law firm DLA Piper US LLP to represent them in connection with the lawsuit.

The Company believes that the lawsuit has no merit and intends to mount a vigorous defense.

The plaintiffs filed an amended complaint on January 28, 2011, and the Company filed a motion to dismiss with the court on March 14, 2011.

The plaintiffs subsequently filed their opposition to the Company’s motion to dismiss on April 28, 2011.

On July 25, 2011 the court denied the Company’s motion to dismiss, thus allowing the litigation to proceed.

Nevertheless, at this stage of the proceedings, management cannot opine that a favorable outcome for the company is probable or that an unfavorable outcome to the company is remote.

While certain legal defense costs may be later reimbursed by the Company’s insurance carrier, no reasonable estimate of any impact of the outcome of the litigation or related legal fees on the financial statements can be made as of date of this statement.

On April 1, 2011 the Company was served a summon for a complaint filed by Tribank Capital Investments, Inc.

(“Tribank”) on March 30, 2011 in the Superior Court of the State of California for the County of Los Angeles against the Company and its Chairman and CEO Mr.

Zhenyong Liu (the “Tribank Matter”).

By filing the complaint, Tribank alleges, among other claims, that the Company breached the Non-Circumvention Agreement dated October 29, 2008 between the Company and Tribank (the “Agreement”), and that the Company was unjustly enriched as a result of breaching the Agreement.

The complaint seeks, among other relief, compensatory damages and plaintiff’s counsel’s fees.

On April 29, 2011 the Company filed a Notice of Removal to remove the jurisdiction of the case from the state court of California to the Federal District Court for the District of Central California and filed a motion to dismiss the lawsuit on May 6, 2011.

On July 18, 2011, United States District Court Judge Manual Real granted Orient Paper motion to dismiss the complaint in its entirety, finding that venue is improper because the contract that forms the basis of the parties' relationship contains a valid and enforceable forum selection clause providing that the Hong Kong Special Administrative Region of China is the exclusive forum for resolution of disputes.

Tribank filed a Notice of Appeal on August 5, 2011.

The Company continues to believe that the action is without merit, and will vigorously defend any further litigation brought by Plaintiff.

(14) Concentration and Major Suppliers

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

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

The Company does not believe that it is subject to any material risk of supplier concentration.

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

of December 31, 2020, the Company has entered into several contracts for the purchase of paper machine of a new tissue paper production

line PM10 and the improvement of Industrial Buildings.

Total outstanding commitments under these contracts were $4,570,331 and

$1,101,989 as of December 31, 2020 and 2019, respectively.

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

On June 25, 2019, Dongfang Paper entered

into an acquisition agreement with shareholder of Hebei Tengsheng Paper Co., Ltd.

(“Hebei Tengsheng”), a limited liability

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

The consideration for

the acquisition is RMB320 million (approximately $49 million), of which $20 million was paid by the Company, and the balance consideration

of $29 million is payable by December 31, 2021.

and Indemnities

Company agreed with Baoding Huanrun Trading Co., a major supplier of raw materials, to guarantee certain obligations of this third

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

to $4,751,031 (RMB31,000,000) and $4,443,680 (RMB31,000,000), respectively, that matured at various times in 2018-2023.

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

Segment Reporting

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

operating segments:

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

produces digital photo paper.

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

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

Administrative functions such as finance, treasury,

and information systems are centralized.

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

between the operating segments based on gross revenue generated.

The operating segments do share facilities in Xushui County,

Baoding City, Hebei Province, China.

All sales were sold to customers located in the PRC.

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

financial information for the two reportable segments is as follows:

December 31, 2020

Not Attributable

Elimination of

Enterprise-wide,

Inter-segment

Depreciation and amortization

Interest income

Interest expense

Income tax expense(benefit)

Net income (loss)

December 31, 2019

Not Attributable

Elimination of

Enterprise-wide,

Inter-segment

$ 113,072,638

$ 117,614,886

Depreciation and amortization

Loss from impairment and disposal of

property, plant and equipment

Interest income

Interest expense

Income tax expense(benefit)

Net income (loss)

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Concentration and Major Customers and Suppliers

the years ended December 31, 2020, and 2019, the Company had no single customer contributed over 10% of total sales.

the year ended December 31, 2020, the Company had two major suppliers that accounted for 72% and 12% of total purchases by the

the year ended December 31, 2019, the Company had two major suppliers that accounted for 74% and 12% of total purchases by the

Concentration of Credit Risk

Financial instruments which the Company is potentially subject to concentrations of credit risk consist principally of cash.

The Company places its temporary cash investments in reputable financial institutions in the PRC and the United States.

Although it is generally understood that the PRC central government stands behind all of the banks in China in the event of bank failure, there is no deposit insurance system in China that is similar to the protection provided by the Federal Deposit Insurance Corporation (FDIC) of the United States.

The Company’s U.S.

bank accounts are all covered by the FDIC insurance and did not carry any balance exceeding the maximum coverage of $250,000 as of December 31, 2009.

instruments for which the Company is potentially subject to concentration of credit risk consist principally of cash.

places its cash in reputable financial institutions in the PRC and the United States.

Although it is generally understood that

the PRC central government stands behind all of the banks in China in the event of bank failure, there is no deposit insurance

system in China that is similar to the protection provided by the Federal Deposit Insurance Corporation (“FDIC”) of

the United States as of December 31, 2018 and December 31, 2017.

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

was effective in the PRC that the maximum protection would be up to RMB500,000 (US$76,630) per depositor per insured financial

intuition, including both principal and interest.

For the cash placed in financial institutions in the United States, the Company’s

bank accounts are all fully covered by the FDIC insurance as of December 31, 2020, and 2019, while for the cash placed in

financial institutions in the PRC, the balances exceeding the maximum coverage of RMB500,000 amounted to RMB25,322,558 (US$3,880,911)

as of December 31, 2020.

Risks and Uncertainties

Orient Paper is subject to substantial risks from, among other things, intense competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, foreign currency exchange rates, and operating in the PRC under its various laws and restrictions.

Tech Packaging is subject to substantial risks from, among other things, intense competition associated with the industry in general,

other risks associated with financing, liquidity requirements, rapidly changing customer requirements, foreign currency exchange

rates, and operating in the PRC under its various laws and restrictions.

Recent Accounting Pronouncements

On June 9, 2009, the FASB issued a new standards, SFAS No.

166, “Accounting for Transfers of Financial Assets – an amendment of FASB Statement No.

140”, which is codified as ASC Topic 810, to eliminate the concept of a qualifying special-purpose entity and clarifies existing GAAP as it relates to determining whether a transferor has surrendered control over transferred financial assets.

It also requires entities to provide more information about sales of securitized financial assets and similar transactions, particularly if the seller retains some risk with respect to the assets.

This standard is effective for financial asset transfers occurring after the beginning of an entity's first fiscal year that begins after November 15, 2009.

The Company does not expect the adoption of this pronouncement to have material impact on its consolidated financial statements.

In June 2009, the FASB issued a new standard, SFAS No.

167, “Amendment to FASB Interpretation No.46(R)” to improve financial reporting by companies involved with Variable Interest Entities (“VIEs”) and to provide additional disclosures about the involvement with VIEs and any significant changes in risk exposure due to that involvement.

ASC 810 amends FASB Interpretation No.46(R), “Variable Interest Entities” for determining whether an entity is a variable interest entity (“VIE”) and requires an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a VIE.

Under ASC 810, an enterprise has a controlling financial interest when it has a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE.

A reporting entity will be required to disclose how its involvement with a VIE affects the reporting entity's financial statements.

This standard shall be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009.

The Company does not expect the adoption of this pronouncement to have material impact on its consolidated financial statements.

ORIENT PAPER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

In December 2009, the FASB issued ASU No.

2009-17, “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (“ASU 2009-17”)”.

ASU 2009-17 amends the variable-interest entity guidance in FASB ASC 810-10-05-8 to clarify the accounting treatment for legal entities in which equity investors do not have sufficient equity at risk for the entity to finance its activities without financial support.

ASU 2009-17 shall be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009.

The Company is currently evaluating the effect of ASU 2009-17 on its consolidated financial statements and results of operation and is currently not yet in a position to determine such effects.

In January 2010, the FASB issued ASU No.

2010-02, “Consolidation (Topic 810) Accounting and Reporting for Decreases in Ownership of a Subsidiary — a Scope Clarification”.

This amendment affects entities that have previously adopted Topic 810-10 (formally SFAS 160).

It clarifies the decrease in ownership provisions of Subtopic 810-10 and removes the potential conflict between guidance in that Subtopic and asset de-recognition and gain or loss recognition guidance that may exist in other US GAAP.

An entity will be required to follow the amended guidance beginning in the period that it first adopts FAS 160 (now included in Subtopic 810-10).

For those entities that have already adopted FAS 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009.

The amendments should be applied retrospectively to the first period that an entity adopted FAS 160.

The Company does not expect the provision of ASU No.

2010-02 to have material impact on its consolidated financial statements.

In January 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements.

ASU 2010-06 amends ASC Topic 820 to require the following additional disclosures regarding fair value measurements:

(i) the amounts of transfers between Level 1 and Level 2 of the fair value hierarchy;

(ii) reasons for any transfers in or out of Level 3 of the fair value hierarchy and (iii) the inclusion of information about purchases, sales, issuances and settlements in the reconciliation of recurring Level 3 measurements.

ASU 2010-06 also amends ASC Topic 820 to clarify existing disclosure requirements, requiring fair value disclosures by class of assets and liabilities rather than by major category and the disclosure of valuation techniques and inputs used to determine the fair value of Level 2 and Level 3 assets and liabilities.

With the exception of disclosures relating to purchases, sales issuances and settlements of recurring Level 3 measurements, ASU 2010-06 was effective for interim and annual reporting periods beginning after December 15, 2009.

The disclosure requirements related to purchases, sales, issuances and settlements of recurring Level 3 measurements will be effective for financial statements for annual reporting periods beginning after December 15, 2010.

The Company is currently evaluating the effect of ASC 2010-06 on its financial statements and results of operation and is currently not yet in a position to determine such effects.

In July 2010, the FASB issued ASU 2010-20, “Receivables – Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses” (ASU 2010-20).

ASU 2010-20 amends Topic 310 to improve the disclosures that an entity provides about the credit quality of its financing receivables and the related allowance for credit losses.

As a result of these amendments, an entity is required to disaggregate by portfolio segment or class certain existing disclosures and provide new disclosures about its financing receivables and related allowance for credit losses.

These provisions are effective for interim and annual reporting periods ending on or after December 15, 2010.

In January 2011, ASU 2011-06, “Receivables (Topic 310):

Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No.

2010-20” is issued to temporarily delay the effective date of the disclosures about troubled debt restructurings for public entities.

The delay is intended to allow the Board time to complete its deliberations on what constitutes a troubled debt restructuring.

Accordingly, ASU 2010-20 are changed to be effective for interim and annual periods ending after June 15, 2011.

Management assessed that ASU 2010-20 concerns disclosures only and will not have a material impact on our financial position or results of operations.

In August 2010, the FASB issued ASU 2010-22, “Accounting for Various Topics - Technical Corrections to SEC Paragraphs”.

It amends various SEC paragraphs based on external comments received and the issuance of SEC Staff Accounting Bulletin (SAB) No.

112, which amends or rescinds portions of certain SAB topics.

The topics affected include reporting of inventories in financial statements for Form 10-Q, debt issue costs in conjunction with a business combination, sales of stock by subsidiary, gain recognition on sales of business, business combinations prior to an initial public offering, loss contingencies and liability assumed in business combination, divestitures, and oil and gas exchange offers.

The Company is currently evaluating the effect of ASU 2010-22 on its financial statements and believes it would have no impact on the Company's results of operations.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820):

Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S.

GAAP and IFRSs, which amends U.S.

GAAP to conform it with fair value measurement and disclosure requirements in International Financial Reporting Standards (“IFRS”).

It changes change certain fair value measurement principles and enhances the disclosure requirements for fair value measurements to provide a consistent definition of fair value and ensure that fair value measurements and disclosure requirements are similar between U.S.

GAAP and IFRSs.

The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2011 and are applied prospectively.

The Company evaluated the effect of ASU 2011-04 on its financial statements and has concluded that it would have no impact on the Company's results of operations.

In June, 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220):

Presentation of Comprehensive Income, will require companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements.

It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity.

The ASU does not change the items that must be reported in other comprehensive income.

The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.

Currently, the Company evaluated the effect of ASU 2011-05 on its financial statements and has concluded that it would have no impact on the Company's results of operations.

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

Measurement of Credit Losses on Financial

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

expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit

loss estimates.

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

other financial instruments.

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

In October 2019, the FASB issued ASU No.

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

Dates”, to finalize the effective date delays for private companies, not-for-profits, and smaller reporting companies applying

the CECL standards.

The ASU is effective for reporting periods beginning after December 15, 2022 and interim periods within those

fiscal years.

Early adoption is permitted.

We are currently evaluating the impact of the adoption of ASU 2016-13 on our condensed

consolidated financial statements.

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

Simplifying the Accounting for Income Taxes.

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

The amendments

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

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

years, beginning after December 15, 2020.

All other amendments should be applied on a prospective basis.

We do not expect the

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

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Subsequent Event

The Company adopts ASC Topic 855 “Subsequent

Events”.

The Company evaluates subsequent events that have occurred after the balance sheet date but before the financial

statements are issued.

There are two types of subsequent events:

(1) recognized, or those that provide additional evidence with

respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing

financial statements, and (2) non-recognized, or those that provide evidence with respect to conditions that did not exist at the

date of the balance sheet but arose subsequent to that date.

The Company performed its evaluation of subsequent events through

March 23, 2021.

March 2021 Public Offering

On March 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.

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 Offering

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.

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.

Summarized Quarterly Financial Data (Unaudited)

financial information for 2020 and 2019 is as follows:

Gross (loss) profit

(Loss) income from operations

Net income per share

Gross (loss) profit

(Loss) income from operations

Net (loss) income

Net income per share

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Condensed Financial Information of the Parent Company

condensed financial statements of IT Tech Packaging Inc.

(“ITP”, the “parent company”) have been prepared

in accordance with accounting principles generally accepted in the United States of America.

Under the PRC laws and regulations,

the Company’s PRC subsidiaries are restricted in their ability to transfer certain of their net assets to the parent company

in the form of dividend payments, loans or advances.

The amounts restricted include paid-in capital, capital surplus and statutory

reserves, as determined pursuant to PRC generally accepted accounting principles, totaling $45,589,643 as of December 31, 2020,

following represents condensed unconsolidated financial information of the parent company only:

Current Assets

Cash and cash equivalents

Total current assets

Investment in subsidiaries

$ 181,210,840

$ 170,498,891

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

Inter-company payable

Due to related parties

Total current liabilities

Derivative liability

Total liabilities

Total stockholders' equity

Total Liabilities and Stockholders' Equity

$ 181,210,840

$ 170,498,891

TECH PACKAGING, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)

Selling, general and administrative expenses

Loss from Operations

Equity in earnings of unconsolidated subsidiaries

Loss on derivative liability

Income before Income Taxes

Provision for Income Taxes

$ (5,554,002 )

Other comprehensive income /(loss)

Total Comprehensive Income (loss)

Net Cash (Used in) Provided by Operating Activities

Net Cash Used in Investing Activities

Net Cash Provided by Financing Activities

Net Increase (Decrease) in Cash and Cash Equivalents

Cash and Cash Equivalents - Beginning of Year

Cash and Cash Equivalents - End of Year

condensed financial information has been prepared using the same accounting policies as set out in the Company’s consolidated

financial statements except that the parent company has used equity method to account for its investments in the subsidiaries.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

The Company’s financial statements for the fiscal year ended December 31, 2008 included in the Annual Report on Form 10-K for the fiscal year 2009 were initially audited and the audit report, dated March 19, 2009, were issued by Davis Accounting Group P.C.(a.k.a, Ethania Audit Group P.C.

("Davis") The licenses of Mr.

Edwin Reese Davis Jr.

and Davis lapsed on September 30, 2008 and were formally revoked as of November 4, 2010 by the Utah Division of Occupational & Professional Licensing.

The Company had no knowledge that Davis's license in Utah lapsed until 2011.

During the time when Davis was retained by the Company, Davis represented that it was in good standing.

On December 1, 2009, Davis Accounting Group P.C.

(“Davis”) resigned as our registered independent public accounting firm.

The audit reports of Davis on our financial statements for the fiscal year ended December 31, 2008 contained no adverse opinions or disclaimers of opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principles.

During the fiscal year ended December 31, 2007 and through the date of this report, we have had no disagreements with Davis on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Davis, would have caused it to make reference to the subject matter of such disagreements in its report on our financial statements for such periods.

During the fiscal year ended December 31, 2008, there have been no reportable events as defined under Item 304(a)(1)(v) of Regulation S-K adopted by the SEC.

We provided Davis with a copy of this disclosure before its filing with the SEC.

We requested that Davis provide us with a letter addressed to the SEC stating whether or not it agrees with the above statements, and we received a letter from Davis stating that it agrees with the above statements.

New Independent Accountants

On December 1, 2009, our Audit Committee of the Board of Directors approved the appointment of BDO Limited, the Hong Kong member firm of the BDO International network (“BDO”), as our new registered independent public accounting firm, effective as of December 1, 2009, for the year ending December 31, 2009, and to conduct review engagements on the Company’s non-annual quarterly financial statements on an ongoing basis thereafter.

During the two most recent fiscal years and through the date of our engagement of BDO, we did not consult with BDO regarding either (1) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, or (2) any matter that was either the subject of a disagreement (as defined in Regulation S-K Item 304(a)(1)(v)), during the two most recent fiscal years.

Prior to engaging BDO, BDO did not provide our Company with either written or oral advice that was an important factor considered by our Company in reaching a decision to continue the appointment of BDO as our new registered independent public accounting firm.

On May 31, 2011, the Company engaged BDO to re-audit the financial statements for the fiscal year ended December 31, 2008.

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

What changed 10-K/A

Item 8. Financial Statements and Supplementary Data