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Item 1. Financial Statements

2021-11-10 compared with 2021-08-10 · 718 added, 666 removed, 528 unchanged (72% of the section changed)

Financial Statements

IT TECH PACKAGING, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2021 AND DECEMBER 31, 2020

TECH PACKAGING, INC.

CONSOLIDATED BALANCE SHEETS

OF SEPTEMBER 30, 2021 AND DECEMBER 31, 2020

September 30,

Current Assets

1 unchanged sentence

Restricted cash

Accounts receivable (net of allowance for doubtful accounts of $ 87,876 and $ 34,391 as of June 30, 2021 and December 31, 2020, respectively)

Accounts receivable (net of allowance for doubtful accounts of $ 54,668 and $ 34,391 as of September 30, 2021 and December 31 2020, respectively)

Prepayments and other current assets

24 unchanged sentences

Derivative liability

Total liabilities (including amounts of the consolidated VIE without recourse to the Company of $ 18,427,033 and $ 17,950,224 as of June 30, 2021 and December 31, 2020, respectively)

Total liabilities (including amounts of the consolidated VIE without recourse to the Company of $ 17,764,728 and $ 17,950,224 as of September 30, 2021 and December 31, 2020, respectively)

Commitments and Contingencies

Stockholders’ Equity

Common stock, 500,000,000 shares authorized, $ 0.001 par value per share, 99,049,900 and 28,535,816 shares issued and outstanding as of June 30, 2021 and December, 31,2020, respectively

Common stock, 500,000,000 shares authorized, $ 0.001 par value per share, 99,049,900 and 28,535,816 shares issued and outstanding as of September 30, 2021 and December, 31,2020, respectively

Additional paid-in capital

6 unchanged sentences

$ 199,874,474

See accompanying notes to condensed consolidated

financial statements.

IT TECH PACKAGING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30,

2021 AND 2020

accompanying notes to condensed consolidated financial statements.

TECH PACKAGING, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

$ 115,832,013

Cost of sales

8 unchanged sentences

( 8,445,356 )

Income (Loss) from Operations

(Loss) Income from Operations

( 3,488,694 )

3 unchanged sentences

Interest expense

Gain (loss) on derivative liability

Loss on derivative liability

Income (Loss) before Income Taxes

( 4,516,710 )

( 4,022,084 )

Provision for Income Taxes

( 4,950,994 )

( 5,022,382 )

Net Income (Loss)

( 3,249,528 )

( 3,937,292 )

Other Comprehensive Income (Loss)

Other Comprehensive (Loss) Income

Foreign currency translation adjustment

( 2,465,575 )

Total Comprehensive Income (Loss)

$ ( 2,121,321 )

$ ( 2,844,712 )

$ ( 5,881,893 )

Losses Per Share:

Basic and Diluted Losses per Share

Earnings (Losses) Per Share:

Basic and Diluted Earnings (Losses) per Share

Outstanding – Basic and Diluted

See accompanying notes to condensed consolidated

financial statements.

IT TECH PACKAGING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND

Six Months Ended

accompanying notes to condensed consolidated financial statements.

TECH PACKAGING, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

Nine Months Ended

September 30,

Cash Flows from Operating Activities:

4 unchanged sentences

(Gain) Loss on derivative liability

(Recovery from) Allowance for bad debts

( 2,810,913 )

Allowance for bad debts

Share-based compensation and expenses

18 unchanged sentences

Purchases of property, plant and equipment

( 12,781,114 )

( 3,144,261 )

Proceeds from sale of property, plant and equipment

Net Cash Used in Investing Activities

( 12,781,114 )

( 2,571,949 )

Cash Flows from Financing Activities:

13 unchanged sentences

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

See accompanying notes to condensed consolidated

financial statements.

IT TECH PACKAGING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND

accompanying notes to condensed consolidated financial statements.

TECH PACKAGING, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

Comprehensive

10 unchanged sentences

( 3,937,292 )

( 3,416,318 )

Balance at June 30, 2020

Balance at September 30, 2020

$ ( 1,852,602 )

4 unchanged sentences

$ 175,080,174

Issuance of shares to officer and directors

Issuance of shares to institutional investors

4 unchanged sentences

( 3,249,528 )

Balance at June 30, 2021

Balance at September 30, 2021

$ 105,991,266

$ 207,967,606

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

accompanying notes to condensed consolidated financial statements.

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Organization and Business Background

IT Tech Packaging, Inc.

(the “Company”)

was incorporated in the State of Nevada on December 9, 2005, under the name “Carlateral, Inc.” Through the steps described

immediately below, we became the holding company for Hebei Baoding Dongfang Paper Milling Company Limited (“Dongfang Paper”),

a producer and distributor of paper products in China, on October 29, 2007.

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.

Tech Packaging, Inc.

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

Inc.” Through the steps described immediately below, we became the holding company for Hebei Baoding Dongfang Paper Milling Company

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

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

We were the surviving entity.

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.

On October 29, 2007, pursuant to an agreement

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

a corporation formed on November 13, 2006 under the laws of the British Virgin Islands, and issued the shareholders of Dongfang Holding

an aggregate of 7,450,497 (as adjusted for a four-for-one reverse stock split effected in November 2009) shares of our common stock, which

shares were distributed pro-rata to the shareholders of Dongfang Holding in accordance with their respective ownership interests in Dongfang

At the time of the Merger Agreement, Dongfang Holding owned all of the issued and outstanding stock and ownership of Dongfang

Paper and such shares of Dongfang Paper were held in trust with Zhenyong Liu, Xiaodong Liu and Shuangxi Zhao, for Mr.

Zhao (the original shareholders of Dongfang Paper) to exercise control over the disposition of Dongfang Holding’s shares in

Dongfang Paper on Dongfang Holding’s behalf until Dongfang Holding successfully completed the change in registration of Dongfang

Paper’s capital with the relevant PRC Administration of Industry and Commerce as the 100 % owner of Dongfang Paper’s shares.

As a result of the merger transaction, Dongfang Holding became a wholly owned subsidiary of the Company, and Dongfang Holding’s

wholly owned subsidiary, Dongfang Paper, became an indirectly owned subsidiary of the Company.

Dongfang Holding, as the 100 % owner of Dongfang

Paper, was unable to complete the registration of Dongfang Paper’s capital under its name within the proper time limits set forth

under PRC law.

In connection with the consummation of the restructuring transactions described below, Dongfang Holding directed the trustees

to return the shares of Dongfang Paper to their original shareholders, and the original Dongfang Paper shareholders entered into certain

agreements with Baoding Shengde Paper Co., Ltd.

(“Baoding Shengde”) to transfer the control of Dongfang Paper over to Baoding

On June 24, 2009, the Company consummated a number

of restructuring transactions pursuant to which it acquired all of the issued and outstanding shares of Shengde Holdings Inc., a Nevada

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.

1 unchanged sentence

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.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

To 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 RMB 1 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 Agreement;

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.

A 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.

As the 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.

On 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.

In addition, 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.

The Company has no direct equity interest in Dongfang

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 three months ended June 30, 2021 and 2020 was

accounted for 99.77 % and 96.79 % of the Company’s total revenue, respectively.

The revenue generated from Dongfang Paper for the

six months ended June 30, 2021 and 2020 was accounted for 99.66 % and 97.59 % of the Company’s total revenue, respectively.Dongfang

Paper also accounted for 81.25 % and 90.70 % of the total assets of the Company as of June 30, 2021 and December 31, 2020, respectively.

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

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

TECH PACKAGING, INC.

TO CONDENSED 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;

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;

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.

A 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.

As the 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.

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

In addition, 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.

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

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

Upon full payment of the consideration in the amount of RMB 320 million (approximately $ 45 million), Dongfang Paper 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 three months ended September 30, 2021 and 2020 was accounted for 97.01 % and 99.34 % of the Company’s total revenue,

respectively.

The revenue generated from Dongfang Paper for the nine months ended September 30, 2021 and 2020 was accounted for 98.89 %

and 98.44 % of the Company’s total revenue, respectively.Dongfang Paper also accounted for 83.91 % and 90.70 % of the total assets

of the Company as of September 30, 2021 and December 31, 2020, respectively.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2021 and December 31, 2020, details of the Company’s

As of September 30, 2021 and December 31, 2020, details of the Company’s

subsidiaries and variable interest entities are as follows:

38 unchanged sentences

The aggregate carrying value of Dongfang Paper’s assets and liabilities (after elimination

of intercompany transactions and balances) in the Company’s condensed consolidated balance sheets as of June 30, 2021 and December

of intercompany transactions and balances) in the Company’s condensed consolidated balance sheets as of September 30, 2021 and December

31, 2020 are as follows:

September 30,

Current Assets

17 unchanged sentences

Advance from customers

Due to related parties

Accrued payroll and employee benefits

16 unchanged sentences

(2) Basis of Presentation and Significant Accounting Policies

The accompanying unaudited condensed

consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange

Commission (“SEC”) for reporting on Form 10-Q.

Accordingly, certain information and notes required by the United States

of America generally accepted accounting principles (“GAAP”) for annual financial statements are not included herein.

These interim statements should be read in conjunction with the consolidated financial statements and notes thereto included in the

Annual Report on Form 10-K for the year ended December 31, 2020 of the Company, and its subsidiaries and variable interest entity

(which we sometimes refer to collectively as “the Company”, “we”, “us” or

The accompanying unaudited condensed consolidated

financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”)

for reporting on Form 10-Q.

Accordingly, certain information and notes required by the United States of America generally accepted accounting

principles (“GAAP”) for annual financial statements are not included herein.

These interim statements should be read in conjunction

with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31,

2020 of the Company, and its subsidiaries and variable interest entity (which we sometimes refer to collectively as “the Company”,

“we”, “us” or “our”).

Principles of Consolidation

3 unchanged sentences

Such adjustments are of a normal recurring nature, unless otherwise noted.

The balance sheet as of June 30,

2021 and the results of operations for the six months ended June 30, 2021 are not necessarily indicative of the results to be expected

for any future period.

The balance sheet as of September

30, 2021 and the results of operations for the nine months ended September 30, 2021 are not necessarily indicative of the results to be

expected for any future period.

Our unaudited condensed consolidated financial

32 unchanged sentences

activity and that are significant to the fair value of the assets or liabilities.

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 June 30, 2021 and December 31, 2020, the carrying value of the Company’s

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

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

of these instruments;

while loans from credit union and loans from a related party approximate at their fair value as the interest rates

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

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

“ Derivative liabilities” under Note (10), meet the criteria of derivatives and are required to be measured at

The fair value of these derivative liabilities was determined based on management’s estimate of the expected

future cash flows required to settle the liabilities.

This valuation technique involves management’s estimates and judgment

based on unobservable inputs and is classified in level 3.

Non-Recurring

Fair Value Measurements

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 were determined using models

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

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.

(3) Restricted

cash was nil as of June 30, 2021 and December 31, 2020.

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Classification within the hierarchy is determined based on the lowest

level of input that is significant to the fair value measurement.

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 September 30, 2021 and December 31, 2020, the carrying value of the Company’s short term financial instruments, such as cash

and cash equivalents, accounts receivable, accounts and notes payable, short-term bank loans, balance due to a related party and obligation

under capital lease, approximate at their fair values because of the short maturity of these instruments;

while loans from credit union

and loans from a related party approximate at their fair value as the interest rates thereon are close to the market rates of interest

published by the People’s Bank of China.

Management determined that liabilities created

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

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

The fair value of these derivative liabilities

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

This valuation

technique involves management’s estimates and judgment based on unobservable inputs and is classified in level 3.

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 were determined using models with significant unobservable inputs which

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

Share-Based Compensation

The 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.

The 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

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.

(3) Restricted Cash

Restricted cash was nil as of September 30, 2021 and December 31, 2020.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(4) Inventories

materials inventory includes mainly recycled paper board and recycled white scrap paper.

Finished goods include mainly products of corrugating

medium paper, offset printing paper and tissue paper products.

Inventories consisted of the following as of June 30, 2021 and December

Raw materials inventory includes mainly recycled paper board and recycled

white scrap paper.

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

Inventories consisted of the following as of September 30, 2021 and December 31, 2020:

September 30,

Raw Materials

7 unchanged sentences

Total inventory, net

(5) Prepayments

and other current assets

and other current assets consisted of the following as of June 30, 2021 and December 31, 2020:

(5) Prepayments and other current assets

Prepayments and other current assets consisted of the following as

of September 30, 2021 and December 31, 2020:

September 30,

Prepaid land lease

1 unchanged sentence

Value-added tax recoverable

of June 30, 2021 and December 31, 2020, land use rights represented two parcels of state-owned lands located in Xushui District and Wei

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

in progress mainly represents payments for paper machine of a new tissue paper production line PM10.

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of June 30, 2021 and December 31, 2020, certain property, plant and equipment of Dongfang Paper with net values of $ 1,522,164 and $ 2,349,796 ,

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 $ 5,997,212 and $ 6,010,359 , respectively, as of June 30, 2021 and December 31, 2020 was pledged for the bank loan from Industrial

& Commercial Bank of China.

Land use right of Hebei Tengsheng with net value of $ 5,615,919 and $ 5,560,146 , respectively, as of June

30, 2021 and December 31, 2020 was pledged for a long-term loan from credit union of Baoding Shengde.

In addition, land use right of

Hebei Tengsheng with net value of $ 8,700,601 and $ 8,614,194 , respectively, as of June 30, 2021 and December 31, 2020 was pledged for

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

See “ 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 $ 4,070,458 and $ 3,721,640 for the three months ended June 30, 2021 and 2020, respectively.

Depreciation and amortization of property, plant and equipment was $ 8,159,525 and $ 7,496,314 for the six months ended June 30, 2021 and

(6) Property, plant and equipment, net

As of September 30, 2021 and December 31, 2020, property, plant and

equipment consisted of the following:

September 30,

Property, Plant, and Equipment:

Land use rights

Building and improvements

Machinery and equipment

Construction in progress

accumulated depreciation and amortization

( 125,912,986 )

( 113,590,606 )

Property, Plant and Equipment, net

$ 127,063,147

$ 145,142,642

As of September 30, 2021 and December 31, 2020,

land use rights represented two parcels of state-owned lands located in Xushui District and Wei County of Hebei Province in China, with

lease terms of 50 years expiring in 2061 and 2066, respectively.

Construction in progress mainly represents payments for paper machine

of a new tissue paper production line PM10.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2021 and December 31, 2020,

certain property, plant and equipment of Dongfang Paper with net values of $ 1,313,720 and $ 2,349,796 , 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 $ 5,937,242 and $ 6,010,359 ,

respectively, as of September 30, 2021 and December 31, 2020 was pledged for the bank loan from Industrial & Commercial Bank of China.

Land use right of Hebei Tengsheng with net value of $ 5,594,011 and $ 5,560,146 , respectively, as of September 30, 2021 and December 31,

2020 was pledged for a long-term loan from credit union of Baoding Shengde.

In addition, land use right of Hebei Tengsheng with net value

of $ 8,666,660 and $ 8,614,194 , respectively, as of September 30, 2021 and December 31, 2020 was pledged for another long-term loan from

credit union of Baoding Shengde.

See “ Short-term bank loans ” under Note (7), Loans Payable, for details of the transaction

and asset collaterals.

Depreciation and amortization of property, plant

and equipment was $ 3,500,145 and $ 3,805,389 for the three months ended September 30, 2021 and 2020, respectively.

Depreciation and amortization

of property, plant and equipment was $ 11,659,670 and $ 11,301,703 for the nine months ended September 30, 2021 and 2020, respectively.

(7) Financing with Sale-Leaseback

The Company entered into a sale-leaseback arrangement

(the “Lease Financing Agreement”) with TAC Leasing Co., Ltd.(“TLCL”) on August 6, 2020, for a total financing

proceeds in the amount of RMB 16 million (approximately US$ 2.5 million).

Under the sale-leaseback arrangement, Hebei Tengsheng sold the

Leased Equipment to TLCL for 16 million (approximately US$ 2.5 million).

Concurrent with the sale of equipment, Hebei Tengsheng leases

back the equipment sold to TLCL for a lease term of three years .

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

price of RMB 100 (approximately $ 15 ) to TLCL and buy back the Leased Equipment.

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

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

implicit interest rate of 15.6 % per annum and stated at $ 567,099 at the inception of the lease on August 17, 2020.

Hebei Tengsheng made payments due according to

the schedule.

The balance of Leased Equipment net of amortization was $ 2,288,902 and $ 2,397,653 as of September 30, 2021 and December

31, 2020, respectively.

(7) 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, 2020.

Tengsheng made payments due according to the schedule.

The balance of Leased Equipment net of amortization was $ 2,339,145 and $ 2,397,653

as of June 30, 2021 and December 31, 2020, respectively.

The lease liability was $ 453,573 and $ 536,959 , and its current portion in the

amount of $ 199,544 and $ 182,852 as of June 30, 2021 and December 31, 2020, respectively.

of the Leased Equipment was $ 41,457 and nil for the three months ended June 30, 2021 and 2020.

The lease liability was $ 404,958 and $ 536,959 , and its current portion in the amount of $ 206,606 and $ 182,852

as of September 30, 2021 and December 31, 2020, respectively.

Amortization of the Leased Equipment was $ 41,208

$ 82,454 and nil for the six months ended June 30, 2021 and 2020.

Total interest expenses for the sale-leaseback arrangement was $ 18,932

and nil for the three months ended June 30, 2021 and 2020.

and $ 12,718 for the three months ended September 30, 2021 and 2020.

Amortization of the Leased Equipment was $ 123,663 and $ 12,718 for

the nine months ended September 30, 2021 and 2020.

Total interest expenses for the sale-leaseback arrangement was $ 17,026 and $ 7,172 for

the three months ended September 30, 2021 and 2020.

Total interest expenses for the sale-leaseback arrangement was $ 56,376 and $ 7,172

nil for the six months ended June 30, 2021 and 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 June 30, 2021 were as follows:

for the nine months ended September 30, 2021 and 2020.

As a result of the sale and leaseback, a deferred

gain in the amount of $ 288,922 was recorded.

The deferred gain is amortized over the lease term and as an offset to amortization of the

Leased Equipment.

The future minimum lease payments of the capital

lease as of September 30, 2021 were as follows:

September 30,

unearned discount

Current portion

lease liability

Industrial and Commercial Bank

of China (“ICBC”)

Current portion lease liability

(8) Loans Payable

Short-term bank loans

December 11, 2020, the Company entered into a working capital loan agreement with the ICBC, with a balance of $ 6,422,501 and $ 6,435,348

as of June 30, 2021 and December 31, 2020, respectively.

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

as collateral for the benefit of the bank.

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

The loan will be due and repaid

at various installments by December 7, 2021.

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of June 30, 2021, there were guaranteed short-term borrowings of $ 6,422,501 and unsecured bank loans of $ nil .

As of December 31, 2020,

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

short-term borrowing rates for the three months ended June 30, 2021 and 2020 were approximately 4.79 %.

short-term borrowing rates for the six months ended June 30, 2021 and 2020 were approximately 4.79 %.

loans from credit union

June 30, 2021 and December 31, 2020, loans payable to Rural Credit Union of Xushui District, amounted to $ 9,690,252 and $ 9,594,017 ,

September 30,

Industrial and Commercial Bank of China (“ICBC”)

Total short-term bank loans

On December 11, 2020, the Company entered into

a working capital loan agreement with the ICBC, with a balance of $ 6,320,350 and $ 6,435,348 as of September 30, 2021 and December 31,

2020, respectively.

Rural Credit Union of Xushui District

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,

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2021, there were guaranteed

short-term borrowings of $ 6,320,350 and unsecured bank loans of $ nil .

As of December 31, 2020, there were guaranteed short-term borrowings

of $ 6,435,348 and unsecured bank loans of $ nil .

The average short-term borrowing rates for the three and nine months

ended September 30, 2021 and 2020 were approximately 4.79 %.

Long-term loans from credit union

As of September 30, 2021 and December 31, 2020, loans payable to Rural

Credit Union of Xushui District, amounted to $ 9,652,450 and $ 9,594,017 , respectively.

September 30,

Rural Credit Union of Xushui District Loan 1

Rural Credit Union of Xushui District Loan 2

Rural Credit Union of

Xushui District Loan 4

Current portion

of long-term loans from credit union

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

( 5,134,610 )

( 4,996,245 )

loans from credit union

As of June 30, 2021, the Company’s long-term debt repayments

Long-term loans from credit union

As of September 30, 2021, the Company’s long-term debt repayments

for the next coming years were as follows:

Remainder of 2021

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.

On April 16, 2014, the Company entered into a

loan agreement with the Rural Credit Union of Xushui District for a term of 5 years, which was originally due in various installments

from June 21, 2014 to November 18, 2018.

The loan is guaranteed by an independent third party.

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 June 30, 2021 and December 31,

2020, total outstanding loan balance was $ 1,331,249 and $ 1,318,028 , respectively, Out of the total outstanding loan balance, current

portion amounted were $ 247,674 and $ 214,563 as of June 30, 2021 and December 31, 2020, respectively, which are presented as current liabilities

in the consolidated balance sheet and the remaining balance of $ 1,083,575 and $ 11,103,465 are presented as non-current liabilities in

the consolidated balance sheet as of June 30, 2021 and December 31, 2020, respectively.

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

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

On June 21, 2018, the loan was extended

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

The loan is secured

by certain of the Company’s manufacturing equipment with net book value of $ 1,522,164 and $ 2,349,796 as of June 30, 2021 and December

31, 2020, respectively.

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

As of June 30, 2021 and December

31, 2020, the total outstanding loan balance was $ 3,869,908 and $ 3,831,476 , respectively.

Out of the total outstanding loan balance,

current portion amounted were $ 417,950 and $ 337,169 as of June 30, 2021 and December 31, 2020 respectively, which are presented as current

liabilities in the consolidated balance sheet and the remaining balance of $ 3,451,959 and $ 3,494,307 are presented as non-current liabilities

in the consolidated balance sheet as of June 30, 2021 and December 31, 2020, respectively.

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

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.

On March 22, 2021, the loan was renewed for additional one year and the repayments will be due on April 16, 2022.

As of June 30, 2021 and December 31, 2020, the total outstanding loan balance was $ 2,476,742 and $ 2,452,145 , respectively.

the total outstanding loan balance, current portion amounted were $ 2,476,742 and $ 2,452,145 as of June 30, 2021 and December 31,

2020, respectively, which are presented as current liabilities in the consolidated balance sheet as of June 30, 2021 and December

31, 2020, respectively.

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On December 12, 2019, the Company entered into a loan

agreement with the Rural Credit Union of Xushui District for a term of 2 years, which 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.

On March 22, 2021, the loan was extended and

the repayments will be due on August 18, 2022.

As of June 30, 2021 and December 31, 2020, the total outstanding loan balance was $ 2,012,353

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 September 30, 2021 and December 31, 2020, total outstanding loan balance was $ 1,326,055

and $ 1,318,028 , respectively.

Out of the total outstanding loan balance, current portion amounted were $ nil and $ 1,992,368 as of June

30, 2021 and December 31, 2020, respectively, which are presented as current liabilities in the consolidated balance sheet as of June

Out of the total outstanding loan balance, current portion amounted were $ 246,708 and $ 214,563 as of September

30, 2021 and December 31, 2020, respectively, which are presented as current liabilities in the consolidated balance sheet and the remaining

balance of $ 1,079,347 and $ 11,103,465 are presented as non-current liabilities in the consolidated balance sheet as of September 30, 2021

and December 31, 2020, respectively.

interest expenses for the short-term bank loans and long-term loans for the three months ended June 30, 2021 and 2020 were $ 264,967 and

On July 15, 2013, the Company entered into a loan

agreement with the Rural Credit Union of Xushui District for a term of 5 years, which was originally due and payable in various installments

from December 21, 2013 to July 26, 2018.

On June 21, 2018, the loan was extended for additional 5 years and will be due and payable in

various installments from December 21, 2018 to June 20, 2023.

The loan is secured by certain of the Company’s manufacturing equipment

with net book value of $ 1,313,720 and $ 2,349,796 as of September 30, 2021 and December 31, 2020, respectively.

Interest payment is due

quarterly and bears a fixed rate of 0.64 % per month.

As of September 30, 2021 and December 31, 2020, the total outstanding loan balance

was $ 3,854,813 and $ 3,831,476 , respectively.

Out of the total outstanding loan balance, current portion amounted were $ 416,320 and $ 337,169

as of September 30, 2021 and December 31, 2020 respectively, which are presented as current liabilities in the consolidated balance sheet

and the remaining balance of $ 3,438,493 and $ 3,494,307 are presented as non-current liabilities in the consolidated balance sheet as of

September 30, 2021 and December 31, 2020, 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.

On March 22, 2021, the loan was renewed

for additional one year and the repayments will be due on April 16, 2022.

As of September 30, 2021 and December 31, 2020, the total outstanding

loan balance was $ 2,467,080 and $ 2,452,145 , respectively.

Out of the total outstanding loan balance, current portion amounted were $ 2,467,080

and $ 2,452,145 as of September 30, 2021 and December 31, 2020, respectively, which are presented as current liabilities in the consolidated

balance sheet as of September 30, 2021 and December 31, 2020, respectively.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On December 12, 2019, the Company entered into

a loan agreement with the Rural Credit Union of Xushui District for a term of 2 years, which 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.

On March 22, 2021, the loan was extended

and the repayments will be due on August 18, 2022.

As of September 30, 2021 and December 31, 2020, the total outstanding loan balance

was $ 2,004,502 and $ 1,992,368 , respectively.

Out of the total outstanding loan balance, current portion amounted were $ 2,004,502 and $ 1,992,368

as of September 30, 2021 and December 31, 2020, respectively, which are presented as current liabilities in the consolidated balance sheet

as of September 30, 2021 and December 31, 2020, respectively.

Total interest expenses for the short-term bank

loans and long-term loans for the three months ended September 30, 2021 and 2020 were $ 264,644 and $ 251,266 , respectively.

Total interest

expenses for the short-term bank loans and long-term loans for the nine months ended September 30, 2021 and 2020 were $ 788,094 and $ 737,420 ,

respectively.

Total interest expenses for the short-term bank loans and long-term loans for the six months ended June 30, 2021

and 2020 were $ 523,450 and $ 486,154 , respectively.

Party Transactions

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

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.

(9) Related Party Transactions

Zhenyong Liu, the Company’s CEO has

loaned money to Dongfang Paper for working capital purposes over a period of time.

On January 1, 2013, Dongfang Paper and Mr.

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 $ 395,248 and $ 392,855 of interest were outstanding to Mr.

Zhenyong Liu, which were recorded in other payables and accrued

liabilities as part of the current liabilities in the consolidated balance sheet as of September 30, 2021 and December 31, 2020, respectively.

On 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 September

30, 2021 and December 31, 2020, approximately $ 46,258 and $ 45,978 of interest, respectively, were outstanding to Mr.

Zhenyong Liu, which

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

30, 2021 and December 31, 2020, 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 June 30, 2021 and December 31, 2020, approximately $ 46,439 and $ 45,978 of interest, respectively 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.

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

On March 1, 2015, the Company entered an agreement

Zhenyong Liu which allows Dongfang Paper to borrow from Mr.

Zhenyong Liu an

amount up to $ 17,201,342 (RMB 120,000,000 ) 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 an amount up to $ 17,201,342 (RMB 120,000,000 ) 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

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.

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

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 .

of June 30, 2021 and December 31, 2020, the outstanding interest was $ 212,748 and $ 210,635 , respectively, which was recorded in other

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

of June 30, 2021 and December 31, 2020, total amount of loans due 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 September 30, 2021 and December 31, 2020, the outstanding

interest was $ 211,918 and $ 210,635 , respectively, which was recorded in other payables and accrued liabilities as part of the current

liabilities in the consolidated balance sheet.

As of September 30, 2021 and December 31, 2020,

total amount of loans due to Mr.

Zhenyong Liu were $ nil .

The interest expense incurred for such

related party loans are $ nil for the three and six months ended June 30, 2021 and 2020.

The interest expense incurred for such related party loans are $ nil for the three

and nine months ended September 30, 2021 and 2020.

The accrued interest owing to Mr.

was approximately $ 655,983 and $ 649,468 , as of June 30, 2021 and December 31, 2020, respectively, which was recorded in other payables

and accrued liabilities.

of June 30, 2021 and December 31, 2020, amount due to shareholder was $727,433, 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 from 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 $ 154,603 (RMB 1,000,000 ).

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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

payables and accrued liabilities

Other payables and accrued

liabilities consist of the following:

Zhenyong Liu was approximately $ 653,424 and $ 649,468 ,

as of September 30, 2021 and December 31, 2020, respectively, which was recorded in other payables and accrued liabilities.

As of September 30, 2021 and December 31, 2020,

amount due to shareholder was $727,433, which represents funds from shareholders to pay for various expenses incurred in the U.S.

amount is due on demand with interest free.

Lease of Headquarters Compound Real Properties from a Related Party

On August 7, 2013, the Company’s Audit Committee

and the Board of Directors approved the sale of the land use right of the Headquarters Compound (the “LUR”), the office building

and essentially all industrial-use buildings in the Headquarters Compound (the “Industrial Buildings”), and three employee

dormitory buildings located within the Headquarters Compound (the “Dormitories”) to Hebei Fangsheng for cash prices of approximately

$ 2.77 million, $ 1.15 million, and $ 4.31 million, respectively.

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

In connection with the sale of the Industrial

Buildings, Hebei Fangsheng agreed to lease the Industrial Buildings back to the Company for its original use for a term of up to three

years , with an annual rental payment of approximately $ 154,579 (RMB 1,000,000 ).

The lease agreement expired in August 2016.

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.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(10) Other payables and accrued liabilities

Other payables and accrued liabilities consist of the following:

September 30,

Accrued electricity

4 unchanged sentences

Accrued bank loan interest

(11) Derivative

Company analyzed warrants 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 June 30, 2021.

(11) Derivative Liabilities

The Company analyzed warrants 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.

ASC 815 requires we assess the fair market value

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

The Company determined our derivative liabilities

to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of September 30, 2021.

The Black-Scholes model requires six basic data inputs:

the exercise or strike price, time to expiration,

the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate.

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

The fair value of each warrant is estimated

using the Black-Scholes valuation model.

The following weighted-average assumptions were used in the June 30, 2021:

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

The following weighted-average assumptions were used in the September 30, 2021:

Nine months ended

September 30,

Expected term

3 unchanged sentences

0.19 % - 0.53 %

following table summarizes the changes in the derivative liabilities during the three months ended June 30, 2021:

Value Measurements Using Significant Observable Inputs (Level 3)

The following table summarizes the changes in the derivative liabilities

during the three months ended September 30, 2021:

Fair Value Measurements Using Significant Observable Inputs (Level

Balance at December 31, 2020

Addition of new derivatives recognized as warrant

Addition of new derivatives recognized as loss

on derivatives

Addition of new derivatives recognized as loss on derivatives

Exercise of warrants

( 2,902,119 )

Change in fair value

of derivative liability

Change in fair value of derivative liability

( 13,624,260 )

Balance at June 30, 2021

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of common stock to investors

April 29, 2020, the Company and certain institutional investors entered into a securities purchase agreement, as amended on May 4, 2020

(the “2020 Purchase Agreement”), pursuant to which the Company agreed to sell to such investors an aggregate of 4,400,000

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

stock in a concurrent private placement, for gross proceeds of approximately $ 2.55 million (net proceeds of approximately 2.27 million).

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

The exercise price of the warrant was $ 0.7425

January 20, 2021, the Company offered and sold to certain institutional investors an aggregate of 26,181,818 shares of common stock and

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

$14.4 million.

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

The exercise price of the warrant

was $ 0.55 per share.

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.

The purchase price for each share of common stock and accompanying warrant was $ 0.75 .

The exercise price

of the warrant was $ 0.75 per share,

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.

Total 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.

Total fair value of the shares

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

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

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

Total fair value of the shares of common

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

of common stock to 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,

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 into 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 2, 2021.

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 $0.70 per share.

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Balance at September 30, 2021

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(12) Common Stock

Issuance of common stock to investors

On April 29, 2020, the Company and certain institutional

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

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

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

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

The purchase price for each share of Common Stock and the

corresponding warrant was $ 0.58 .

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

On January 20, 2021, the Company offered and sold

to certain institutional investors an aggregate of 26,181,818 shares of common stock and 26,181,818warrants to purchase up to 26,181,818

shares of common stock in a bestefforts public offering for gross proceeds of approximately $14.4 million.

The purchase price for each

share of common stock and the corresponding warrant was $ 0.55 .

The exercise price of the warrant was $ 0.55 per share.

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.

The purchase price

for each share of common stock and accompanying warrant was $ 0.75 .

The exercise price of the warrant was $ 0.75 per share,

Issuance of common stock pursuant to the 2012 Incentive Stock Plan,

2015 Omnibus Equity Incentive and 2019 Omnibus Equity Incentive

On January 12, 2016, the Company granted an aggregate

of 1,133,916 shares of common stock under its compensatory incentive plans to nine officers, directors and employees of and a consultant

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

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

Please see Note (14),

Stock Incentive Plans for more details.

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

On September 13, 2018, the compensation committee

granted an aggregate of 534,500 shares of common stock at $ 0.88 per share to fifteen officers, directors and employees of the Company,

which were granted under the 2015 Omnibus Equity Incentive Plan.

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

at $ 470,360 as of the date of issuance.

On April 2, 2020, the compensation committee granted

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

under the 2019 Omnibus Equity Incentive Plan.

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

the date of issuance at $ 0.60 per share.

Issuance of common stock to a consultant

On January 2, 2020, the Company entered into an

agreement with a consultant and agreed as compensation to issue to the consultant in the aggregate of 60,000 shares of common stock for

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

60,000 shares of common stock were issued

to this consultant on April 28, 2020.

Total fair value of the shares of common stock issued was calculated at $ 42,000 at $ 0.70 per share.

Issuance of common stock to a consultant

On November 2, 2020, the Company entered into

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 2, 2021.

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 $0.70 per

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(13) Warrants

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 common stock in a concurrent private placement (the “May 2020 Warrants”).

price of the May 2020 Warrant is $ 0.7425 per share.

These warrants are exercisable on July 23, 2020 and have a term of exercise equal

to five years and six months from the date of issuance till July 23, 2025.

880,000 May 2020 Warrants were exercised in February 2021

at the exercise price of $0.7425 per share and 3,520,000 May 2020 Warrants were outstanding as of June 30, 2021.

The Company classified

warrant as liabilities and accounted for the issuance of the May 2020 Warrants as a derivative.

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 ,818warrants to purchase up to 26,181,818 shares of common stock (the “January 2021 Warrants”).

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

14,106,900 January 2021 Warrants were exercised in January and February of 2021 at the exercise price of $0.55 per share.

January 2021 Warrants were outstanding as of June 30, 2021 .

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 (the “March 2021 Warrants”).

The March 2021Warrants are

exercisable commencing on March 1, 2021 at an exercise price of $0.75 and will expire on March 1, 2026.

67,500 March 2021 Warrants

were exercised in January and March 2021 at the exercise price of $0.75 per share and 14,571,433 March 2021 Warrants were

outstanding as of June 30, 2021.

classified warrants as liabilities and accounted for the issuance of the warrants as a derivative.

of warrant activities is as below:

Six months Ended

June 30, 2021

Pursuant 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 common

stock in a concurrent private placement (the “May 2020 Warrants”).

The exercise price of the May 2020 Warrant is $ 0.7425 per

These warrants are exercisable on July 23, 2020 and have a term of exercise equal to five years and six months from the date of

issuance till July 23, 2025.

880,000 May 2020 Warrants were exercised in February 2021 at the exercise price of $0.7425 per share and

3,520,000 May 2020 Warrants were outstanding as of September 30, 2021.

The Company classified warrant as liabilities and accounted for

the issuance of the May 2020 Warrants as a derivative.

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 ,818warrants to purchase up to 26,181,818

shares of common stock (the “January 2021 Warrants”).

The January 2021 Warrants are exercisable commencing on January 20,

2021 at an exercise price of $0.55 and will expire on January 20, 2026.

14,106,900 January 2021 Warrants were exercised in January and

February of 2021 at the exercise price of $0.55 per share.

12,074,918 January 2021 Warrants were outstanding as of September 30, 2021 .

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 (the “March 2021 Warrants”).

The March 2021Warrants are exercisable commencing on March 1, 2021 at an exercise

price of $0.75 and will expire on March 1, 2026.

67,500 March 2021 Warrants were exercised in January and March 2021 at the exercise price

of $0.75 per share and 14,571,433 March 2021 Warrants were outstanding as of September 30, 2021.

The Company classified warrants as liabilities and accounted for the

issuance of the warrants as a derivative.

A summary of warrant activities is as below:

Nine months Ended

September 30, 2021

Outstanding and exercisable at beginning of the period

4 unchanged sentences

Outstanding and exercisable at end of the period

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

following table summarizes information relating to outstanding and exercisable warrants as of June 30, 2021.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes information relating to outstanding

and exercisable warrants as of September 30, 2021.

Warrants Outstanding

2 unchanged sentences

Contractual life

Weighted Average

Exercise Price

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”

The intrinsic value of the warrants as of June 30, 2021 is $ nil .

(14) Earnings

For the three

months ended June 30, 2021 and 2020, basic and diluted net income per share are calculated as follows:

Aggregate intrinsic value is the sum of the amounts

by which the quoted market price of the Company’s stock exceeded the exercise price of the warrants at December 31, 2020 for those

warrants for which the quoted market price was in excess of the exercise price (“in-the-money” warrants).

The intrinsic value

of the warrants as of September 30, 2021 is $ nil .

(14) Earnings Per Share

For the three months ended September 30, 2021

and 2020, basic and diluted net income per share are calculated as follows:

Three Months Ended

September 30,

Basic income (loss) per share

1 unchanged sentence

$ ( 520,974 )

$ ( 980,031 )

Weighted average common stock outstanding - denominator

3 unchanged sentences

$ ( 520,974 )

$ ( 980,031 )

Weighted average common stock outstanding - denominator

2 unchanged sentences

Diluted income (loss) per share

months ended June 30, 2021 and 2020, basic and diluted net income per share are calculated as follows:

Six Months Ended

Basic income (loss) per share

Net income (loss) for the period - numerator

For the nine months ended September 30, 2021 and

2020, basic and diluted net income per share are calculated as follows:

Nine Months Ended

September 30,

Basic loss per share

Net loss for the period - numerator

$ ( 3,249,528 )

1 unchanged sentence

Weighted average common stock outstanding - denominator

Net income (loss) per share

Diluted income (loss) per share

Net income (loss) for the period - numerator

Net loss per share

Diluted loss per share

Net loss for the period - numerator

$ ( 3,249,528 )

3 unchanged sentences

Weighted average common stock outstanding - denominator

Diluted income (loss) per share

For the three

and six months ended June 30, 2021 and 2020 there were no securities with dilutive effect issued and outstanding.

Diluted loss per share

For the three and nine months ended September 30, 2021 and 2020 there

were no securities with dilutive effect issued and outstanding.

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

federal tax and state statutory tax

rates up to 34 % and 0 %, respectively.

On December 22, 2017, the U.S.

enacted the Tax Cuts and Jobs Act (the “2017 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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(15) Income Taxes

United States

The Company and Shengde Holdings are incorporated

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

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

22, 2017, the U.S.

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

TCJAlowered 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

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

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

If a company cannot determine a provisional estimate to be included in its financial statements, it should continue to apply

ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the 2017 TCJA.

Transition tax:

The transition tax is a tax on

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

subsidiaries.

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

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

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

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

income taxes paid on such earnings.

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

The Company was able to make

a reasonable estimate of the transition tax and recorded a provisional obligation and additional income tax expense of approximately

$ 80,000 in the fourth quarter of 2017.

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

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

This amount may change when the Company

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

federal taxation and finalizes the amounts held

in cash or other specified assets.

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

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

Pursuant to the PRC New Enterprise

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

The provisions

for income taxes for three months ended June 30, 2021 and 2020 were as follows:

Further, the transition tax is based

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

The Company was able to make a reasonable estimate of

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

However, the Company is continuing to gather additional information and will consider additional technical guidance to more precisely

compute and account for the amount of the transition tax.

This amount may change when the Company finalizes the calculation of post-1986

foreign E&P previously deferred from U.S.

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

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

Dongfang Paper and Baoding Shengde are

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

Pursuant to the PRC New Enterprise Income Tax Law, Enterprise Income

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

The provisions for income taxes for three

months ended September 30, 2021 and 2020 were as follows:

Three Months Ended

September 30,

Provision for Income Taxes

3 unchanged sentences

Total Provision for (Deferred tax benefit)/ Income Taxes

The provisions

for income taxes for six months ended June 30, 2021 and 2020 were as follows:

Six Months Ended

The provisions for income taxes for nine

months ended September 30, 2021 and 2020 were as follows:

Nine Months Ended

September 30,

Provision for Income Taxes

5 unchanged sentences

$ ( 579,418 )

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

approximately $ 2,508,797 and $ 0 for U.S.

income tax 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.

As of June 30, 2021, 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.

As of June 30, 2021, the Company provided a 100 % valuation allowance on the U.S.

deferred tax asset benefit to reduce the total deferred

tax asset to the amount realizable for the PRC income tax purposes.

Management reviews this valuation allowance periodically and will

make adjustments as warranted.

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

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

tax 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.

As of September 30, 2021, 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 September 30, 2021, 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:

September 30,

Deferred tax assets (liabilities)

6 unchanged sentences

Total deferred tax assets, net

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

The following table reconciles the statutory rates to the Company’s

effective tax rate:

Three Months Ended

September 30,

PRC Statutory rate

3 unchanged sentences

Effective income tax rate

Six Months Ended

Nine Months Ended

September 30,

PRC Statutory rate

Effect of different tax jurisdiction

Effect of expenses not deductible for PRC tax purposes

Effect of reconciling items in the PRC for tax purposes

(Over) Under-provision in previous year

Change in valuation allowance

Effective income tax rate

During the three months ended June 30, 2021 and 2020,

the effective income tax rate was estimated by the Company to be 109.7 % and 7.5 %, respectively.

During the six months ended June 30, 2021 and 2020,

the effective income tax rate was estimated by the Company to be 2181.0 % and 15.1 %, respectively.

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

tax liability on all unrepatriated

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

tax deductions and net operating

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

federal or state corporate income tax liability in the

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.

During the three months ended September 30, 2021 and 2020, the effective

income tax rate was estimated by the Company to be - 4.9 % and - 5.3 %, respectively.

During the nine months ended September 30, 2021 and 2020, the effective

income tax rate was estimated by the Company to be 291.0 % and 12.8 %, respectively.

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

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

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

that its future dividend policy and the available U.S.

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

other substantial current U.S.

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

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.

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

tax provisions would be required.

IT TECH PACKAGING, INC.

resulting in U.S.

taxable income in the future,

or if it is determined that such earnings are to be remitted in the foreseeable future, additional tax provisions would be required.

TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9 unchanged sentences

part, upon the results of operations for the given period.

As of June 30, 2021 and December 31, 2020, management considered that the Company

had no uncertain tax positions affecting its consolidated financial position and results of operations or cash flows, and will continue

to evaluate for any uncertain position in future.

As of September 30, 2021 and December 31, 2020, management considered that

the Company had no uncertain tax positions affecting its consolidated financial position and results of operations or cash flows, and

will continue to evaluate for any uncertain position in future.

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

consolidated financial statements for the six months ended June 30, 2021 and 2020, 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.

consolidated financial statements for the nine months ended September 30, 2021 and 2020, respectively.

The Company’s tax positions

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

(16) Stock Incentive Plans

20 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Future minimum lease payments of all operating

leases are as follows:

Future minimum lease payments of all operating leases are as follows:

September 30,

Total operating lease payments

Capital commitment

As of June 30, 2021, the Company has entered contract

for the purchase of paper machine of a new tissue paper production line PM10.

Total outstanding commitments under these contracts were

$ 4,606,801 and $ 4,570,331 as of June 30, 2021 and December 31, 2020, respectively.

The Company expected to pay off all the balances within

As of September 30, 2021, the Company has entered

contract for the purchase of paper machine of a new tissue paper production line PM10.

Total outstanding commitments under these contracts

were $ 6,491,981 and $ 4,570,331 as of September 30, 2021 and December 31, 2020, respectively.

The Company expected to pay off all the

balances within 1-3 years.

On June 25, 2019, Dongfang Paper entered into

3 unchanged sentences

The consideration for the acquisition

is RMB 320 million (approximately $ 49.5 million), of which $ 21 million was paid by the Company, and the balance consideration of $ 28.5

million is payable by December 31, 2021.

is RMB 320 million (approximately $ 49 million), of which $ 32 million was paid by the Company, and the balance consideration of $ 17 million

is payable by December 31, 2021.

Guarantees and Indemnities

The Company agreed with Baoding Huanrun Trading

Co., a major supplier of raw materials, to guarantee certain obligations of this third party, and as of June 30, 2021 and December 31,

2020, the Company guaranteed its long-term loan from financial institutions amounting to $4,798,687 (RMB31,000,000) and $4,751,031 (RMB31,000,000),

respectively, that matured at various times in 2018-2023.

If Huanrun Trading Co., were to become insolvent, the Company could be materially

adversely affected.

Co., a major supplier of raw materials, to guarantee certain obligations of this third party, and as of September 30, 2021 and December

31, 2020, the Company guaranteed its long-term loan from financial institutions amounting to $4,779,967 (RMB31,000,000) and $4,779,967

(RMB31,000,000), respectively, that matured at various times in 2018-2023.

If Huanrun Trading Co., were to become insolvent, the Company

could be materially adversely affected.

(18) Segment Reporting

12 unchanged sentences

All sales were sold to customers located

IT TECH PACKAGING, INC.

TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2 unchanged sentences

Three Months Ended

June 30, 2021

September 30, 2021

Not Attributable

10 unchanged sentences

Three Months Ended

June 30, 2020

September 30, 2020

Not Attributable

Elimination of

Enterprise-wide,

Inter-segment

of Inter-segment

Depreciation and amortization

4 unchanged sentences

( 1,394,727 )

( 1,396,586 )

Six Months Ended

June 30, 2021

Nine Months Ended

September 30, 2021

Not Attributable

Elimination of

Enterprise-wide,

Inter-segment

of Inter-segment

$ 108,949,261

( 5,318,563 )

Depreciation and amortization

5 unchanged sentences

( 3,249,528 )

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended

June 30, 2020

Nine Months Ended

September 30, 2020

Not Attributable

Elimination of

Enterprise-wide,

Inter-segment

of Inter-segment

Gross profit (loss)

8 unchanged sentences

( 3,937,292 )

As of June 30, 2021

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2021

Not Attributable

2 unchanged sentences

Inter-segment

$ 105,220,080

As of December 31, 2020

4 unchanged sentences

(19) Concentration and Major Customers and Suppliers

For the three months ended June 30, 2021, the Company had no single

customer contributed over 10 % of total sales.

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

customer contributed over 10 % of total sales.

For the three months ended June 30, 2021, the Company had three major

suppliers accounted for 79 %, 10 % and 3 % of total purchases.

For the three months ended June 30, 2020, the Company had four major

suppliers accounted for 74 %, 11 %, 4 % and 3 % of total purchases.

For the six months ended June 30, 2021, the Company had three major

suppliers accounted for 80 %, 10 % and 2 % of total purchases.

For the six months ended June 30, 2020, the Company had four major

For the three and nine months ended September 30, 2021, the Company

had no single customer contributed over 10 % of total sales.

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

had no single customer contributed over 10 % of total sales.

For the three months ended September 30, 2021, the Company had three

major suppliers accounted for 74 %, 12 % and 5 % of total purchases.

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

major suppliers accounted for 75 %, 11 % and 3 % of total purchases.

For the nine months ended September 30, 2021, the Company had two major

suppliers accounted for 78 % and 11 % of total purchases.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

(20) Concentration of Credit Risk

5 unchanged sentences

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 as of June 30, 2021 and December 31, 2020.

On May 1, 2015,

the new “Deposit Insurance Regulations” was effective in the PRC that the maximum protection would be up to RMB 500,000 (US$ 77,398 )

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 U.S.

bank accounts are all fully covered by the FDIC insurance as of June 30 June 30, 2021 and

Deposit Insurance Corporation (“FDIC”) of the United States as of as of September 30, 2021 and December 31, 2020.

2015, the new “Deposit Insurance Regulations” was effective in the PRC that the maximum protection would be up to RMB 500,000

(US$ 77,096 ) 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 U.S.

bank accounts are all fully covered by the FDIC insurance as of September 30, 2021 and

December 31, 2020, respectively, while for the cash placed in financial institutions in the PRC, the balances exceeding the maximum coverage

of RMB 500,000 amounted to RMB 132,244,676 (US$ 20,470,995 ) as of June 30, 2021.

of RMB 500,000 amounted to RMB 109,299,409 (US$ 16,853,148 ) as of September 30, 2021.

(21) Risks and Uncertainties

25 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements