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Item 1A. Risk Factors

2022-03-15 compared with 2021-03-23 · 1104 added, 817 removed, 104 unchanged (95% of the section changed)

Risks Relating to our Business

Our business, financial condition

and results of operations may be materially adversely affected by global health epidemics, including the COVID-19 outbreak.

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

and results of operations.

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

COVID-19 as a global pandemic.

Relating to our Business

business, financial condition and results of operations may be materially adversely affected by global health epidemics, including the

COVID-19 outbreak.

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

results of operations.

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

a global pandemic.

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

In response to the

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

the Chinese New Year holiday, quarantining individuals suspected of having COVID-19, asking residents in China to stay at home

and to avoid public gathering, among other things.

During the early part of 2020, COVID-19 caused temporary closure of our

CMP production, and as a result, our revenue of CMP decreased by 49.89%.in the first quarter of 2020.

It is, however, still unclear

how the pandemic will evolve going forward, and we cannot assure you whether the COVID-19 pandemic will again bring about

significant negative impact on our business operations, financial condition and operating results, including but not limited to

negative impact to our total revenues.

While we have

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

as a global pandemic.

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

for 2021 cannot be reasonably estimated at this time.

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

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

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

Existing insurance

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

We are still assessing our business

operations and the total impact COVID-19 may have on our results and financial condition, but there can be no assurance that this

analysis will enable us to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns

in business sentiment generally.

In order to comply with PRC

regulatory requirements, we operate our businesses through companies with which we have contractual relationships but in which

we do not have controlling ownership.

We do not have direct

or indirect equity ownership of Dongfang Paper which operates a majority of our business.

Although we have entered into contractual

arrangements with Dongfang Paper and its individual owners pursuant to which we receive an economic interest in Dongfang Paper,

and exert a controlling influence over Dongfang Paper, in a manner substantially similar to a controlling equity interest, these

contractual arrangements are not as effective in providing control over Dongfang Paper as direct ownership.

For example, Dongfang

Paper may be unwilling or unable to perform their contractual obligations under our commercial agreements, including payment of

consulting fees under the Exclusive Technical Service and Business Consulting Agreement as they become due.

If that were to occur,

we would not be able to conduct our operations in the manner currently planned.

In addition, we may not succeed in enforcing our

rights under the contractual arrangements insofar as our contractual rights and legal remedies under Chinese law may be inadequate.

Furthermore, Dongfang Paper may seek to renew their agreements on terms that are disadvantageous to us.

If we are unable to renew

these agreements on favorable terms when these agreements expire, or to enter into similar agreements with other parties, we will

lose control of Dongfang Paper.

Because we rely on the consulting

services agreement with Dongfang Paper for essentially all of our revenue and cash flows, any difficulty for Dongfang Paper to

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

We are a holding company

and currently conduct business through Dongfang Paper.

As a result, we rely on payments from the consulting services agreement

which forms a part of the contractual arrangements between Baoding Shengde and Dongfang Paper.

Since Baoding Shengde is not a legal

shareholder of Dongfang Paper under PRC statutes, the arrangement for Dongfang Paper to pay a substantial portion of its net income

to Baoding Shengde may be challenged by the PRC government, which could prevent us from receiving required funds or making required

payments to some of our service providers.

If the PRC government determines

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

adversely affected.

Although we believe

the restructuring transaction and our current business operations are in compliance with the current laws in China, we cannot be

sure that the PRC government would share the same view.

If we are determined not to be in compliance, the PRC government could

levy fines, revoke our business and operating licenses, require us to discontinue or restrict our operations, restrict our right

to collect revenues, require us to restructure our business, corporate structure or operations, impose additional conditions or

requirements with which we may not be able to comply, impose restrictions on our business operations or on our customers, or take

other regulatory or enforcement actions against us that could be harmful to our business.

As a result, our business in the PRC

could be materially adversely affected.

The shareholders of Dongfang Paper may have potential

conflicts of interests with us, which may adversely affect our business.

We operate most of

our businesses through Dongfang Paper.

Our Chairman, Chief Executive Officer and 4.7% shareholder, Zhenyong Liu, owns 93.39%

of the equity interest in Dongfang Paper.

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

assure you that when conflicts of interest arise, he will act in the best interests of our Company or that any conflict of interest

will be resolved in our favor.

These conflicts may result in management decisions that could negatively affect our operations and

potentially result in the loss of opportunities.

Our arrangements with Dongfang Paper

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

on our income and expenses.

We could face material

and adverse tax consequences if the PRC tax authorities determine that our contracts with Dongfang Paper and its shareholders were

not entered into based on arm’s length negotiations.

If the PRC tax authorities determine that these contracts were not entered

into on an arm’s length basis, they may adjust our income and expenses for PRC tax purposes in the form of a transfer pricing

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

The exercise of our option to purchase

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

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

by Dongfang Paper that conflict with our interests.

Our Call Option Agreement

with Dongfang Paper and its shareholders gives our Chinese subsidiary, Baoding Shengde or its designated entity or natural person,

the option to purchase all or part of the equity interests in Dongfang Paper.

The option may not be exercised by Baoding Shengde

if the exercise would violate any applicable laws and regulations in China or cause any license or permit held by, and necessary

for the operation of Dongfang Paper, to be cancelled or invalidated.

Under the laws of China, if a foreign entity, through a foreign

investment company that it invests in, acquires a domestic related company, China’s regulations regarding mergers and acquisitions

may technically apply to the transaction.

If these regulations apply, an examination and approval of the transaction by China’s

Ministry of Commerce (“MOFCOM”), or its local counterparts would be required.

In addition, an appraisal of the equity

interest or the assets to be acquired would also be mandatory.

Since the scope of business activities (making of cultural paper

products) as defined in the business license of Baoding Shengde does not involve the MOFCOM approval and monitoring, we do not

believe at this time that an approval or an appraisal is required for Baoding Shengde to exercise its option to acquire Dongfang

In light of the different views on this issue, however, it is possible that the central MOFCOM office in Beijing will issue

a standardized opinion imposing the approval and appraisal requirement.

If we are not able to purchase the equity of Dongfang Paper,

then we will lose a substantial portion of our ability to control Dongfang Paper and our ability to ensure that Dongfang Paper

will act in our interests.

Our operating history may not serve as an adequate basis

to judge our future prospects and results of operations.

Dongfang Paper commenced

its current line of business operations in 1996 and received its initial Pollution Discharge Permit in September 1996, which must

be renewed every year for Dongfang Paper to stay in business.

In response to the intensifying efforts

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

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

other things.

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

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

It is, however, still unclear how the pandemic will evolve going forward, and

we cannot assure you whether the COVID-19 pandemic will again bring about significant negative impact on our business operations,

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

While we have resumed business

operations, there remain significant uncertainties surrounding the COVID-19 outbreak and its further development as a global pandemic.

Hence, the extent of the business disruption and the related impact on our financial results and outlook for 2021 cannot be reasonably

estimated at this time.

The extent to which the COVID-19 impacts our results will depend on future developments, which are highly uncertain

and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions taken globally

to contain the corona virus or treat its impact, among others.

Existing insurance coverage may not provide protection for all costs that

may arise from all such possible events.

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

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

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

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

Paper commenced its current line of business operations in 1996 and received its initial Pollution Discharge Permit in September 1996,

which must be renewed every year for Dongfang Paper to stay in business.

Although we have never had problem renewing the Pollution Discharge

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Therefore, our operating history may not provide a more meaningful basis on which to evaluate its business.

assure you that Dongfang Paper or Baoding Shengde will not incur net losses in the future.

We expect that operating expenses of

Dongfang Paper and Baoding Shengde will increase as they expand.

Any significant failure to realize anticipated revenue growth

could result in significant operating losses.

We will continue to encounter risks and difficulties frequently experienced by companies

at a similar stage of development, including our potential failure to:

● raise adequate capital for expansion and operations;

● implement our business model and strategy and adapt

and modify them as needed;

● increase awareness of our brand name, protect our reputation

and develop customer loyalty;

● manage our expanding operations and service offerings,

including the integration of any future acquisitions;

● maintain adequate control of our expenses;

● anticipate and adapt to changing conditions in paper

markets in which we operate as well as the impact of any changes in government regulations, mergers and acquisitions involving

our competitors, technological developments and other significant competitive and market dynamics.

If we are not successful in addressing any or all of

these risks, our business may be materially and adversely affected.

Dongfang Paper and Baoding Shengde’s failure to

compete effectively may adversely affect our ability to generate revenue.

Through Dongfang Paper

and Baoding Shengde, we compete in a highly developed market with companies that have significantly greater experience and history

in our industry.

We cannot assure

you that Dongfang Paper or Baoding Shengde will not incur net losses in the future.

We expect that operating expenses of Dongfang Paper

and Baoding Shengde will increase as they expand.

Any significant failure to realize anticipated revenue growth could result in significant

operating losses.

We will continue to encounter risks and difficulties frequently experienced by companies at a similar stage of development,

including our potential failure to:

raise adequate capital

for expansion and operations;

implement our business

model and strategy and adapt and modify them as needed;

increase awareness of our

brand name, protect our reputation and develop customer loyalty;

manage our expanding operations

and service offerings, including the integration of any future acquisitions;

maintain adequate control

of our expenses;

anticipate and adapt to

changing conditions in paper markets in which we operate as well as the impact of any changes in government regulations, mergers

and acquisitions involving our competitors, technological developments and other significant competitive and market dynamics.

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

Paper and Baoding Shengde’s failure to compete effectively may adversely affect our ability to generate revenue.

Dongfang Paper and Baoding Shengde, we compete in a highly developed market with companies that have significantly greater experience

and history in our industry.

If we do not compete effectively, we could lose market share and experience reduced selling prices, adversely

affecting our financial results.

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

There is also the possibility that competitors will be able to offer additional products, services, lower prices,

or other incentives that we cannot or will not offer or that will make our products less profitable.

We cannot assure you that

we will be able to compete effectively with current or future competitors or that the competitive pressures we face will not harm

our business.

We may not be able to effectively control

and manage our growth.

If our business and

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

An expansion would

increase demands on existing management, workforce and facilities.

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

There is also the possibility that competitors will be able to offer additional products, services, lower prices, or other incentives

that we cannot or will not offer or that will make our products less profitable.

We cannot assure you that we will be able to compete

effectively with current or future competitors or that the competitive pressures we face will not harm our business.

may not be able to effectively control and manage our growth.

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

would increase demands on existing management, workforce and facilities.

Failure to satisfy such increased demands could interrupt or

adversely affect our operations and cause delay in production and delivery of our paper products, as well as administrative inefficiencies.

We, through our subsidiaries, may

engage in future acquisitions that could dilute the ownership interests of our stockholders and cause us to incur debt and assume

contingent liabilities.

We, through our subsidiaries,

may review acquisition and strategic investment prospects that we believe would complement the current product offerings of Dongfang

Paper, augment its market coverage or enhance its technical capabilities, or otherwise offer growth opportunities.

time we review investments in new businesses and we, through our subsidiaries, expect to make investments in, and to acquire, businesses,

products, or technologies in the future.

We expect that when we raise funds from investors for any of these purposes we will be

either the issuer or the primary obligor while the proceeds will be forwarded to Dongfang Paper.

through our subsidiaries, may engage in future acquisitions that could dilute the ownership interests of our stockholders and cause us

to incur debt and assume contingent liabilities.

through our subsidiaries, may review acquisition and strategic investment prospects that we believe would complement the current product

offerings of Dongfang Paper, augment its market coverage or enhance its technical capabilities, or otherwise offer growth opportunities.

From time to time we review investments in new businesses and we, through our subsidiaries, expect to make investments in, and to acquire,

businesses, products, or technologies in the future.

We expect that when we raise funds from investors for any of these purposes we will

be either the issuer or the primary obligor while the proceeds will be forwarded to Dongfang Paper.

In the event of any future acquisitions,

● issue equity securities which would dilute current

stockholders’

percentage ownership;

issue equity securities

which would dilute current stockholders’ percentage ownership;

incur substantial debt;

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expend significant cash.

These actions could

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

Moreover, even if we do obtain benefits

in the form of increased sales and earnings, there may be a lag between the time when the expenses associated with an acquisition

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

Moreover, even if we do obtain

benefits in the form of increased sales and earnings, there may be a lag between the time when the expenses associated with an acquisition

are incurred and the time when we recognize such benefits.

Acquisitions and investment activities also entail numerous risks, including:

● difficulties in the assimilation of acquired operations,

technologies and/or products;

● unanticipated costs associated with the acquisition

or investment transaction;

● the diversion of management’s attention from

other business concerns;

● adverse effects on existing business relationships

with suppliers and customers;

● risks associated with entering markets in which Dongfang

Paper has no or limited prior experience;

● the potential loss of key employees of acquired organizations;

● substantial charges for the amortization of certain

purchased intangible assets, deferred stock compensation or similar items.

We cannot ensure that

we will be able to successfully integrate any businesses, products, technology, or personnel that we might acquire in the future

and our failure to do so could have a material adverse effect on our and/or Dongfang Paper’s business, operating results

and financial condition.

We are responsible for the indemnification of our officers

and directors.

difficulties in the assimilation

of acquired operations, technologies and/or products;

unanticipated costs associated

with the acquisition or investment transaction;

the diversion of management’s

attention from other business concerns;

adverse effects on existing

business relationships with suppliers and customers;

risks associated with entering

markets in which Dongfang Paper has no or limited prior experience;

the potential loss of key

employees of acquired organizations;

substantial charges for

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

cannot ensure that we will be able to successfully integrate any businesses, products, technology, or personnel that we might acquire

in the future and our failure to do so could have a material adverse effect on our and/or Dongfang Paper’s business, operating

results and financial condition.

are responsible for the indemnification of our officers and directors.

Our Articles of Incorporation

provides for the indemnification and/or exculpation of our directors, officers, employees, agents and other entities which deal

with us to the maximum extent provided, and under the terms provided, by the laws and decisions of the courts of the state of Nevada.

Although we do maintain professional error and omission insurance for the officers and directors, due to limitations of the insurance

coverage these indemnification provisions could still result in substantial expenditures which we may be unable to recoup through

the insurance and could adversely affect our business and financial conditions.

Zhenyong Liu, our Chairman of the Board and Chief

Executive Officer, Jing Hao, our Chief Financial Officer, Dahong Zhou, our Secretary, and Marco Ku Hon Wai, Wenbing Christopher

Wang, Lusha Niu, and Fuzeng Liu, our directors, are key personnel with rights to indemnification under our Articles of Incorporation.

We are dependent on certain

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

of operations.

Our success is, to

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

Zhenyong Liu, our Chief Executive Officer and Chairman of the Board, Jing Hao, our Chief Financial Officer, Dahong Zhou, our Secretary,

and Shuting Liang, Dongfang Paper’s General Engineer, Gengqi Yang, Dongfang Paper’s Vice President of Sales and Marketing,

Xuetao Chen, Dongfang Paper’s Vice President of Environmental Protection and Xiaodong Liu, Baoding Shengde’s General

provides for the indemnification and/or exculpation of our directors, officers, employees, agents and other entities which deal with us

to the maximum extent provided, and under the terms provided, by the laws and decisions of the courts of the state of Nevada.

we do maintain professional error and omission insurance for the officers and directors, due to limitations of the insurance coverage

these indemnification provisions could still result in substantial expenditures which we may be unable to recoup through the insurance

and could adversely affect our business and financial conditions.

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

Jing Hao, our Chief Financial Officer, Dahong Zhou, our Secretary, and Marco Ku Hon Wai, Wenbing Christopher Wang, Lusha Niu, and Fuzeng

Liu, our directors, are key personnel with rights to indemnification under our Articles of Incorporation.

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

condition and results of operations.

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

Zhenyong Liu, our Chief Executive Officer and Chairman of the Board, Jing Hao, our Chief Financial Officer, Dahong Zhou, our

Secretary, and Shuting Liang, Dongfang Paper’s General Engineer, Gengqi Yang, Dongfang Paper’s Vice President of Sales and

Marketing, Xuetao Chen, Dongfang Paper’s Vice President of Environmental Protection and Xiaodong Liu, Baoding Shengde’s General

Manager, perform key functions in the operation of our business.

There can be no assurance that IT Tech Packaging, Dongfang Paper

or Baoding Shengde will be able to retain these officers after the term of their employment contracts expire.

The loss of these

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

We do not carry

key man life insurance for any of our key personnel or personnel nor do we foresee purchasing such insurance to protect against

a loss of key personnel and personnel.

We are dependent upon

the services of Mr.

Zhenyong Liu for the continued growth and operation of our Company because of his experience in the industry

and his personal and business contacts in the PRC.

Liu has entered into an employment agreement with Baoding Shengde,

our wholly owned subsidiary and a PRC company, and that we have no reason to believe that Mr.

There can be no assurance that IT Tech Packaging, Dongfang Paper or

Baoding Shengde will be able to retain these officers after the term of their employment contracts expire.

The loss of these officers

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

We do not carry key man life

insurance for any of our key personnel or personnel nor do we foresee purchasing such insurance to protect against a loss of key personnel

and personnel.

are dependent upon the services of Mr.

Zhenyong Liu for the continued growth and operation of our Company because of his experience in

the industry and his personal and business contacts in the PRC.

Liu has entered into an employment agreement with Baoding

Shengde, our wholly owned subsidiary and a PRC company, and that we have no reason to believe that Mr.

Liu will discontinue his services

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and pursue our business strategy as well as our results of operations.

We may not be able to hire and retain

qualified personnel to support our growth and if we are unable to retain or hire these personnel in the future, our ability to

improve our products and implement our business objectives could be adversely affected.

We must attract, recruit

and retain a sizeable workforce of technically competent employees.

Competition for senior management and senior personnel in the

PRC is intense, the pool of qualified candidates in the PRC is very limited, and we may not be able to retain the services of our

senior executives or senior personnel, or attract and retain high-quality senior executives or senior personnel in the future.

may not be able to hire and retain qualified personnel to support our growth and if we are unable to retain or hire these personnel in

the future, our ability to improve our products and implement our business objectives could be adversely affected.

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

Competition for senior management and senior

personnel in the PRC is intense, the pool of qualified candidates in the PRC is very limited, and we may not be able to retain the services

of our senior executives or senior personnel, or attract and retain high-quality senior executives or senior personnel in the future.

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

Our operating results may fluctuate as a result of factors

beyond our control.

Our operating results

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

These factors

● the costs of paper products and development;

● the relative speed and success with which we can obtain

and maintain customers, merchants and vendors for our products;

● capital expenditure for equipment;

● marketing and promotional activities and other costs;

● changes in our pricing policies, suppliers and competitors;

● the ability of our suppliers to provide products in

a timely manner to their customers;

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

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

These factors include:

the costs of paper products

and development;

the relative speed and

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

capital expenditure for

marketing and promotional

activities and other costs;

changes in our pricing

policies, suppliers and competitors;

the ability of our suppliers

to provide products in a timely manner to their customers;

changes in operating expenses;

● increased competition in the paper markets;

● other general economic and seasonal factors.

We face risks related to product liability claims.

We presently do not

maintain product liability insurance.

We face the risk of loss because of adverse publicity associated with product liability lawsuits,

whether or not such claims are valid.

increased competition in

the paper markets;

other general economic

and seasonal factors.

face risks related to product liability claims.

presently do not maintain product liability insurance.

We face the risk of loss because of adverse publicity associated with product

liability lawsuits, whether or not such claims are valid.

We may not be able to avoid such claims.

Although product liability lawsuits in the PRC are

rare, and we have not, to date, experienced significant failure of our products, there is no guarantee that we will not face such

liability in the future.

This liability could be substantial and the occurrence of such loss or liability may have a material adverse

effect on our business, financial condition and prospects.

Our operating results also depend on the availability

and pricing of energy and raw materials.

In addition to our

dependence upon wood pulp, recycled white scrap paper and paperboard costs, our operating results depend on the availability and

pricing of energy and other raw materials.

An interruption in the supply of supplemental chemical agents could cause a material

disruption at our mill.

Although product liability lawsuits

in the PRC are rare, and we have not, to date, experienced significant failure of our products, there is no guarantee that we will not

face such liability in the future.

This liability could be substantial and the occurrence of such loss or liability may have a material

adverse effect on our business, financial condition and prospects.

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

addition to our dependence upon wood pulp, recycled white scrap paper and paperboard costs, our operating results depend on the availability

and pricing of energy and other raw materials.

An interruption in the supply of supplemental chemical agents could cause a material disruption

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

At present, our raw materials including natural gas are purchased from a number of suppliers, of which the three largest suppliers

account for over 89% of all purchases.

If any of these contracts were to be terminated for any reason, or not renewed upon expiration,

or if market conditions were to substantially change creating a significant increase in the price of natural gas and recycled paper,

we may not be able to find alternative, comparable suppliers or suppliers capable of providing coal to us on terms or in amounts

satisfactory to us.

We replaced all the

coal boilers with natural gas boiler in September 2017, but due to the gas consumption rise significantly, the government will

from time to time issue mandated restriction/suspension of natural gas supply for all natural gas consumption industries, including

our raw materials including natural gas are purchased from a number of suppliers, of which the three largest suppliers account for over

89% of all purchases.

If any of these contracts were to be terminated for any reason, or not renewed upon expiration, or if market conditions

were to substantially change creating a significant increase in the price of natural gas and recycled paper, we may not be able to find

alternative, comparable suppliers or suppliers capable of providing coal to us on terms or in amounts satisfactory to us.

replaced all the coal boilers with natural gas boiler in September 2017, but due to the gas consumption rise significantly, the government

will from time to time issue mandated restriction/suspension of natural gas supply for all natural gas consumption industries, including

the paper manufacturing industry in order to secure adequate natural gas to households uses in urban and rural areas.

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to the risks of natural gas supply restriction and above-mentioned factors.

As a result, our business, financial condition and

operating results could suffer.

A material disruption at one of our

manufacturing facilities could prevent us from meeting customer demand, reduce our sales, and/or negatively affect our net income.

Any of our manufacturing

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

of events, including:

As a result, our business, financial condition and operating

results could suffer.

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

affect our net income.

of our manufacturing facilities, or any of our machines within an otherwise operational facility, could cease operations unexpectedly

due to a number of events, including:

maintenance outages;

prolonged power failures;

● an equipment failure, including any malfunction of

our waste water treatment facilities;

● disruption in the supply of raw materials, such as

wood fiber, energy, or chemicals;

an equipment failure, including

any malfunction of our waste water treatment facilities;

disruption in the supply

of raw materials, such as wood fiber, energy, or chemicals;

a chemical spill or release;

● closure because of environmental-related concerns;

closure because of environmental-related

explosion of a boiler;

● the effect of a drought or reduced rainfall on our

water supply;

● disruptions in the transportation infrastructure, including

roads, bridges, railroad tracks, and tunnels;

● fires, floods, earthquakes, hurricanes, epidemic or

other catastrophes;

● terrorism or threats of terrorism;

the effect of a drought

or reduced rainfall on our water supply;

disruptions in the transportation

infrastructure, including roads, bridges, railroad tracks, and tunnels;

fires, floods, earthquakes,

hurricanes, epidemic or other catastrophes;

terrorism or threats of

labor difficulties;

other operational problems.

the abovementioned events were to occur, we may be unable to meet customer demand, which may adversely affect our sales and

Our certificates, permits, and licenses

related to our papermaking operations are subject to governmental control and renewal and failure to obtain renewal will cause

all or part of our operations to be terminated.

the National Environmental Protection Bureau issued Interim Measures on the Administration of Water Pollutants Discharge

Permits, requiring all companies discharging pollution into the water as a direct or indirect byproduct of production to

adhere to certain caps on pollution discharge.

Additionally, such companies were required to obtain and annually renew a

Pollution Discharge Permit in order to conduct their operations.

The PRC government has the authority to shut down a

company’s operations for its failure to maintain a valid permit.

any of the abovementioned events were to occur, we may be unable to meet customer demand, which may adversely affect our sales and net

certificates, permits, and licenses related to our papermaking operations are subject to governmental control and renewal and failure

to obtain renewal will cause all or part of our operations to be terminated.

1988, the National Environmental Protection Bureau issued Interim Measures on the Administration of Water Pollutants Discharge Permits,

requiring all companies discharging pollution into the water as a direct or indirect byproduct of production to adhere to certain caps

on pollution discharge.

On January 24, 2021, the State Council issued Regulations on the Administration of Pollutant Discharge Permits,

which has effected on March 1, 2022.Additionally, such companies were required to obtain and annually renew a Pollution Discharge Permit

in order to conduct their operations.

The PRC government has the authority to shut down a company’s operations for its failure

to maintain a valid permit.

We renewed our Pollution Discharge Permit in June 2020.

Our latest permit is effective from June 28, 2020 through June 27, 2025.

Pollution discharge Permit for Hebei Tengsheng

was effective from January 7, 2019 through January 6, 2022.

An application to renew will be filed by us with the local

environment protection agency before the expiration.

by us to obtain any certificate, permit, and license necessary for our operations or the failure by us to obtain the renewal of

any such certificate, permit or license may materially and adversely affect our business, prospects, financial condition and results

Our latest permit is effective from June 28, 2020

through June 27, 2025.

Pollution discharge Permit for Hebei Tengsheng was effective from August 10, 2021 through August 9, 2026.

An application

to renew will be filed by us with the local environment protection agency before the expiration.

failure by us to obtain any certificate, permit, and license necessary for our operations or the failure by us to obtain the renewal

of any such certificate, permit or license may materially and adversely affect our business, prospects, financial condition and results

of operation.

Compliance with environmental regulations

is expensive, and noncompliance may result in adverse publicity and potentially significant monetary damages and fines or suspension

of our business operations.

We are required to

comply with all Chinese national and local regulations regarding the protection of the environment.

with environmental regulations is expensive, and noncompliance may result in adverse publicity and potentially significant monetary damages

and fines or suspension of our business operations.

are required to comply with all Chinese national and local regulations regarding the protection of the environment.

Compliance with environmental

regulation is expensive.

The Chinese government is adopting even more stringent environmental protection and operational safety

regulations and the costs of complying with these regulations are expected to increase.

Although we have obtained all of the necessary

approvals and permits for our production facilities currently existing, we cannot assure you that we will be able to comply with

all applicable environmental protection and operational safety requirements, and obtain all of the required governmental approvals

and permits that may be or may become applicable to us on a timely basis, or at all, or will be able to complete all our registrations

and filings with the government, in time for our future projects.

The relevant governmental authorities may impose on us fines

for any non-compliance, set deadlines for rectification, and order us to cease construction or production if we fail to comply

with their requirements.

If we are unable to respond to pricing pressures, our

business may be harmed.

In order to remain

competitive, from time to time we have to adjust the prices of our products to remain competitive.

We may not have available sufficient

financial or other resources to continue to make investments necessary to maintain our competitive position.

If we fail to introduce enhancements

to our existing products or to develop new products, our business and results of operations could be adversely affected.

that our future success depends in part on our ability to enhance our existing products and develop new products in order to continue

to meet customer demand.

The Chinese government is adopting even more stringent environmental protection and operational safety regulations

and the costs of complying with these regulations are expected to increase.

Although we have obtained all of the necessary approvals

and permits for our production facilities currently existing, we cannot assure you that we will be able to comply with all applicable

environmental protection and operational safety requirements, and obtain all of the required governmental approvals and permits that

may be or may become applicable to us on a timely basis, or at all, or will be able to complete all our registrations and filings with

the government, in time for our future projects.

The relevant governmental authorities may impose on us fines for any non-compliance,

set deadlines for rectification, and order us to cease construction or production if we fail to comply with their requirements.

we are unable to respond to pricing pressures, our business may be harmed.

order to remain competitive, from time to time we have to adjust the prices of our products to remain competitive.

We may not have available

sufficient financial or other resources to continue to make investments necessary to maintain our competitive position.

we fail to introduce enhancements to our existing products or to develop new products, our business and results of operations could be

adversely affected.

believe that our future success depends in part on our ability to enhance our existing products and develop new products in order to

continue to meet customer demand.

Our failure to introduce new or enhanced products on a timely and cost-competitive basis, or the development

of processes that make our existing products obsolete, could harm our business and results of operations.

We have limited insurance coverage and may incur losses

resulting from product liability claims or business interruptions.

As the insurance industry

in China is still in an early stage of development, insurance companies in China currently offer limited business insurance products.

have limited insurance coverage and may incur losses resulting from product liability claims or business interruptions.

the insurance industry in China is still in an early stage of development, insurance companies in China currently offer limited business

insurance products.

We do not have any product liability insurance or business interruption insurance.

Based on the insurance products available in

China, even if we decide to take out business interruption coverage, such insurance as currently available offers limited coverage

compared to that offered in many other jurisdictions.

Any business disruption, natural disaster, or product liability claim could

result in our incurring substantial costs and diversion of resources, which would have an adverse effect on our business and results

Based on the insurance products

available in China, even if we decide to take out business interruption coverage, such insurance as currently available offers limited

coverage compared to that offered in many other jurisdictions.

Any business disruption, natural disaster, or product liability claim

could result in our incurring substantial costs and diversion of resources, which would have an adverse effect on our business and results

of operations.

Our failure to protect our

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

may adversely affect our business.

and ability to compete depends in part on our intellectual property.

failure to protect our intellectual property rights may undermine our competitive position, and external infringements of our intellectual

property rights may adversely affect our business.

success and ability to compete depends in part on our intellectual property.

We primarily rely on a combination of trademark, trade secret,

and copyright laws, as well as confidentiality procedures and contractual restrictions with our employees, contractors and others

to establish and protect our intellectual property rights.

However, confidentiality and license arrangements may be breached by

counterparties, and there may not be adequate remedies available to us for any such breach.

Accordingly, we may not be able to

effectively protect our intellectual property rights or to enforce our contractual rights.

In addition, our trade secrets may

be leaked or otherwise become available to, or be independently discovered by, our competitors.

The steps we take to protect our

intellectual property rights may be inadequate or we may be unable to secure intellectual property protection for some of our

Infringement of intellectual property rights continues to pose a serious risk of doing business.

the future file, patent applications on certain of our innovations.

and copyright laws, as well as confidentiality procedures and contractual restrictions with our employees, contractors and others to

establish and protect our intellectual property rights.

However, confidentiality and license arrangements may be breached by counterparties,

and there may not be adequate remedies available to us for any such breach.

Accordingly, we may not be able to effectively protect our

intellectual property rights or to enforce our contractual rights.

In addition, our trade secrets may be leaked or otherwise become available

to, or be independently discovered by, our competitors.

The steps we take to protect our intellectual property rights may be inadequate

or we may be unable to secure intellectual property protection for some of our properties.

Infringement of intellectual property rights

continues to pose a serious risk of doing business.

may in the future file, patent applications on certain of our innovations.

It is possible, however, that these innovations may not be

In addition, given the cost, effort and risks associated with patent application, we may choose not to seek patent

protection for some innovations.

Furthermore, our patent applications may not lead to granted patents, the scope of the protection

gained may be insufficient or an issued patent may be deemed invalid or unenforceable.

We also cannot guarantee that any of our

present or future patents or other intellectual property rights will not lapse or be invalidated, circumvented, challenged, or

unable to protect our intellectual property, our competitors could use our intellectual property to market offerings similar to

In addition, given the cost, effort and risks associated with patent application, we may choose not to seek patent protection

for some innovations.

Furthermore, our patent applications may not lead to granted patents, the scope of the protection gained may be

insufficient or an issued patent may be deemed invalid or unenforceable.

We also cannot guarantee that any of our present or future patents

or other intellectual property rights will not lapse or be invalidated, circumvented, challenged, or abandoned.

we are unable to protect our intellectual property, our competitors could use our intellectual property to market offerings similar to

ours and our ability to compete effectively would be impaired.

Moreover, others may independently develop technologies that are

competitive to ours or infringe on our intellectual property.

The enforcement of our intellectual property rights depends on our

legal actions against these infringers being successful, but we cannot be sure these actions will be successful, even when our

rights have been infringed.

In addition, defending our intellectual property rights might entail significant expense and diversion

of management resources.

Any of our intellectual property rights may be challenged by others or invalidated through administrative

processes or litigations.

We can provide no assurance that we will prevail in such litigations, and, even if we do prevail, we

may not obtain a meaningful relief.

Accordingly, despite our efforts, we may be unable to prevent external parties from infringing

or misappropriating our intellectual property.

Any intellectual property that we own may not provide us with competitive advantages

or may be successfully challenged by external parties.

We may be subject to intellectual

property infringement claims or other allegations, which may materially and adversely affect our business, financial condition

and prospects.

be certain that we do not or will not infringe patents, copyrights, trademarks or other intellectual property rights held by external

Moreover, others may independently develop technologies that are competitive

to ours or infringe on our intellectual property.

The enforcement of our intellectual property rights depends on our legal actions against

these infringers being successful, but we cannot be sure these actions will be successful, even when our rights have been infringed.

In addition, defending our intellectual property rights might entail significant expense and diversion of management resources.

our intellectual property rights may be challenged by others or invalidated through administrative processes or litigations.

We can provide

no assurance that we will prevail in such litigations, and, even if we do prevail, we may not obtain a meaningful relief.

despite our efforts, we may be unable to prevent external parties from infringing or misappropriating our intellectual property.

intellectual property that we own may not provide us with competitive advantages or may be successfully challenged by external parties.

may be subject to intellectual property infringement claims or other allegations, which may materially and adversely affect our business,

financial condition and prospects.

cannot be certain that we do not or will not infringe patents, copyrights, trademarks or other intellectual property rights held by external

From time to time, we may be subject to legal proceedings and claims alleging infringement of patents, trademarks, copyrights

or other intellectual property rights, or misappropriation of creative ideas or formats, or other infringement of proprietary,

which may materially and adversely affect our business, financial condition and prospects.

Risks Related To Doing Business in the PRC

Changes in the policies of

the PRC government could have a significant impact upon the business we may be able to conduct in the PRC and the profitability

of such business.

Our business operations

may be adversely affected by the current and future political environment in the PRC.

The PRC has operated as a socialist state

since the middle of the 20th century and is controlled by the Communist Party of China.

The Chinese government exerts substantial

influence and control over the manner in which we must conduct our business activities.

The PRC has only permitted provincial and

local economic autonomy and private economic activities since 1978.

The government of the PRC has exercised and continues to exercise

substantial control over virtually every sector of the Chinese economy, including the paper industry, through regulation and state

Our ability to operate in the PRC may be adversely affected by changes in Chinese laws and regulations, including those

relating to taxation, import and export tariffs, raw materials, environmental regulations, land use rights, property and other

Under its current leadership, the government of the PRC has been pursuing economic reform policies that encourage private

economic activity and greater economic decentralization.

There is no assurance, however, that the government of the PRC will continue

to pursue these policies, or that it will not significantly alter these policies from time to time without notice.

Policies of the PRC

government can have significant effects on the economic conditions of the PRC.

The PRC government has confirmed that economic development

will follow the model of a market economy.

Under this direction, we believe that the PRC will continue to strengthen its economic

and trading relationships with foreign countries and business development in the PRC will follow market forces.

or other intellectual property rights, or misappropriation of creative ideas or formats, or other infringement of proprietary, which

may materially and adversely affect our business, financial condition and prospects.

Related To Doing Business in the PRC

PRC government has significant oversight and discretion over the conduct of a PRC company’s business operations or to exert control

over any offering of securities conducted overseas and/or foreign investment in China-based issuers, and may intervene with or influence

our operations, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value

of such securities to significantly decline or be worthless, as the government deems appropriate to further regulatory, political and

societal goals.

PRC government may intervene or influence our operations at any time, which could result in a material change in our operations and/or

the value of our common stock.

For example, the PRC government has recently published new policies that significantly affected certain

industries such as the education and internet industries, and we cannot rule out the possibility that it will in the future release regulations

or policies regarding any industry that could adversely affect the business, financial condition and results of operations of our company.

Furthermore, the PRC government has also recently indicated an intent to exert more oversight and control over securities offerings and

other capital markets activities that are conducted overseas and foreign investment in China-based companies.

Any such action, once taken

by the PRC government, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors

and cause the value of such securities to significantly decline or in extreme cases, become worthless.

the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance

notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed

overseas using variable interest entity structure, adopting new measures to extend the scope of cyber security reviews, and expanding

the efforts in anti-monopoly enforcement.

Currently, these statements and regulatory actions have had no impact on our daily business

operation, the ability to accept foreign investments and list our securities on an U.S.

or other foreign exchange.

Since these statements

and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and

what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and

the potential impact such modified or new laws and regulations will have on our daily business operation, the ability to accept foreign

investments and list our securities on an U.S.

or other foreign exchange.

Our business may

be subject to a variety of PRC laws and other obligations regarding cyber security and data protection.

business may be subject to PRC laws relating to the collection, use, sharing, retention, security, and transfer of confidential and private

information, such as personal information and other data.

These laws continue to develop, and the PRC government may adopt other rules

and restrictions in the future.

Non-compliance could result in penalties or other significant legal liabilities.

Pursuant to the PRC Cyber security Law, which was promulgated by the

Standing Committee of the National People’s Congress on November 7, 2016 and took effect on June 1, 2017, personal information and

important data collected and generated by a critical information infrastructure operator in the course of its operations in China must

be stored in China, and if a critical information infrastructure operator purchases internet products and services that affects or may

affect national security, it should be subject to cyber security review by the Cyberspace Administration of China (“CAC”).

Due to the lack of further interpretations, the exact scope of “critical information infrastructure operator” remains unclear.

April 13, 2020, twelve Chinese government agencies jointly promulgated the Measures for Cyber security Review (2020 version) (“Old

Measures”), which became effective on June 1, 2020, set forth the cyber security review mechanism for critical information

infrastructure operators, and provided that critical information infrastructure operators (“CIIOs”) who intend to procure

network products and services that affect or may affect national security shall be subject to a cyber security review.

2021, the Standing Committee of the National People’s Congress promulgated the PRC Data Security Law, which took effect in September 2021.

The Data Security Law provides for a security review procedure for the data activities that may affect national security.

the CAC issued the Measures of Cyber security Review (Revised Draft for Comments) on July 10, 2021, which requires operators with personal

information of more than one million users who want to list abroad to file a cyber security review with the CAC.

Furthermore, the

General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the

Opinions on Severe and Lawful Crackdown on Illegal Securities Activities, which was available to the public on July 6, 2021.

These opinions

emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based

These opinions proposed to take effective measures, such as promoting the construction of relevant regulatory systems, to deal

with the risks and incidents facing China-based overseas-listed companies and the demand for cyber security and data privacy protection.

Data Security Law also sets forth the data security protection obligations for entities and individuals handling personal data, including

that no entity or individual may acquire such data by stealing or other illegal means, and the collection and use of such data should

not exceed the necessary limits The costs of compliance with, and other burdens imposed by, PRC Cyber security Law and any other cyber

security and related laws may limit the use and adoption of our products and services and could have an adverse impact on our business.

Further, if the enacted version of the Measures for Cyber security Review mandates clearance of cyber security review and other specific

actions to be completed by companies like us, we face uncertainties as to whether such clearance can be timely obtained, or at all.

January 4, 2022, the CAC issued the revised Measures on Cyberspace Security Review (the “Revised Measures”)that has came into

effect on February 15, 2022, which required that, among others, in addition to “operator of critical information infrastructure,”

any “network platform operator data processor” controlling personal information of no less than one million users which seeks

to list in a foreign stock exchange should also be subject to cyber security review.

We do not believe we are among the “operator

of critical information infrastructure” or “network platform operator data processor” who control over one million personal

information as mentioned above;

however, the definition of “network platform operator” is unclear.

The revised draft of the

Measures for Cyber security Review is in the process of being formulated and it is also unclear on how it will be interpreted, amended

and implemented by the relevant PRC governmental authorities.

The Revised Measures also establish a Cyber security Review Office (the

“CRO”), an administrative body within the CAC, to formulate the regulations for cyber security review and to lead the cyber

security review process.

Applicable CIIOs and NP operators are required to submit an application to the CRO, and the CRO will assess whether

a cyber security review is required.

these laws, opinions and the measures were recently issued, official guidance and interpretation of these remain unclear in several respects

at this time, and the PRC government authorities may have wide discretion in the interpretation and enforcement of these laws, opinions

and the measures.

Therefore, it is uncertain whether the future regulatory changes would impose additional restrictions on our business.

believe that we are currently not be subject to the cyber security review by the CAC, given the factors discussed above.

However, there

remains uncertainty as to how the Revised Measures will be interpreted or implemented and whether the PRC regulatory agencies, including

the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the Revised Measures.

such new laws, regulations, rules, or implementation and interpretation come into effect, we will take all reasonable measures and actions

to comply and to minimize the adverse effect of such laws on us.

cannot assure you that PRC regulatory agencies, including the CAC, would take the same view as we do.

In the event that we are subject

to any mandatory cyber security review and other specific actions required by the CAC, we face uncertainty as to whether any clearance

or other required actions can be timely completed, or at all.

Given such uncertainty, we may be further required to suspend our relevant

business, or face other penalties, which could materially and adversely affect our business, financial condition, and results of operations.

in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in the PRC and the

profitability of such business.

business operations, financial condition, results of operations and prospects may be adversely affected by the current and future political

environment in the PRC.

The PRC has operated as a socialist state since the middle of the 20th century and is controlled by the Communist

Party of China.

The Chinese government exerts substantial influence and control over the manner in which we must conduct our business

The PRC has only permitted provincial and local economic autonomy and private economic activities since 1978.

The government

of the PRC has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy, including

the paper industry, through regulation and state ownership.

Our ability to operate in the PRC may be adversely affected by changes in

Chinese laws and regulations, including those relating to taxation, import and export tariffs, raw materials, environmental regulations,

land use rights, property and other matters.

Under its current leadership, the government of the PRC has been pursuing economic reform

policies that encourage private economic activity and greater economic decentralization.

There is no assurance, however, that the government

of the PRC will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.

of the PRC government can have significant effects on the economic conditions of the PRC.

The PRC government has confirmed that economic

development will follow the model of a market economy.

Under this direction, we believe that the PRC will continue to strengthen its

economic and trading relationships with foreign countries and business development in the PRC will follow market forces.

While we believe

that this trend will continue, there can be no assurance that this will be the case.

A change in policies

by the PRC government could adversely affect our interests by, among other factors:

changes in laws, regulations or the interpretation

thereof, confiscatory taxation, restrictions on currency conversion, imports or sources of supplies, or the expropriation or nationalization

of private enterprises.

Although the PRC government has been pursuing economic reform policies for more than three decades, there

is no assurance that the government will continue to pursue such policies or that such policies may not be significantly altered,

especially in the event of a change in leadership, social or political disruption, or other circumstances affecting the PRC’s

change in policies by the PRC government could adversely affect our interests by, among other factors:

changes in laws, regulations or

the interpretation thereof, confiscatory taxation, restrictions on currency conversion, imports or sources of supplies, or the expropriation

or nationalization of private enterprises.

Although the PRC government has been pursuing economic reform policies for more than three

decades, there is no assurance that the government will continue to pursue such policies or that such policies may not be significantly

altered, especially in the event of a change in leadership, social or political disruption, or other circumstances affecting the PRC’s

political, economic and social life.

The PRC laws and regulations governing

our current business operations are sometimes vague and uncertain.

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

PRC laws and regulations governing our current business operations are sometimes vague and uncertain.

Any changes in such PRC laws and

regulations may harm our business.

The PRC laws and regulations

governing our current business operations are sometimes vague and uncertain.

The PRC’s legal system is a civil law system

based on written statutes, in which system decided legal cases have little value as precedents unlike the common law system prevalent

in the United States.

There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations,

including but not limited to the laws and regulations governing our business, the enforcement and performance of our contractual

arrangements with our affiliated Chinese entity, Dongfang Paper, and its shareholders, or the enforcement and performance of our

arrangements with customers in the event of the imposition of statutory liens, death, bankruptcy and criminal proceedings.

Chinese government has been developing a comprehensive system of commercial laws, and considerable progress has been made in introducing

laws and regulations dealing with economic matters such as foreign investment, corporate organization and governance, commerce,

taxation and trade.

However, because these laws and regulations are relatively new, and because of the limited volume of published

cases and judicial interpretation and their lack of force as precedents, interpretation and enforcement of these laws and regulations

involve significant uncertainties.

New laws and regulations that affect existing and proposed future businesses may also be applied

retroactively.

Our major operating entity, Dongfang Paper, conducts its operations in China, and as a result, we are required to

comply with PRC laws and regulations.

We cannot assure you that our current ownership and operating structure would not be found

in violation of any current or future PRC laws or regulations.

Any of these or similar actions could significantly disrupt our

business operations or restrict us from conducting a substantial portion of our business operations, which could materially and

adversely affect our business, financial condition and results of operations.

The PRC’s legal system is a civil law system based

on written statutes, in which system decided legal cases have little value as precedents unlike the common law system prevalent in the

United States.

There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including

but not limited to the laws and regulations governing our business, the enforcement and performance of our contractual arrangements with

our VIE, Dongfang Paper, and its shareholders, or the enforcement and performance of our arrangements with customers in the event of the

imposition of statutory liens, death, bankruptcy and criminal proceedings.

The Chinese government has been developing a comprehensive

system of commercial laws, and considerable progress has been made in introducing laws and regulations dealing with economic matters such

as foreign investment, corporate organization and governance, commerce, taxation and trade.

However, because these laws and regulations

are relatively new, and because of the limited volume of published cases and judicial interpretation and their lack of force as precedents,

interpretation and enforcement of these laws and regulations involve significant uncertainties.

New laws and regulations that affect existing

and proposed future businesses may also be applied retroactively.

Our major operating entity, Dongfang Paper, conducts its operations

in China, and as a result, we are required to comply with PRC laws and regulations.

We cannot assure you that our current ownership and

operating structure would not be found in violation of any current or future PRC laws or regulations.

Any of these or similar actions

could significantly disrupt our business operations or restrict us from conducting a substantial portion of our business operations, which

could materially and adversely affect our business, financial condition and results of operations.

We cannot predict what effect the interpretation

of existing or new PRC laws or regulations may have on our business.

If the relevant authorities find that we are in violation

of PRC laws or regulations, they would have broad discretion in dealing with such a violation, including, without limitation:

If the relevant authorities find that we are in violation of PRC

laws or regulations, they would have broad discretion in dealing with such a violation, including, without limitation:

levying fines;

● revoking Dongfang Paper’s business and other

● requiring that we restructure our ownership or operations;

● requiring that we discontinue any portion or all of

our business.

Among the material laws that we are subject to are the Price

Law of The People’s Republic of China, Measurement Law of The People’s Republic of China, Tax Law, Environmental Protection

Law, Contract Law, Patent Law, Accounting Laws and Labor Law.

A slowdown, inflation or other adverse developments in the PRC

economy may harm our customers and the demand for our services and products.

All of our operations

are conducted in the PRC and all of our revenue is generated from sales in the PRC.

Although the PRC economy has grown significantly

in recent years, we cannot assure you that this growth will continue.

In 2020, China’s Gross Domestic Product (“GDP”)

revoking Dongfang Paper’s

business and other licenses;

requiring that we restructure

our ownership or operations;

requiring that we discontinue

any portion or all of our business.

the material laws that we are subject to are the Price Law of The People’s Republic of China, Measurement Law of The People’s

Republic of China, Tax Law, Environmental Protection Law, Contract Law, Patent Law, Accounting Laws and Labor Law.

slowdown, inflation or other adverse developments in the PRC economy may harm our customers and the demand for our services and products.

of our operations are conducted in the PRC and all of our revenue is generated from sales in the PRC.

Although the PRC economy has grown

significantly in recent years, we cannot assure you that this growth will continue.

In 2021, China’s Gross Domestic Product (“GDP”)

growth rate was 8.1% as compared to 2.3% in 2020.

A slowdown in overall economic growth, an economic downturn, a recession or other

adverse economic developments in the PRC could significantly reduce the demand for our products and harm our business.

Additionally, while

the PRC economy experienced rapid growth, such growth has been uneven among various sectors of the economy and in different geographical

A slowdown in overall economic growth, an economic downturn, a recession or other adverse

economic developments in the PRC could significantly reduce the demand for our products and harm our business.

Additionally,

while the PRC economy experienced rapid growth, such growth has been uneven among various sectors of the economy and in different geographical

areas of the country.

2 unchanged sentences

rise at a rate that is insufficient to compensate for the rise in the costs of supplies, it may harm our profitability.

to control inflation in the past, the PRC government has imposed controls on bank credit, limits on loans for fixed assets and

restrictions on state bank lending.

In order to control

inflation in the past, the PRC government has imposed controls on bank credit, limits on loans for fixed assets and restrictions on state

bank lending.

Such an austere policy can lead to a slowing of economic growth.

Governmental control of currency conversion may affect

the value of your investment.

The PRC government

imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out

We receive substantially all of our revenue in Renminbi, which is currently not a freely convertible currency.

in the availability of foreign currency may restrict our ability to remit sufficient foreign currency to pay dividends, or otherwise

satisfy foreign currency denominated obligations.

Under existing PRC foreign exchange regulations, payments of current account

items, including profit distributions, interest payments and expenditures from the transaction, can be made in foreign currencies

without prior approval from the PRC State Administration of Foreign Exchange by complying with certain procedural requirements.

However, approval from appropriate governmental authorities is required where Renminbi is to be converted into foreign currency

and remitted out of the PRC to pay capital expenses such as the repayment of bank loans denominated in foreign currencies.

The PRC government

may also in the future restrict access to foreign currencies for current account transactions.

If the foreign exchange control

system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay certain

of our expenses as they come due.

The fluctuation of the Renminbi may harm your investment.

of the Renminbi against the U.S.

dollar and other currencies may fluctuate and is affected by, among other things, changes in

the PRC’s political and economic conditions.

According to the Bureau of the Fiscal Service, as of December 31, 2020, $1

is converted into 6.5249 Yuan (RMB).

As we rely entirely on revenues earned in the PRC, any significant revaluation of the

Renminbi may materially and adversely affect our cash flows, revenues and financial condition.

For example, to the extent

that we need to convert U.S.

dollars we receive from an offering of our securities into Renminbi for Dongfang Paper’s

operations, appreciation of the Renminbi against the U.S.

dollar would diminish the value of the proceeds of the offering and

this could harm our business, financial condition and results of operations because it would reduce the proceeds available to

us for capital investment in proportion to the appreciation of the Renminbi.

may rely on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may

have, and any limitation on the ability of our PRC Subsidiary to make payments to us could have a material and adverse effect on our

ability to conduct our business.

Tech Packaging Inc.

is a Nevada holding company and conducts all of its business through its operating subsidiaries and the VIE.

Packaging Inc.

relies principally on dividends and other distributions on equity from our PRC Subsidiary for cash requirements, including

for services of any debt IT Tech Packaging Inc.

PRC Subsidiary’s ability to distribute dividends is based upon its distributable earnings.

Current PRC regulations permit our PRC

Subsidiary to pay dividends to its shareholders only out of its accumulated profits, if any, determined in accordance with PRC accounting

standards and regulations.

If our PRC Subsidiary incurs debt on its own behalf in the future, the instruments governing the debt may

restrict its ability to pay dividends or make other payments to us.

Any limitation on the ability of our PRC Subsidiary to distribute

dividends or other payments to its shareholders could materially and adversely limit our ability to grow, make investments or acquisitions

that could be beneficial to our business, pay dividends or otherwise fund and conduct our business.

addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax rate of up to 10% will be applicable

to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties

or arrangements between the PRC central government and governments of other countries or regions where the non-PRC resident enterprises

are incorporated.

control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of investors’ investment.

PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of

currency out of China.

We receive a significant portion of our revenues in Renminbi.

Under our current corporate structure, our Nevada

holding company may rely on dividend payments from our PRC Subsidiary to fund any cash and financing requirements we may have.

existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade

and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of SAFE by complying with

certain procedural requirements.

Specifically, under the existing exchange restrictions, without prior approval of SAFE, cash generated

from the operations of our PRC subsidiary in China may be used to pay dividends to our Nevada holding company.

approval from or registration with appropriate government authorities is required where Renminbi is to be converted into foreign currency

and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies.

As a result, we need

to obtain SAFE approval to use cash generated from the operations of our PRC subsidiary and VIE to pay off their respective debt in a

currency other than Renminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency

other than Renminbi.

PRC government has imposed more restrictive foreign exchange policies and stepped up scrutiny of major outbound capital movement including

overseas direct investment.

More restrictions and substantial vetting process are put in place by SAFE to regulate cross-border transactions

falling under the capital account.

The PRC government may at its discretion further restrict access in the future to foreign currencies

for current account transactions.

If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to

satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders of our common stock.

regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion

may delay us from making loans or additional capital contributions to our PRC Subsidiary, which could materially and adversely affect

our liquidity and our ability to fund and expand our business.

funds IT Tech Packaging Inc.

transfers to its PRC Subsidiary, either as a shareholder loan or as an increase in registered capital, are

subject to approval by or registration with relevant governmental authorities in China.

According to the relevant PRC regulations on

foreign invested enterprises, or FIEs, in China, capital contributions to our PRC Subsidiary are subject to the approval of or report

investment information to the MOFCOM or their respective local branches and registration with a local bank authorized by the SAFE.

addition, any foreign loan procured by our PRC Subsidiary cannot exceed statutory limits and is required to be registered with SAFE or

its local branches.

Any medium or long-term loan to be provided by IT Tech Packaging Inc.

to the VIE must be registered with the National

Development and Reform Commission, or NDRC, and the SAFE or its local branches.

We may not be able to complete such registrations on

a timely basis, with respect to future capital contributions or foreign loans by IT Tech Packaging Inc.

to its PRC Subsidiary.

fail to complete such registrations, our ability to capitalize our PRC operations may be negatively affected, which could adversely affect

our liquidity and our ability to fund and expand business.

March 30, 2015, the SAFE promulgated the Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement

of Foreign-Invested Enterprises, or SAFE Circular 19, which took effect on June 1, 2015.

SAFE Circular 19 launched a nationwide

reform of the administration of the settlement of the foreign exchange capitals of FIEs and allows FIEs to settle their foreign exchange

capital at their discretion, but continues to prohibit FIEs from using the Renminbi fund converted from their foreign exchange capital

for expenditure beyond their business scopes, providing entrusted loans or repaying loans between nonfinancial enterprises.

issued the Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or SAFE

Circular 16, effective in June 2016.

Pursuant to SAFE Circular 16, enterprises registered in China may also convert their foreign

debts from foreign currency to Renminbi on a self-discretionary basis.

SAFE Circular 16 provides an integrated standard for conversion

of foreign exchange under capital account items (including but not limited to foreign currency capital and foreign debts) on a self-discretionary

basis which applies to all enterprises registered in China.

SAFE Circular 16 reiterates the principle that Renminbi converted from foreign

currency-denominated capital of a company may not be directly or indirectly used for purposes beyond its business scope or prohibited

by PRC laws or regulations, while such converted Renminbi shall not be provided as loans to its non-affiliated entities.

As this circular

is relatively new, there remains uncertainty as to its interpretation and application and any other future foreign exchange related rules.

Violations of these Circulars could result in severe monetary or other penalties.

SAFE Circular 19 and SAFE Circular 16 may significantly

limit our ability to fund the establishment of new entities in China by the VIE, to invest in or acquire any other PRC companies through

our PRC Subsidiary, or to establish new consolidated VIE in China, which may adversely affect our business, financial condition and results

of operations.

October 23, 2019, the SAFE promulgated the Notice of the State Administration of Foreign Exchange on Further Promoting the Convenience

of Cross-border Trade and Investment, or the SAFE Circular 28, which, among other things, allows all foreign-invested companies to use

Renminbi converted from foreign currency-denominated capital for equity investments in China, as long as the equity investment is genuine,

does not violate applicable laws, and complies with the negative list on foreign investment.

However, since the SAFE Circular 28 is newly

promulgated, it is unclear how SAFE and competent banks will carry this out in practice.

light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies,

we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals

on a timely basis, if at all, with respect to future loans by IT Tech Packaging to its PRC Subsidiary or with respect to future capital

contributions by IT Tech Packaging Inc.

to its PRC Subsidiary.

If we fail to complete such registrations or obtain such approvals, our

ability to to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect

our liquidity and our ability to fund and expand our business.

fluctuation of the Renminbi may harm your investment.

value of the Renminbi against the U.S.

dollar and other currencies may fluctuate and is affected by, among other things, changes in the

PRC’s political and economic conditions.

According to the Bureau of the Fiscal Service, as of December 31, 2021, $1 is converted

into 6.3757Yuan (RMB).

As we rely entirely on revenues earned in the PRC, any significant revaluation of the Renminbi may materially

and adversely affect our cash flows, revenues and financial condition.

For example, to the extent that we need to convert U.S.

we receive from an offering of our securities into Renminbi for Dongfang Paper’s operations, appreciation of the Renminbi against

dollar would diminish the value of the proceeds of the offering and this could harm our business, financial condition and results

of operations because it would reduce the proceeds available to us for capital investment in proportion to the appreciation of the Renminbi.

Thus, if we raise 1,000,000 U.S.

dollars and the

Renminbi appreciates against the U.S.

dollar by 15%, then the proceeds will be worth only RMB5,673,826 as opposed to RMB

6,524,900 prior to the appreciation.

dollars and the Renminbi appreciates against the U.S.

dollar by 15%, then the proceeds will be worth

only RMB5,544,087 as opposed to RMB 6,375,700 prior to the appreciation.

Conversely, if we decide to convert our Renminbi into U.S.

dollars for the purpose of

making payments for dividends on our common shares or for other business purposes and the U.S.

dollar appreciates against the

Renminbi, the U.S.

for the purpose of making payments for dividends on our common shares or for other business purposes and the U.S.

dollar appreciates

against the Renminbi, the U.S.

dollar equivalent of the Renminbi we convert would be reduced in proportion to the amount the U.S.

In addition, the depreciation of significant RMB denominated assets could result in a charge to our income

statement and a reduction in the dollar value of these assets.

Thus, if Dongfang Paper has RMB1,000,000 in assets and

Renminbi is depreciated against the U.S.

dollar by 15%, then the assets will be valued at $133,269 as opposed to $153,259

prior to the depreciation.

In addition, the depreciation of significant RMB denominated assets could result in a charge to our income statement and

a reduction in the dollar value of these assets.

Thus, if Dongfang Paper has RMB1,000,000 in assets and Renminbi is depreciated against

dollar by 15%, then the assets will be valued at $136,387 as opposed to $156,846 prior to the depreciation.

July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S.

Under the new policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign

This change in policy resulted in an approximately 1.65% depreciation of the Renminbi against the U.S.

December 31, 2019.

While the international reaction to the Renminbi revaluation has generally been positive, there remains

significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in

a further and more significant depreciation of the Renminbi against the U.S.

Failure to comply with PRC

regulations relating to the establishment of offshore special purpose companies by PRC residents may materially adversely affect

The PRC State Administration

of Foreign Exchange, or SAFE, has promulgated regulations, including the Notice on Relevant Issues Relating to Domestic Residents’

Investment and Financing and Round-Trip Investment through Special Purpose Vehicles, or SAFE Circular No.

37, effective on July

14, 2014, and its appendixes, that require PRC residents, including PRC institutions and individuals, to register with local branches

of the SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas

investment and financing, with such PRC residents’

legally owned assets or equity interests in domestic enterprises or offshore

assets or interests, referred to in SAFE Circular No.

37 as a “special purpose vehicle.”

SAFE Circular No.

requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such

as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material

In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration,

the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent

and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in

their ability to contribute additional capital into its PRC subsidiary.

Further, failure to comply with the various SAFE registration

requirements described above could result in liability under PRC law for foreign exchange evasion.

Because of uncertainty

over the interpretation of Circular 37, we cannot assure you that, if challenged by government agencies, the structure of our organization

has fully complied with all applicable registrations or approvals required by Circular 37.

Moreover, because of uncertainty over

how Circular 37 will be interpreted and implemented, and how or whether SAFE will apply it to us, we cannot predict how it will

the new policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies.

This change in policy resulted in an approximately 2.44% appreciation of the Renminbi against the U.S.

dollar as of December 31, 2021.

While the international reaction to the Renminbi revaluation has generally been positive, there remains significant international pressure

on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant depreciation

of the Renminbi against the U.S.

to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may materially adversely

PRC State Administration of Foreign Exchange, or SAFE, has promulgated regulations, including the Notice on Relevant Issues Relating

to Domestic Residents’ Investment and Financing and Round-Trip Investment through Special Purpose Vehicles, or SAFE Circular No.

37, effective on July 14, 2014, and its appendixes, that require PRC residents, including PRC institutions and individuals, to register

with local branches of the SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose

of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises

or offshore assets or interests, referred to in SAFE Circular No.

37 as a “special purpose vehicle.” SAFE Circular No.

further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such

as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event.

In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the

PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying

out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in their ability to contribute

additional capital into its PRC subsidiary.

Further, failure to comply with the various SAFE registration requirements described above

could result in liability under PRC law for foreign exchange evasion.

of uncertainty over the interpretation of Circular 37, we cannot assure you that, if challenged by government agencies, the structure

of our organization has fully complied with all applicable registrations or approvals required by Circular 37.

Moreover, because of uncertainty

over how Circular 37 will be interpreted and implemented, and how or whether SAFE will apply it to us, we cannot predict how it will

affect our business operations or future strategies.

A failure by such PRC resident beneficial holders or future PRC resident stockholders

to comply with Circular 37, if SAFE requires it, could subject these PRC resident beneficial holders to fines or legal sanctions,

restrict our overseas or cross-border investment activities, limit our subsidiaries’

ability to make distributions or pay

dividends or affect our ownership structure, which could adversely affect our business and prospects.

The PRC’s legal and judicial system may not adequately

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

The PRC legal and

judicial system may negatively impact foreign investors.

In 1982, the National People’s Congress amended the Constitution

of China to authorize foreign investment and guarantee the “lawful rights and interests”

of foreign investors in the

However, the PRC’s system of laws is not yet comprehensive.

The legal and judicial systems in the PRC are still rudimentary,

and enforcement of existing laws is inconsistent.

Many judges in the PRC lack the depth of legal training and experience that would

be expected of a judge in a more developed country.

Because the PRC judiciary is relatively inexperienced in enforcing the laws

that do exist, anticipation of judicial decision-making is more uncertain than would be expected in a more developed country.

may be impossible to obtain swift and equitable enforcement of laws that do exist, or to obtain enforcement of the judgment of

one court by a court of another jurisdiction.

The PRC’s legal system is based on the civil law regime, that is, it is based

on written statutes;

a decision by one judge does not set a legal precedent that is required to be followed by judges in other

In addition, the interpretation of Chinese laws may be varied to reflect domestic political changes.

The trend of legislation

over the last 20 years has significantly enhanced the protection of foreign investment and allowed for more control by foreign

parties of their investments in Chinese enterprises.

However, the promulgation of new laws, changes to existing laws and the pre-emption

of local regulations by national laws may adversely affect foreign investors.

A change in leadership, social or political disruption,

or unforeseen circumstances affecting the PRC’s political, economic or social life, may affect the PRC government’s

to comply with Circular 37, if SAFE requires it, could subject these PRC resident beneficial holders to fines or legal sanctions, restrict

our overseas or cross-border investment activities, limit our subsidiaries’ ability to make distributions or pay dividends or affect

our ownership structure, which could adversely affect our business and prospects.

the approval and/or other requirements of the CSRC or other PRC governmental authorities are currently not required, they may be required,

in connection with our oversea listing under PRC rules, regulations or policies, and, if required, we cannot predict whether or how soon

we will be able to obtain such approval.

August 8, 2006, six PRC regulatory agencies, including the China Securities Regulatory Commission (“CSRC”), promulgated the

Regulation on Mergers and Acquisitions of Domestic Companies by Foreign Investors (“M&A Rules”), which became effective

on September 8, 2006 and then was further amended on June 22, 2009.

This regulation, among other things, has certain provisions that

purport to require offshore SPVs formed for the purpose of listing and controlled by PRC individuals or companies, to obtain the approval

of the CSRC prior to listing their securities on an overseas stock exchange.

On September 21, 2006, the CSRC published on its official

website a notice specifying the documents and materials that are required to be submitted for obtaining CSRC approval.

In addition, the PRC government

authorities may strengthen oversight over offerings that are conducted overseas.

For instance, on July 6, 2021, the relevant PRC governmental

authorities promulgated the Opinions on Strictly Cracking Down on Illegal Securities Activities, which emphasized the need to strengthen

the supervision over overseas listings by PRC companies.

Effective measures, such as promoting the construction of relevant regulatory

systems, are to be taken to deal with the risks and incidents of China-based overseas-listed companies, cyber security and data privacy

protection requirements and similar matters.

The Measures for Cyber security Review issued by the CAC on January 4, 2022 also required

that, among others, “critical information infrastructure” or internet platform operator holding over one million users’

personal information to apply for a cyber security review before any listing at a foreign country.

These statements and regulations are

recently issued and there remain substantial uncertainties about their interpretation and implementation.

December 24, 2021, CSRC issued Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic

Companies (Draft for Comments) (the “Administration Provisions”), and the Administrative Measures for the Filing of Overseas

Securities Offering and Listing by Domestic Companies (the “Measures”), which are open for public comments by January 23,

The Administration Provisions and Measures for overseas listings lay out specific requirements for filing documents and include

unified regulation management, strengthening regulatory coordination, and cross-border regulatory cooperation.

Domestic companies seeking

to list abroad must carry out relevant security screening procedures if their businesses involve supervisions such as foreign investment

security and cyber security reviews.

Companies endangering national security are among those off-limits for overseas listings.

to Relevant Officials of the CSRC Answered Reporter Questions (“CSRC Answers”), after the Administration Provisions and Measures

are implemented upon completion of public consultation and due legislative procedures, the CSRC will formulate and issue guidance for

filing procedures to further specify the details of filing administration and ensure that market entities could refer to clear guidelines

for filing, which means it will still take time to put the Administration Provisions and Measures into effect.

As the Administration

Provisions and Measures have not yet come into effect, we are currently unaffected by them.

However, according to CSRC Answers, only

new initial public offerings and refinancing by existing overseas listed Chinese companies will be required to go through the filing

other existing overseas listed companies will be allowed a sufficient transition period to complete their filing procedure.

However, it is uncertain when the Administration Provision and the Measures will take effect or if they will take effect as currently

We believe that, as of the

date of this annual report, we are not required to obtain any permission from PRC authorities to operate and issue securities to foreign

investors, including permissions from the CSRC or CAC.

However, there is no guarantee that this will continue to be the case in the future

in connection with the listing or continued listing of our securities on NYSE American, or even in the event such permission or approval

is required and obtained, the approval could be subsequently revoked or rescinded.

Any failure to obtain or a delay in obtaining the necessary

permissions from the PRC authorities to conduct offerings or listing outside of China may subject us to sanctions imposed by the PRC regulatory

If we do not receive or maintain the approvals, or we inadvertently conclude that such approvals are not required, or applicable

laws, regulations, or interpretations change such that we are required to obtain approval in the future, we may be subject to an investigation

by competent regulators, fines or penalties, or an order prohibiting us from conducting an offering, and these risks could result in a

material adverse change in our operations and the value of our company’s securities, significantly limit or completely hinder our

ability to offer or continue to offer securities to investors, or cause such securities to significantly decline in value or become worthless.

of the date of this annual report, we have not received any inquiry, notice, warning, sanctions or regulatory objection to our operations

from the CSRC, CAC or any other PRC governmental authorities, and our PRC Subsidiary and the VIE have obtained all requisite permissions

from PRC governmental authorities to operate our business as currently conducted under relevant PRC laws and regulations and no permissions

have been denied by governmental authorities.

M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors,

which could make it more difficult for us to pursue growth through acquisitions in China.

other things, the M&A Rules established additional procedures and requirements that could make merger and acquisition activities

by foreign investors more time consuming and complex.

Such regulation requires, among other things, that the Ministry of Commerce be

notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise or a

foreign company with substantial PRC operations, if certain thresholds under the Provisions on Thresholds for Prior Notification of Concentrations

of Undertakings, issued by the State Council in 2008, are triggered.

Moreover, the Anti-Monopoly Law requires that the anti-monopoly

law enforcement authority shall be notified in advance of any concentration of undertaking if certain thresholds are triggered.

the security review rules issued by the State Council that became effective in March 2011 specify that mergers and acquisitions

by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign

investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict

review by the Ministry of Commerce, and the rules prohibit any activities attempting to bypass a security review, including by structuring

the transaction through a proxy or contractual control arrangement.

the future, we may grow our business by acquiring complementary businesses.

Complying with the requirements of the above-mentioned regulations

and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining

approval from the Ministry of Commerce or its local counterparts may delay or inhibit our ability to complete such transactions, which

could affect our ability to expand our business or maintain our market share.

PRC’s legal and judicial system may not adequately protect our business and operations and the rights of foreign investors.

PRC legal and judicial system may negatively impact foreign investors.

In 1982, the National People’s Congress amended the Constitution

of China to authorize foreign investment and guarantee the “lawful rights and interests” of foreign investors in the PRC.

However, the PRC’s system of laws is not yet comprehensive.

The legal and judicial systems in the PRC are still rudimentary, and

enforcement of existing laws is inconsistent.

Many judges in the PRC lack the depth of legal training and experience that would be expected

of a judge in a more developed country.

Because the PRC judiciary is relatively inexperienced in enforcing the laws that do exist, anticipation

of judicial decision-making is more uncertain than would be expected in a more developed country.

It may be impossible to obtain swift

and equitable enforcement of laws that do exist, or to obtain enforcement of the judgment of one court by a court of another jurisdiction.

The PRC’s legal system is based on the civil law regime, that is, it is based on written statutes;

a decision by one judge does

not set a legal precedent that is required to be followed by judges in other cases.

In addition, the interpretation of Chinese laws may

be varied to reflect domestic political changes.

trend of legislation over the last 20 years has significantly enhanced the protection of foreign investment and allowed for more control

by foreign parties of their investments in Chinese enterprises.

However, the promulgation of new laws, changes to existing laws and the

pre-emption of local regulations by national laws may adversely affect foreign investors.

A change in leadership, social or political

disruption, or unforeseen circumstances affecting the PRC’s political, economic or social life, may affect the PRC government’s

ability to continue to support and pursue these reforms.

Such a shift could have a material adverse effect on our business and

The practical effect

of the PRC legal system on our business operations in the PRC can be viewed from two separate but intertwined considerations.

as a matter of substantive law, the foreign invested enterprise laws provide significant protection from government interference.

Such a shift could have a material adverse effect on our business and prospects.

practical effect of the PRC legal system on our business operations in the PRC can be viewed from two separate but intertwined considerations.

First, as a matter of substantive law, the foreign invested enterprise laws provide significant protection from government interference.

In addition, these laws guarantee the full enjoyment of the benefits of corporate articles and contracts to foreign invested enterprise

2 unchanged sentences

from the general corporation laws of the United States.

Similarly, the PRC accounting laws mandate accounting practices, which

are not consistent with U.S.

Similarly, the PRC accounting laws mandate accounting practices, which are not

consistent with U.S.

generally accepted accounting principles.

PRC’s accounting laws require that an annual “statutory

be performed in accordance with PRC accounting standards and that the books of account of foreign invested enterprises

are maintained in accordance with Chinese accounting laws.

Article 14 of the People’s Republic of China Wholly Foreign-Owned

Enterprise Law requires a wholly foreign-owned enterprise to submit certain periodic fiscal reports and statements to designated

financial and tax authorities, at the risk of business license revocation.

While the enforcement of substantive rights may appear

less clear than United States procedures, foreign invested enterprises and wholly foreign-owned enterprises are Chinese registered

companies, which enjoy the same status as other Chinese registered companies in business-to-business dispute resolution.

rendered by an arbitration tribunal is enforceable in accordance with the United Nations Convention on the Recognition and Enforcement

of Foreign Arbitral Awards (1958).

Therefore, as a practical matter, although no assurances can be given, the Chinese legal infrastructure,

while different in operation from its United States counterpart, should not present any significant impediment to the operation

of foreign invested enterprises.

Because our principal assets

are located outside of the United States and most of our directors and officers reside outside of the United States, it may be

difficult for you to effect service of legal process, enforce your rights based on U.S.

federal securities laws against us and

our officers or to enforce U.S.

PRC’s accounting laws require that an annual “statutory audit”

be performed in accordance with PRC accounting standards and that the books of account of foreign invested enterprises are maintained

in accordance with Chinese accounting laws.

Article 14 of the People’s Republic of China Wholly Foreign-Owned Enterprise Law requires

a wholly foreign-owned enterprise to submit certain periodic fiscal reports and statements to designated financial and tax authorities,

at the risk of business license revocation.

While the enforcement of substantive rights may appear less clear than United States procedures,

foreign invested enterprises and wholly foreign-owned enterprises are Chinese registered companies, which enjoy the same status as other

Chinese registered companies in business-to-business dispute resolution.

Any award rendered by an arbitration tribunal is enforceable

in accordance with the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958).

Therefore, as

a practical matter, although no assurances can be given, the Chinese legal infrastructure, while different in operation from its United

States counterpart, should not present any significant impediment to the operation of foreign invested enterprises.

our principal assets are located outside of the United States and most of our directors and officers reside outside of the United States,

it may be difficult for you to effect service of legal process, enforce your rights based on U.S.

federal securities laws against us

and our officers or to enforce U.S.

court judgment against us or them in the PRC.

All of our directors

and officers reside outside the United States.

In addition, our operating company is located in the PRC and substantially all of

our assets are located outside of the United States.

of our directors and officers reside outside the United States.

In addition, our operating company is located in the PRC and substantially

all of our assets are located outside of the United States.

It may therefore be difficult for investors in the United States to enforce

their legal rights based on the civil liability provisions of the U.S.

Federal securities laws against us in the courts of either

Federal securities laws against us in the courts of either the

or the PRC and, even if civil judgments are obtained in U.S.

courts, to enforce such judgments in PRC courts.

it is unclear if extradition treaties now in effect between the United States and the PRC would permit effective enforcement against

us or our officers and directors of criminal penalties, under the U.S.

Further, it is unclear

if extradition treaties now in effect between the United States and the PRC would permit effective enforcement against us or our officers

and directors of criminal penalties, under the U.S.

Federal securities laws or otherwise.

may be difficult for overseas regulators to conduct investigation or collect evidence within China.

claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law

or practicality in China.

For example, in China, there are significant legal and other obstacles to providing information needed

for regulatory investigations or litigations initiated outside China.

Although the authorities in China may establish a regulatory

cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision

and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the

absence of mutual and practical cooperation mechanism.

Furthermore, according to Article 177 of the PRC Securities Law, or Article

177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or

evidence collection activities within the territory of the PRC.

While detailed interpretation of or implementation rules under

Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or

evidence collection activities within China may further increase difficulties faced by you in protecting your interests.

We may be required to broaden the coverage of the mandatory

social security insurance programs under the Labor Law of the PRC.

The PRC Labor Law,

effective January 1, 2008, requires that employers enroll in the following social security insurance programs and offer certain

employer-sponsored premium benefits to eligible employees:

claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or

practicality in China.

For example, in China, there are significant legal and other obstacles to providing information needed for regulatory

investigations or litigations initiated outside China.

Although the authorities in China may establish a regulatory cooperation mechanism

with the securities regulatory authorities of another country or region to implement cross-border supervision and administration,

such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical

cooperation mechanism.

Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020,

no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory

While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for

an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase

difficulties faced by our investors in protecting their interests.

may be required to broaden the coverage of the mandatory social security insurance programs under the Labor Law of the PRC.

PRC Labor Law, effective January 1, 2008, requires that employers enroll in the following social security insurance programs and offer

certain employer-sponsored premium benefits to eligible employees:

(1) retirement endowment, (2) healthcare insurance, (3) unemployment

insurance, (4) workers’

compensation insurance, and (5) pregnancy insurance.

Of these insurance programs, the retirement

endowment fund requires employee withholdings of 4% to 8% of the gross compensation, while the employer’s matching contribution

varies from 16% to 20% of such compensation.

While the Company is enrolled in the retirement endowment fund and is withholding

employees’

portion and the employer’s portion of the endowment contribution, many of the Company’s employees

have elected to waive their coverage under these mandatory social security insurance programs in favor of certain other low-cost,

local government-sponsored social security insurance programs for residents in non-urban districts.

Although we have verified with

the local government agencies for the validity of the employee waivers and reasonably believe that we are not required to cover

the employees who waived the benefits, the local government may change its policy and ask us to broaden our insurance coverage

to those who have specifically waived their rights.

The current tensions in

international trade and rising political tensions, particularly between U.S.

and China, may adversely impact our business, financial

condition, and results of operations.

insurance, (4) workers’ compensation insurance, and (5) pregnancy insurance.

Of these insurance programs, the retirement endowment

fund requires employee withholdings of 4% to 8% of the gross compensation, while the employer’s matching contribution varies from

16% to 20% of such compensation.

While the Company is enrolled in the retirement endowment fund and is withholding employees’ portion

and the employer’s portion of the endowment contribution, many of the Company’s employees have elected to waive their coverage

under these mandatory social security insurance programs in favor of certain other low-cost, local government-sponsored social security

insurance programs for residents in non-urban districts.

Although we have verified with the local government agencies for the validity

of the employee waivers and reasonably believe that we are not required to cover the employees who waived the benefits, the local government

may change its policy and ask us to broaden our insurance coverage to those who have specifically waived their rights.

current tensions in international trade and rising political tensions, particularly between U.S.

and China, may adversely impact our

business, financial condition, and results of operations.

Although cross-border business

2 unchanged sentences

position, or prevent us from being able to conduct business in certain countries.

If any new tariffs, legislation, or regulations

are implemented, or if existing trade agreements are renegotiated, such changes could adversely affect our business, financial

condition, and results of operations.

Recently, there have been heightened tensions in international economic relations, such

as the one between the United States and China.

government has recently imposed, and has recently proposed to impose

additional, new, or higher tariffs on certain products imported from China to penalize China for what it characterizes as unfair

trade practices.

China has responded by imposing, and proposing to impose additional, new, or higher tariffs on certain products

imported from the United States.

Following mutual retaliatory actions for months, on January 15, 2020, the United States

and China entered into the Economic and Trade Agreement Between the United States of America and the People’s Republic

of China as a phase one trade deal, effective on February 14, 2020.

political tensions between the United States and China have escalated due to, among other things, trade disputes, the COVID-19 outbreak,

sanctions imposed by the U.S.

Department of Treasury on certain officials of the Hong Kong Special Administrative Region

and the PRC central government and the executive orders issued by U.S.

If any new tariffs, legislation, or regulations are

implemented, or if existing trade agreements are renegotiated, such changes could adversely affect our business, financial condition,

and results of operations.

Recently, there have been heightened tensions in international economic relations, such as the one between

the United States and China.

government has recently imposed, and has recently proposed to impose additional, new, or higher

tariffs on certain products imported from China to penalize China for what it characterizes as unfair trade practices.

China has responded

by imposing, and proposing to impose additional, new, or higher tariffs on certain products imported from the United States.

mutual retaliatory actions for months, on January 15, 2020, the United States and China entered into the Economic and Trade

Agreement between the United States of America and the People’s Republic of China as a phase one trade deal, effective on February 14,

addition, political tensions between the United States and China have escalated due to, among other things, trade disputes, the

COVID-19 outbreak, sanctions imposed by the U.S.

Department of Treasury on certain officials of the Hong Kong Special Administrative

Region and the PRC central government and the executive orders issued by U.S.

President Donald J.

2 unchanged sentences

Rising political tensions could reduce levels of trades,

investments, technological exchanges and other economic activities between the two major economies, which would have a material

adverse effect on global economic conditions and the stability of global financial markets.

Any of these factors could have a

material adverse effect on our business, prospects, financial condition and results of operations.

direct impact of the current international trade tensions and political tensions between the United States and China, and

any escalation of such tensions, on the paper making industry in China is uncertain, the negative impact on general, economic,

political and social conditions may adversely impact our business, financial condition and results of operations.

Risks Related to Our Corporate

Our current corporate structure

and business operations may be affected by the newly enacted Foreign Investment Law.

2019, the National People’s Congress, China’s national legislative body (the “NPC”) approved the Foreign

Investment Law, which became effective on January 1, 2020.

investments, technological exchanges and other economic activities between the two major economies, which would have a material adverse

effect on global economic conditions and the stability of global financial markets.

Any of these factors could have a material adverse

effect on our business, prospects, financial condition and results of operations.

the direct impact of the current international trade tensions and political tensions between the United States and China, and any

escalation of such tensions, on the paper making industry in China is uncertain, the negative impact on general, economic, political

and social conditions may adversely impact our business, financial condition and results of operations.

Related to Our Corporate Structure

current corporate structure and business operations may be affected by the newly enacted Foreign Investment Law.

March 15, 2019, the National People’s Congress, China’s national legislative body (the “NPC”) approved the

Foreign Investment Law, which became effective on January 1, 2020.

Since it is relatively new, uncertainties exist in relation to

its interpretation and its implementation rules that are yet to be issued.

The Foreign Investment Law does not explicitly classify

whether variable interest entities that are controlled through contractual arrangements would be deemed as foreign-invested enterprises

if they are ultimately “controlled”

by foreign investors.

The Foreign Investment Law does not explicitly classify whether

variable interest entities that are controlled through contractual arrangements would be deemed as foreign-invested enterprises

if they are ultimately “controlled” by foreign investors.

However, it has a catch-all provision under the definition

of “foreign investment”

that includes investments made by foreign investors in China through other means as provided

by laws, administrative regulations or the State Council.

Therefore, it still leaves leeway for future laws, administrative regulations

or provisions of the State Council to provide for contractual arrangements as a form of foreign investment.

There can be no assurance

that our control over our consolidated VIEs through contractual arrangements will not be deemed as a foreign investment in the

Investment Law grants national treatment to foreign-invested entities, except for those foreign-invested entities that

operate in industries specified as either “restricted”

or “prohibited”

from foreign investment in the

Special Administrative Measures for Market Access of Foreign Investment (Negative List), which was approved by the CPC Central

Committee and the State Council and issued by the State Development and Reform Commission and the Ministry of Commerce with an

effective date of July 30, 2019.

The Foreign Investment Law provides that foreign-invested entities operating in “restricted”

or “prohibited”

industries will require market entry clearance and other approvals from relevant PRC government authorities.

If our control over our consolidated VIEs through contractual arrangements are deemed as foreign investment in the future, and

any business of our consolidated VIEs is considered “restricted”

or “prohibited”

from foreign investment

under the “negative list”

effective at the time, we may be deemed to be in violation of the Foreign Investment Law,

the contractual arrangements that allow us to have control over our consolidated VIEs may be deemed as invalid and illegal, and

we may be required to unwind such contractual arrangements and/or restructure our business operations, any of which may have a

material adverse effect on our business operation.

if future laws, administrative regulations or provisions mandate further actions to be taken by companies with respect to existing

contractual arrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner,

Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges

could materially and adversely affect our current corporate structure and business operations.

Any failure by our consolidated

VIEs or their shareholders to perform their obligations under our contractual arrangements with them would have a material adverse

effect on our business.

our wholly foreign-owned enterprise in the PRC, have entered into a series of contractual arrangements with our consolidated

of “foreign investment” that includes investments made by foreign investors in China through other means as provided by laws,

administrative regulations or the State Council.

Therefore, it still leaves leeway for future laws, administrative regulations or provisions

of the State Council to provide for contractual arrangements as a form of foreign investment.

There can be no assurance that our control

over our consolidated VIEs through contractual arrangements will not be deemed as a foreign investment in the future.

Foreign Investment Law grants national treatment to foreign-invested entities, except for those foreign-invested entities that

operate in industries specified as either “restricted” or “prohibited” from foreign investment in the Special

Administrative Measures for Market Access of Foreign Investment (Negative List), which was approved by the CPC Central Committee and

the State Council and issued by the State Development and Reform Commission and the Ministry of Commerce with an effective date of July 30,

2019and renew on January 1, 2022.

The Foreign Investment Law provides that foreign-invested entities operating in “restricted”

or “prohibited” industries will require market entry clearance and other approvals from relevant PRC government authorities.

If our control over our consolidated VIEs through contractual arrangements are deemed as foreign investment in the future, and any business

of our consolidated VIEs is considered “restricted” or “prohibited” from foreign investment under the “negative

list” effective at the time, we may be deemed to be in violation of the Foreign Investment Law, the contractual arrangements that

allow us to have control over our consolidated VIEs may be deemed as invalid and illegal, and we may be required to unwind such contractual

arrangements and/or restructure our business operations, any of which may have a material adverse effect on our business operation.

if future laws, administrative regulations or provisions mandate further actions to be taken by companies with respect to existing contractual

arrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all.

to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely

affect our current corporate structure and business operations.

failure by our consolidated VIEs or their shareholders to perform their obligations under our contractual arrangements with them would

have a material adverse effect on our business.

through our wholly foreign-owned enterprise in the PRC, have entered into a series of contractual arrangements with our consolidated

VIEs and their shareholders.

For a description of these contractual arrangements, see “Overview and Corporation History.”

If our consolidated VIEs or their shareholders fail to perform their respective obligations under these contractual arrangements,

we may incur substantial costs and expend additional resources to enforce such arrangements.

We may also have to rely on legal

remedies under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure

you will be effective under PRC laws.

For example, if the shareholders of our consolidated VIEs were to refuse to transfer their

equity interests in the consolidated VIEs to us or our designee when we exercise the purchase option pursuant to these contractual

arrangements, or if they were otherwise to act in bad faith toward us, then we may have to take legal actions to compel them to

perform their contractual obligations.

In addition, if there are any disputes or governmental proceedings involving any interest

in such shareholders’

equity interests in our VIEs, our ability to exercise shareholders’

rights or foreclose the

equity interest pledges according to the contractual arrangements may be impaired.

If these disputes or proceedings were to impair

our control over our VIEs, we may not be able to maintain effective control over our business operations in the PRC and thus would

not be able to continue to consolidate our VIEs’

financial results, which would in turn result in a material adverse effect

on our business, operations and financial condition.

We may lose the ability

to use and enjoy assets held by our consolidated VIEs that are material to the operation of our business if the entity goes bankrupt

For a description of these contractual arrangements, see “Overview and Corporation History.”

If our consolidated VIEs or their shareholders fail to perform their respective obligations under these contractual arrangements, we

may incur substantial costs and expend additional resources to enforce such arrangements.

We may also have to rely on legal remedies

under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be

effective under PRC laws.

For example, if the shareholders of our consolidated VIEs were to refuse to transfer their equity interests

in the consolidated VIEs to us or our designee when we exercise the purchase option pursuant to these contractual arrangements, or if

they were otherwise to act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual

In addition, if there are any disputes or governmental proceedings involving any interest in such shareholders’ equity

interests in our VIEs, our ability to exercise shareholders’ rights or foreclose the equity interest pledges according to the contractual

arrangements may be impaired.

If these disputes or proceedings were to impair our control over our VIEs, we may not be able to maintain

effective control over our business operations in the PRC and thus would not be able to continue to consolidate our VIEs’ financial

results, which would in turn result in a material adverse effect on our business, operations and financial condition.

order to comply with PRC regulatory requirements, we operate our businesses through companies with which we have contractual relationships

but in which we do not have controlling ownership.

do not have direct or indirect equity ownership of Dongfang Paper which operates a majority of our business.

Although we have entered

into contractual arrangements with Dongfang Paper and its individual owners pursuant to which we receive an economic interest in Dongfang

Paper, and exert a controlling influence over Dongfang Paper, in a manner substantially similar to a controlling equity interest, these

contractual arrangements are not as effective in providing control over Dongfang Paper as direct ownership.

For example, Dongfang Paper

may be unwilling or unable to perform their contractual obligations under our commercial agreements, including payment of consulting

fees under the Exclusive Technical Service and Business Consulting Agreement as they become due.

If that were to occur, we would not

be able to conduct our operations in the manner currently planned.

In addition, we may not succeed in enforcing our rights under the

contractual arrangements insofar as our contractual rights and legal remedies under Chinese law may be inadequate.

Furthermore, Dongfang

Paper may seek to renew their agreements on terms that are disadvantageous to us.

If we are unable to renew these agreements on favorable

terms when these agreements expire, or to enter into similar agreements with other parties, we will lose control of Dongfang Paper.

we rely on the consulting services agreement with Dongfang Paper for essentially all of our revenue and cash flows, any difficulty for

Dongfang Paper to pay consulting fees to Baoding Shengde under the consulting agreement may have a material adverse effect on our operations.

are a holding company and currently conduct business through Dongfang Paper in China.

As a result, we rely on payments from the consulting

services agreement which forms a part of the contractual arrangements between Baoding Shengde and Dongfang Paper.

Since Baoding Shengde

is not a legal shareholder of Dongfang Paper under PRC statutes, the arrangement for Dongfang Paper to pay a substantial portion of its

net income to Baoding Shengde may be challenged by the PRC government, which could prevent us from receiving required funds or making

required payments to some of our service providers.

If the PRC government determines that the contractual agreements

constituting part of our VIE structure do not comply with applicable PRC regulations , or if these regulations change or are interpreted

differently in the future, we may be unable to assert our contractual rights over the assets of the VIE, and our common stock may decline

Recently, the PRC government

adopted a series of regulatory actions and issued statements to regulate business operations in China, including those related to variable

interest entities.

There are currently no relevant laws or regulations in the PRC that prohibit companies whose entity interests are within

the PRC from listing on overseas stock exchanges.

Although we believe that our corporate structure and contractual arrangements comply

with current applicable PRC laws and regulations, in the event that PRC government determines that the contractual arrangements constituting

part of our VIE structure do not comply with PRC regulations, or if these regulations change or are interpreted differently in the future,

we may be unable to assert our contractual rights over the assets of the VIE, and our common stock may decline in value or be worthless.

Additionally, our common stock may decline in value or become worthless if we are unable to assert our contractual control rights over

the assets of our PRC Subsidiary that conducts all or substantially all of our business operations.

contractual arrangements under a VIE Structure may not be as effective as direct ownership in respect of our relationship with the VIE,

and thus, we may incur substantial costs to enforce the terms of the arrangements, which we may not be able to enforce at all.

contractual arrangements may not be as effective as direct ownership in respect of our relationship with the VIE.

For example, the VIE

and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations

in an acceptable manner or taking other actions that are detrimental to our interests.

If we had direct ownership of the VIE, we would

be able to exercise our rights as a shareholder to effect changes in the board of directors of the VIE, which in turn could implement

changes, subject to any applicable fiduciary obligations, at the management and operational level.

However, under the VIE Agreements,

we rely on the performance by the VIE and its shareholders of their obligations under the contracts to exercise control over the VIE.

The shareholders of the consolidated VIE may not act in the best interests of our company or may not perform their obligations under

these contracts.

Such risks exist throughout the period in which we intend to operate certain portions of our business through the contractual

arrangements with the VIE.

the VIE or its shareholders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial

costs and expend additional resources to enforce such arrangements.

For example, if the shareholders of the VIE refuse to transfer their

equity interest in the VIE to us or our designee if we exercise the purchase option pursuant to the contractual arrangements, or if they

otherwise act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations.

In addition, if any third parties claim any interest in such shareholders’ equity interests in the VIE, our ability to exercise

shareholders’ rights or foreclose the share pledge according to the contractual arrangements may be impaired.

If these or other

disputes between the shareholders of the VIE and third parties were to impair our relationship with the VIE, our ability to consolidate

the financial results of the VIE would be affected, which would in turn result in a material adverse effect on the business, operations

and financial condition.

shareholders of Dongfang Paper may have actual or potential conflicts of interests with us, which may adversely affect our business.

As of the date of this annual

report, we are not aware of any conflicts between the shareholders of the VIE and IT Tech Packaging.

However, the shareholders of Dongfang

Paper, the VIE, may have actual or potential conflicts of interest with IT Tech Packaging in the future.

These shareholders may refuse

to sign or breach, or cause the VIE to breach, or refuse to renew, the existing contractual arrangements IT Tech Packaging has with them

and the VIE, which would have a material and adverse effect on IT Tech Packaging’ ability to effectively control the VIE and receive

economic benefits from them.

For example, the shareholders may be able to cause IT Tech’ agreements with the VIE to be performed

in a manner adverse to IT Tech Packaging by, among other things, failing to remit payments due under the contractual arrangements to IT

Tech Packaging on a timely basis.

We cannot assure you that when conflicts of interest arise any or all of these shareholders will act

in the best interests of IT Tech Packagingor such conflicts will be resolved in IT Tech Packaging’s favor.

Currently, IT Tech Packaging

does not have any arrangements to address potential conflicts of interest between these shareholders and IT Tech Packaging.

resolve any conflict of interest or dispute between IT Tech Packaging and these shareholders, IT Tech Packaging would have to rely on

legal proceedings, which could result in disruption of IT Tech Packaging’s business and subject IT Tech Packaging to substantial

uncertainty as to the outcome of any such legal proceedings.

Chairman, Chief Executive Officer and 5.4% shareholder, Zhenyong Liu, owns 93.39% of the equity interest in Dongfang Paper.

of interests between his duties to IT Tech and to Dongfang Paper may arise.

We cannot assure you that when conflicts of interest arise,

he will act in the best interests of IT Tech or that any conflict of interest will be resolved in our favor.

These conflicts may result

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

may lose the ability to use and enjoy assets held by the VIE that are material to the operation of its business if the entity goes bankrupt

or becomes subject to a dissolution or liquidation proceeding.

Our consolidated

VIEs hold substantially all of our assets.

Under the contractual arrangements, our consolidated VIEs may not and their shareholders

may not cause it to, in any manner, sell, transfer, mortgage or dispose of their assets or their legal or beneficial interests

in the business without our prior consent.

However, in the event that the shareholders of our consolidated VIEs breach these contractual

arrangements and voluntarily liquidate our consolidated VIEs, or our consolidated VIEs declare bankruptcy and all or part of their

assets become subject to liens or rights of third-party creditors, or are otherwise disposed of without our consent, we may

be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial

condition and results of operations.

If our consolidated VIEs undergo a voluntary or involuntary liquidation proceeding, independent

third-party creditors may claim rights to some or all of their assets, thereby hindering our ability to operate our business,

which could materially and adversely affect our business, financial condition and results of operations.

Risks Related to Our Common Stock

If we fail to comply with

Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner, our business could be harmed and our stock price could

Rules adopted

by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require annual assessment of U.S.

public companies’

part of our contractual arrangements with the VIE, the entity holds certain assets that are material to the operation of our business,

including permits, domain names and IP rights.

If the VIE goes bankrupt and all or part of its assets become subject to liens or rights

of third-party creditors, we may be unable to continue some or all of its business activities, which could adversely affect our business,

financial condition and results of operations.

Under the contractual arrangements, the VIE may not, in any manner, sell, transfer, mortgage

or dispose of its assets or legal or beneficial interests in the business without our prior consent.

If the VIE undergoes a voluntary

or involuntary liquidation proceeding, the independent third party creditors may claim rights to some or all of these assets, thereby

hindering our ability to operate our business, which could adversely affect our business, financial condition and results of operations.

arrangements with Dongfang Paper and its shareholders may be subject to a transfer pricing adjustment by the PRC tax authorities which

could have an adverse effect on our income and expenses.

could face material and adverse tax consequences if the PRC tax authorities determine that our contracts with Dongfang Paper and its

shareholders were not entered into based on arm’s length negotiations.

If the PRC tax authorities determine that these contracts

were not entered into on an arm’s length basis, they may adjust our income and expenses for PRC tax purposes in the form of a transfer

pricing adjustment.

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

may lose the ability to use, or otherwise benefit from, the licenses, approvals and assets held by the VIE, which could severely disrupt

our business, render us unable to conduct some of our business operations and constrain our growth.

Tech Packaging relies on contractual arrangements with the VIE to use, or otherwise benefit from, certain foreign restricted licenses

and permits that it needs or may need in the future as its business continues to expand.

The contractual arrangements contain terms that

specifically obligate the VIE’s shareholders to ensure the valid existence of the VIE and restrict the disposal of material assets

However, in the event the VIE’s shareholders breach the terms of these contractual arrangements and voluntarily

liquidate the VIE, or the VIE declares bankruptcy and all or part of its assets become subject to liens or rights of third-party creditors,

or is otherwise disposed of without IT Tech’s consent, IT Tech may be unable to conduct its business operations or otherwise benefit

from the assets held by the VIE, which could have an adverse effect on IT Tech’s business, financial condition and results of operations.

Furthermore, if the VIE undergoes a voluntary or involuntary liquidation proceeding, its shareholders or unrelated third-party creditors

may claim rights to some or all of the assets of the VIE, thereby hindering IT Tech’s ability to operate its business.

exercise of our option to purchase part or all of the equity interests in Dongfang Paper under the Call Option Agreement might be subject

to approval by the PRC government.

Our failure to obtain this approval may impair our ability to substantially control Dongfang Paper

and could result in actions by Dongfang Paper that conflict with our interests.

Call Option Agreement with Dongfang Paper and its shareholders gives our Chinese subsidiary, Baoding Shengde or its designated entity

or natural person, the option to purchase all or part of the equity interests in Dongfang Paper.

The option may not be exercised by Baoding

Shengde if the exercise would violate any applicable laws and regulations in China or cause any license or permit held by, and necessary

for the operation of Dongfang Paper, to be cancelled or invalidated.

Under the laws of China, if a foreign entity, through a foreign

investment company that it invests in, acquires a domestic related company, China’s regulations regarding mergers and acquisitions

may technically apply to the transaction.

If these regulations apply, an examination and approval of the transaction by China’s

Ministry of Commerce (“MOFCOM”), or its local counterparts would be required.

In addition, an appraisal of the equity interest

or the assets to be acquired would also be mandatory.

Since the scope of business activities (making of cultural paper products) as defined

in the business license of Baoding Shengde does not involve the MOFCOM approval and monitoring, we do not believe at this time that an

approval or an appraisal is required for Baoding Shengde to exercise its option to acquire Dongfang Paper.

In light of the different

views on this issue, however, it is possible that the central MOFCOM office in Beijing will issue a standardized opinion imposing the

approval and appraisal requirement.

If we are not able to purchase the equity of Dongfang Paper, then we will lose a substantial portion

of our ability to control Dongfang Paper and our ability to ensure that Dongfang Paper will act in our interests.

Related to Our Common Stock

recent joint statement by the SEC and PCAOB, proposed rule changes submitted by Nasdaq, and the Holding Foreign Companies Accountable

Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of

their auditors, especially the non-U.S.

auditors who are not inspected by the PCAOB.

These developments could add uncertainties to investing

in our securities.

April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D.

Duhnke III, along with other senior SEC staff, released a joint

statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including

The joint statement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers

in China and higher risks of fraud in emerging markets.

May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply a minimum offering size requirement for companies primarily

operating in a “Restrictive Market,” (ii) adopt a new requirement relating to the qualification of management or the

board of directors for Restrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or

listed company based on the qualifications of the company’s auditor.

We are very likely to be deemed as a company primarily

operating in a Restrictive Market under such proposed rules of Nasdaq.

Therefore, Nasdaq might apply the additional and more

stringent criteria for our initial and continued listing, which might cause delay or even denial of our listing

May 20, 2020, the U.S.

Senate passed the Holding Foreign Companies Accountable Act, or HFCAA, requiring a foreign company to certify

it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign

auditor not subject to PCAOB inspection.

If the PCAOB is unable to inspect the company’s auditors for three consecutive years,

the issuer’s securities are prohibited to trade on a national exchange.

On December 2, 2020, the U.S.

House of Representatives

approved the Holding Foreign Companies Accountable Act.

On December 18, 2020, the Holding Foreign Companies Accountable Act was signed

March 24, 2021, the SEC announced that it had adopted interim final amendments to implement congressionally mandated submission and disclosure

requirements of the Act.

The interim final amendments will apply to registrants that the SEC identifies as having filed an annual report

on Forms 10-K, 20-F, 40-F or N-CSR with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction

and that the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by an authority in that

jurisdiction.

The SEC will implement a process for identifying such a registrant and any such identified registrant will be required

to submit documentation to the SEC establishing that it is not owned or controlled by a governmental entity in that foreign jurisdiction,

and will also require disclosure in the registrant’s annual report regarding the audit arrangements of, and governmental influence

on, such a registrant.

June 22, 2021, the U.S.

Senate passed Accelerating Holding Foreign Companies Accountable Act (“AHFCAA”), which, if passed

House of Representatives and signed into law, would reduce the number of consecutive non-inspection years required for triggering

the prohibitions under the Holding Foreign Companies Accountable Act from three years to two.

September 22, 2021, the PCAOB adopted rules to create a framework for the PCAOB to use when determining, as contemplated under the HFCAA,

whether it is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because

of a position taken by one or more authorities in that jurisdiction.

December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the Holding

Foreign Companies Accountable Act.

The rules apply to registrants that the SEC identifies as having filed an annual report with an audit

report issued by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or

investigate completely because of a position taken by an authority in foreign jurisdictions.

December 16, 2021, the PCAOB issued a Determination Report which found that the PCAOB is unable to inspect or investigate completely

registered public accounting firms headquartered in:

(1) mainland China of the People’s Republic of China, because of a position

taken by one or more authorities in mainland China;

and (2) Hong Kong, a Special Administrative Region and dependency of the PRC, because

of a position taken by one or more authorities in Hong Kong..

The PCAOB has made such designations as mandated under the HFCAA.

to each annual determination by the PCAOB, the SEC will, on an annual basis, identify issuers that have used non-inspected audit firms

and thus are at risk of such suspensions in the future.

PCAOB is currently unable to conduct inspections in China without the approval of Chinese government authorities.

If it is later determined

that the PCAOB is unable to inspect or investigate our auditor completely, investors may be deprived of the benefits of such inspection.

Any audit reports not issued by auditors that are completely inspected by the PCAOB, or a lack of PCAOB inspections of audit work undertaken

in China that prevents the PCAOB from regularly evaluating our auditors’ audits and their quality control procedures, could result

in a lack of assurance that our financial statements and disclosures are adequate and accurate.

Our auditor, WWC, P.C., Certified

Public Accountants, is an independent registered public accounting firm with the PCAOB, and as an auditor of publicly traded companies

in the U.S., is subject to laws in the U.S.

pursuant to which the PCAOB conducts regular inspections to assess its compliance with the

applicable professional standards.

WWC, P.C., Certified Public Accountants, is based in the United States and has been inspected by the

PCAOB on a regular basis, with the last inspection in November 2021.

WWC, P.C., Certified Public Accountants, is not headquartered in

mainland China or Hong Kong and was not identified as a firm subject to the determinations announced by the PCAOB on December 16, 2021.

Should the PCAOB be unable to fully conduct inspection of our auditor’s work papers in China, it will make it difficult to evaluate

the effectiveness of our auditor’s audit procedures or equity control procedures.

Investors may consequently lose confidence in

our reported financial information and procedures or quality of the financial statements, which would adversely affect us and our securities.

Moreover, if trading in our securities is prohibited under the HFCAA in the future because the PCAOB determines that it cannot inspect

or fully investigate our auditor at such future time, an exchange may determine to delist our securities.

we fail to comply with Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner, our business could be harmed and our

stock price could decline.

adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require annual assessment of U.S.

public companies’

internal control over financial reporting.

The standards that must be met for management to assess the internal control over financial

reporting as effective are complex, and require significant documentation, testing and possible remediation to meet the detailed

While we have not detected any significant deficiency or material weakness in our internal control and with respect

to the assessment of the internal control for the year ended December 31, 2020, we cannot guarantee the implementation of

controls and procedures in future years to be without any significant deficiency or material weakness.

If we become directly subject

to the scrutiny involving U.S.

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

the matter, which could harm our business operations, stock price and reputation.

companies that have substantially all of their operations in China have been the subject of intense scrutiny by investors, financial

reporting as effective are complex, and require significant documentation, testing and possible remediation to meet the detailed standards.

While we have not detected any significant deficiency or material weakness in our internal control and with respect to the assessment

of the internal control for the year ended December 31, 2021, we cannot guarantee the implementation of controls and procedures in future

years to be without any significant deficiency or material weakness.

we become directly subject to the scrutiny involving U.S.

listed Chinese companies, we may have to expend significant resources to investigate

and/or defend the matter, which could harm our business operations, stock price and reputation.

public companies that have substantially all of their operations in China have been the subject of intense scrutiny by investors, financial

commentators and regulatory agencies.

3 unchanged sentences

the publicly traded stock of many U.S.

listed China-based companies that have been the subject of such scrutiny has sharply

decreased in value.

Many of these companies are now subject to shareholder lawsuits and/or SEC enforcement actions that are conducting

internal and/or external investigations into the allegations.

If we become the subject of any such scrutiny, whether any allegations

are true or not, we may have to expend significant resources to investigate such allegations and/or defend our company.

Such investigations

or allegations will be costly and time-consuming and distract our management from our business plan and could result in our

reputation being harmed and our stock price could decline as a result of such allegations, regardless of the truthfulness of the

Our officers and directors control us through their positions

and stock ownership and their interests may differ from other stockholders.

As of March 1, 2021,

there were 96,968,400 shares of our common stock issued and outstanding.

Zhenyong Liu, our Chief Executive Officer, beneficially

owns approximately 4.7% of our common stock.

As a result, he is able to influence the outcome of stockholder votes on various matters,

including the election of directors and extraordinary corporate transactions including business combinations.

listed China-based companies that have been the subject of such scrutiny has sharply decreased

Many of these companies are now subject to shareholder lawsuits and/or SEC enforcement actions that are conducting internal

and/or external investigations into the allegations.

If we become the subject of any such scrutiny, whether any allegations are true

or not, we may have to expend significant resources to investigate such allegations and/or defend our company.

Such investigations or

allegations will be costly and time-consuming and distract our management from our business plan and could result in our reputation

being harmed and our stock price could decline as a result of such allegations, regardless of the truthfulness of the allegations.

officers and directors control us through their positions and stock ownership and their interests may differ from other stockholders.

of March 1, 2021, there were 96,968,400 shares of our common stock issued and outstanding.

Zhenyong Liu, our Chief Executive Officer,

beneficially owns approximately 4.7% of our common stock.

As a result, he is able to influence the outcome of stockholder votes on various

matters, including the election of directors and extraordinary corporate transactions including business combinations.

interests may differ from those of other stockholders.

Furthermore, ownership of 4.7% of our common stock by Mr.

Liu reduces the

public float and liquidity, and may affect the market price, of our common stock as traded on the NYSE MKT.

We may not continue to pay cash dividends and any return

on investment may be limited to the value of our common stock.

While we intend to

retain the majority of any future earnings for use in the operation and expansion of our business, we did declare four quarterly

Liu reduces the public

float and liquidity, and may affect the market price, of our common stock as traded on the NYSE American.

may not continue to pay cash dividends and any return on investment may be limited to the value of our common stock.

we intend to retain the majority of any future earnings for use in the operation and expansion of our business, we did declare four quarterly

cash dividends in April 2012 and November 2013.

Although it is likely that our Board of Directors will continue the quarterly cash

dividend as a regular dividend policy in the coming years, there is no guarantee that the cash dividend will not be discontinued

Should we decide to continue the cash dividend, as a holding company, our ability to pay dividends and meet other obligations

depends upon the receipt of dividends or other payments from our operating subsidiaries.

In addition, our operating subsidiaries,

from time to time, may be subject to restrictions on their ability to make distributions to us, including restrictions on the conversion

of local currency into U.S.

Although it is likely that our Board of Directors will continue the quarterly cash dividend

as a regular dividend policy in the coming years, there is no guarantee that the cash dividend will not be discontinued or reduced.

we decide to continue the cash dividend, as a holding company, our ability to pay dividends and meet other obligations depends upon the

receipt of dividends or other payments from our operating subsidiaries.

In addition, our operating subsidiaries, from time to time, may

be subject to restrictions on their ability to make distributions to us, including restrictions on the conversion of local currency into

dollars or other hard currency and other regulatory restrictions.

Our common stock may be affected by limited trading volume

and may fluctuate significantly.

Our common stock is

traded on the NYSE MKT.

Although a trading market has developed for our common stock, there can be no assurance that the trading

market for our common stock will be sustained.

Failure to maintain a trading market for our common stock may adversely affect our

shareholders’

ability to sell our common stock in short time periods, or at all.

Our common stock has experienced, and may

experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common

Future financings may dilute stockholders or impair our

financial condition.

In the future, we

may need to raise additional funds through public or private financing, which might include the sale of equity securities.

issuance of equity securities could result in financial and voting dilution to our existing stockholders.

The issuance of debt

could result in effective subordination of stockholders’

interests to the debt, create the possibility of default, and limit

our financial and business alternatives.

common stock may be affected by limited trading volume and may fluctuate significantly.

common stock is traded on the NYSE American.

Although a trading market has developed for our common stock, there can be no assurance

that the trading market for our common stock will be sustained.

Failure to maintain a trading market for our common stock may adversely

affect our shareholders’ ability to sell our common stock in short time periods, or at all.

Our common stock has experienced, and

may experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common

financings may dilute stockholders or impair our financial condition.

the future, we may need to raise additional funds through public or private financing, which might include the sale of equity securities.

The issuance of equity securities could result in financial and voting dilution to our existing stockholders.

The issuance of debt could

result in effective subordination of stockholders’ interests to the debt, create the possibility of default, and limit our financial

and business alternatives.

Unresolved Staff Comments

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

What changed 10-K

Item 1A. Risk Factors