What changed in this filing

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Item 1. Financial Statements

2022-05-10 compared with 2021-11-10 · 581 added, 830 removed, 416 unchanged (77% of the section changed)

Financial Statements

TECH PACKAGING, INC.

CONSOLIDATED BALANCE SHEETS

OF SEPTEMBER 30, 2021 AND DECEMBER 31, 2020

September 30,

IT TECH PACKAGING, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2022 AND DECEMBER 31, 2021

Current Assets

1 unchanged sentence

Restricted cash

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

Accounts receivable (net of allowance for doubtful accounts of $ 73,563 and $ 69,053 as of March 31, 2022 and December 31, 2021, respectively)

Prepayments and other current assets

24 unchanged sentences

Derivative liability

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

Total liabilities (including amounts of the consolidated VIE without recourse to the Company of $ 17,240,190 and $ 17,924,475 as of March 31, 2022 and December 31, 2021, respectively)

Commitments and Contingencies

Stockholders’ Equity

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

Common stock, 500,000,000 shares authorized, $ 0.001 par value per share, 99,049,900 shares issued and outstanding as of March 31, 2022 and December, 31,2021.

Additional paid-in capital

9 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

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

THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

Three Months Ended

Nine Months Ended

September 30,

$ 115,832,013

Cost of sales

1 unchanged sentence

( 22,378,422 )

( 109,150,452 )

( 63,506,913 )

Selling, general and administrative expenses

1 unchanged sentence

( 2,555,318 )

( 7,172,495 )

( 8,445,356 )

(Loss) Income from Operations

Gain on acquisition

Loss from Operations

( 2,956,433 )

3 unchanged sentences

Interest expense

Loss on derivative liability

Income (Loss) before Income Taxes

Gain (Loss) on derivative liability

( 3,636,967 )

Provision for Income Taxes

Loss before Income Taxes

( 2,837,203 )

Net Income (Loss)

( 4,439,061 )

Provision for Income Taxes

( 2,488,214 )

Other Comprehensive (Loss) Income

( 4,338,856 )

Other Comprehensive Income (Loss)

Foreign currency translation adjustment

Total Comprehensive Income (Loss)

( 1,468,770 )

Earnings (Losses) Per Share:

Basic and Diluted Earnings (Losses) per Share

Total Comprehensive Loss

$ ( 1,562,076 )

$ ( 5,807,626 )

Losses Per Share:

Basic and Diluted Losses per Share

Outstanding – Basic and Diluted

accompanying notes to condensed consolidated financial statements.

TECH PACKAGING, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

Nine Months Ended

September 30,

THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

Three Months Ended

Cash Flows from Operating Activities:

4 unchanged sentences

(Gain) Loss on derivative liability

( 2,810,913 )

Gain on acquisition

Allowance for bad debts

Share-based compensation and expenses

( 1,582,754 )

Changes in operating assets and liabilities:

4 unchanged sentences

( 6,270,151 )

( 6,758,500 )

Accounts payable

Advance from customers

Related parties

1 unchanged sentence

Other payables and accrued liabilities

( 1,292,657 )

Income taxes payable

Net Cash (Used in) Provided by Operating Activities

( 1,112,820 )

Net Cash Provided by (Used in) Operating Activities

( 8,280,332 )

Cash Flows from Investing Activities:

Purchases of property, plant and equipment

( 12,781,114 )

Acquisition of land

( 6,807,468 )

Proceeds from sale of property, plant and equipment

Net Cash Used in Investing Activities

( 7,175,972 )

( 2,571,949 )

Cash Flows from Financing Activities:

Proceeds from issuance of shares and warrants, net

Repayment of bank loans

Payment of capital lease obligation

Loan repaid by a related party

Net Cash Provided by Financing Activities

12 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

Comprehensive

3 unchanged sentences

$ 175,080,174

$ 165,995,062

Issuance of shares to officer and directors

Issuance of shares

Issuance of shares to a consultant

Issuance of shares to institutional investors

Issuance of shares to public investors

Exercise of warrants

Foreign currency translation adjustment

1 unchanged sentence

( 1,468,772 )

Balance at September 30, 2020

( 4,338,856 )

Balance at March 31, 2021

$ 104,901,938

$ 204,281,299

Balance at December 31, 2021

1 unchanged sentence

$ 215,749,908

Issuance of shares to officer and directors

Issuance of shares to institutional investors

Issuance of shares to public investors

Exercise of warrants

Foreign currency translation adjustment

1 unchanged sentence

( 2,488,214 )

Balance at September 30, 2021

Balance at March 31, 2022

$ 107,658,115

$ 214,187,832

accompanying notes to condensed consolidated financial statements.

TECH PACKAGING, INC.

72 unchanged sentences

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

A Dongfang Paper Equity Owner will cease to be a party to the agreement

once it transfers its equity interests with the prior approval of Baoding Shengde.

As the Company had controlled Dongfang Paper since

July 16, 2007 through Dongfang Holding and the trust until June 24, 2009 and continued to control Dongfang Paper through Baoding Shengde

and the Contractual Agreements, the execution of the Contractual Agreements is considered as a business combination under common control.

An Dongfang Paper Equity Owner will cease to be a party to the

agreement once it transfers its equity interests with the prior approval of Baoding Shengde.

As the Company had controlled Dongfang Paper

since July 16, 2007 through Dongfang Holding and the trust until June 24, 2009 and continued to control Dongfang Paper through Baoding

Shengde and the Contractual Agreements, the execution of the Contractual Agreements is considered as a business combination under common

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

9 unchanged sentences

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

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

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

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

Upon full payment of the consideration in the amount of RMB 320 million (approximately $ 45 million), Dongfang Paper will gain

control over substantial parcels of land that under the possession of Hebei Tengsheng.

Company has no direct equity interest in Dongfang Paper.

However, through the Contractual Agreements described above, the Company is

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

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

as a controlled variable interest entity of the Company in accordance with Topic 810 - Consolidation of the Accounting Standards Codification

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

The revenue generated from Dongfang

Paper for the three months ended September 30, 2021 and 2020 was accounted for 97.01 % and 99.34 % of the Company’s total revenue,

respectively.

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

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

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

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

subsidiaries and variable interest entities are as follows:

Full payment of the consideration in the amount of RMB 320 million (approximately $ 45 million) was made on February 23, 2022.

The Company has no direct equity interest in Dongfang

However, through the Contractual Agreements described above, the Company is found to be the primary beneficiary (the “Primary

Beneficiary”) of Dongfang Paper and is deemed to have the effective control over Dongfang Paper’s activities that most significantly

affect its economic performance, resulting in Dongfang Paper being treated as a controlled variable interest entity of the Company in

accordance with Topic 810 - Consolidation of the Accounting Standards Codification (the “ASC”) issued by the Financial Accounting

Standard Board (the “FASB”).

The revenue generated from Dongfang Paper for the three months ended March 31, 2022 and 2021

was accounted for 99.63 % and 99.46 % of the Company’s total revenue, respectively.

Dongfang Paper also accounted for 86.52 % and 84.13 %

of the total assets of the Company as of March 31, 2022 and December 31, 2021, respectively.

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of March 31, 2022 and December 31, 2021, details of the Company’s subsidiaries and variable interest entities are as follows:

Incorporation

17 unchanged sentences

Paper production and distribution

* Dongfang Paper is treated as a 100 % controlled variable interest

entity of the Company.

However, uncertainties in the PRC legal system

could cause the Company’s current ownership structure to be found to be in violation of any existing and/or future PRC laws or regulations

and could limit the Company’s ability, through its subsidiary, to enforce its rights under these contractual arrangements.

shareholders of the VIE may have interests that are different than those of the Company, which could potentially increase the risk that

they would seek to act contrary to the terms of the aforementioned agreements.

In addition, if the current structure or any of

the contractual arrangements were found to be in violation of any existing or future PRC law, the Company may be subject to penalties,

which may include, but not be limited to, the cancellation or revocation of the Company’s business and operating licenses, being

required to restructure the Company’s operations or being required to discontinue the Company’s operating activities.

imposition of any of these or other penalties may result in a material and adverse effect on the Company’s ability to conduct its

In such case, the Company may not be able to operate or control the VIE, which may result in deconsolidation of the VIE.

Company believes the possibility that it will no longer be able to control and consolidate its VIE will occur as a result of the aforementioned

risks and uncertainties is remote.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company has aggregated the financial information

of Dongfang Paper in the table below.

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

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

31, 2020 are as follows:

September 30,

* Dongfang Paper is treated as a 100 % controlled variable interest entity of the Company.

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

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

under these contractual arrangements.

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

which could potentially increase the risk that they would seek to act contrary to the terms of the aforementioned agreements.

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

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

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

operating activities.

The imposition of any of these or other penalties may result in a material and adverse effect on the Company’s

ability to conduct its operations.

In such case, the Company may not be able to operate or control the VIE, which may result in deconsolidation

The Company believes the possibility that it will no longer be able to control and consolidate its VIE will occur as a result

of the aforementioned risks and uncertainties is remote.

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The aggregate carrying value of Dongfang Paper’s

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

sheets as of March 31, 2022 and December 31, 2021 are as follows:

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

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

no terms in any agreements or arrangements, implicit or explicit, which require the Company or its subsidiaries to provide financial

support to the VIE.

However, if the VIE does require financial support, the Company or its subsidiaries may, at its option and subject

to statutory limits and restrictions, provide financial support to the VIE.

Current Assets

23 unchanged sentences

Loans from credit union

Deferred gain on sale-leaseback

Lease liability - non-current

Total liabilities

The Company and its consolidated subsidiaries

are not required to provide financial support to the VIE, and no creditor (or beneficial interest holders) of the VIE have recourse to

the assets of Company unless the Company separately agrees to be subject to such claims.

There are no terms in any agreements or arrangements,

implicit or explicit, which require the Company or its subsidiaries to provide financial support to the VIE.

However, if the VIE does

require financial support, the Company or its subsidiaries may, at its option and subject to statutory limits and restrictions, provide

financial support to the VIE.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation and Significant Accounting Policies

The accompanying unaudited condensed consolidated

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

for reporting on Form 10-Q.

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

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

These interim statements should be read in conjunction

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

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

“we”, “us” or “our”).

Principles of Consolidation

Our unaudited condensed consolidated financial

statements reflect all adjustments, which are, in the opinion of management, necessary for a fair presentation of our financial position

and results of operations.

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

The balance sheet as of September

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

expected for any future period.

Our unaudited condensed consolidated financial

statements are prepared in accordance with GAAP.

These accounting principles require us to make certain estimates, judgments and assumptions

that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial

statements and the reported amounts of revenues and expenses during the reporting period.

We believe that the estimates, judgments and

assumptions are reasonable, based on information available at the time they are made.

Actual results could differ materially from those

Valuation of long-lived asset

The Company reviews the carrying value of long-lived

assets to be held and used when events and circumstances warrants such a review.

The carrying value of a long-lived asset is considered

impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value.

that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset

and intangible assets.

Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with

the risk involved.

Losses on long-lived assets and intangible assets to be disposed are determined in a similar manner, except that fair

market values are reduced for the cost to dispose.

Fair Value Measurements

The Company has adopted ASC Topic 820, Fair Value

Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures

about fair value measurements.

It does not require any new fair value measurements, but provides guidance on how to measure fair value

by providing a fair value hierarchy used to classify the source of the information.

It establishes a three-level valuation hierarchy of

valuation techniques based on observable and unobservable inputs, which may be used to measure fair value and include the following:

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

Level 2 - Inputs other than Level 1 that are observable,

either directly or indirectly, such as quoted prices for similar assets or liabilities;

accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of

the Securities and Exchange Commission (“SEC”) for reporting on Form 10-Q.

Accordingly, certain information and notes required

by the United States of America generally accepted accounting principles (“GAAP”) for annual financial statements are not

included herein.

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

included in the Annual Report on Form 10-K for the year ended December 31, 2021 of the Company, and its subsidiaries and variable interest

entity (which we sometimes refer to collectively as “the Company”, “we”, “us” or “our”).

of Consolidation

unaudited condensed consolidated financial statements reflect all adjustments, which are, in the opinion of management, necessary for

a fair presentation of our financial position and results of operations.

Such adjustments are of a normal recurring nature, unless otherwise

The balance sheet as of March 31, 2022 and the results of operations for the three months ended March 31, 2022 are not necessarily

indicative of the results to be expected for any future period.

unaudited condensed consolidated financial statements are prepared in accordance with GAAP.

These accounting principles require us to

make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent

assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting

We believe that the estimates, judgments and assumptions are reasonable, based on information available at the time they are

Actual results could differ materially from those estimates.

of long-lived asset

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

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

identifiable and is less than its carrying value.

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

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

Fair market value is determined primarily using the anticipated

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

Losses on long-lived assets and intangible assets to be disposed

are determined in a similar manner, except that fair market values are reduced for the cost to dispose.

Value Measurements

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

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

It does not require any new fair value measurements, but provides

guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information.

It establishes

a three-level valuation hierarchy of valuation techniques based on observable and unobservable inputs, which may be used to measure fair

value and include the following:

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

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

quoted prices in markets that are not active;

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

Level 3 - Unobservable inputs that are supported by little or no market

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

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Classification within the hierarchy is determined based on the lowest

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

The Company estimates the fair value of financial

instruments using the available market information and valuation methods.

Considerable judgment is required in estimating fair value.

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

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

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

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

while loans from credit union

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

published by the People’s Bank of China.

Management determined that liabilities created

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

or other inputs that are observable or can be corroborated by observable market data for

substantially the full term of the assets or liabilities.

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

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Classification

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

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

judgment is required in estimating fair value.

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

Company could realize in a current market exchange.

As of March 31, 2022 and December 31, 2021, the carrying value of the Company’s

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

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

of these instruments;

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

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

Management determined that liabilities created by

beneficial conversion features associated with the issuance of certain warrants (see “ Derivative liabilities” under

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

The fair value of these derivative liabilities

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

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

This valuation

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

Non-Recurring Fair Value Measurements

The Company reviews long-lived assets for impairment

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

For the continuing operations,

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

fair value only when impairment is recognized.

For discontinued operations, long-lived assets are measured at the lower of carrying amount

or fair value less cost to sell.

The fair value of these assets were determined using models with significant unobservable inputs which

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

Share-Based Compensation

The Company uses the fair value recognition provision

of ASC Topic 718, Compensation-Stock Compensation , which requires the Company to expense the cost of employee services received

in exchange for an award of equity instruments based on the grant date fair value of such instruments over the vesting period.

The Company also applies the provisions of ASC

Topic 505-50, Equity Based Payments to Non-Employees to account for stock-based compensation awards issued to non-employees for

Such awards for services are recorded at either the fair value of the consideration received or the fair value of the instruments

issued in exchange for such services, whichever is more reliably measurable.

Non-Recurring

Fair Value Measurements

Company reviews long-lived assets for impairment annually or more frequently if events or changes in circumstances indicate the possibility

of impairment.

For the continuing operations, long-lived assets are measured at fair value on a nonrecurring basis when there is an indicator

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

For discontinued operations, long-lived assets

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

The fair value of these assets were determined using models

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

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

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

such instruments over the vesting period.

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

awards issued to non-employees for services.

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

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

Restricted Cash

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

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(4) Inventories

Raw materials inventory includes mainly recycled paper board and recycled

white scrap paper.

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

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

September 30,

cash was nil as of March 31, 2022 and December 31, 2021.

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Finished goods include mainly products of corrugating

medium paper, offset printing paper and tissue paper products.

Inventories consisted of the following as of March 31, 2022 and December

Raw Materials

8 unchanged sentences

Prepayments and other current assets

Prepayments and other current assets consisted of the following as

of September 30, 2021 and December 31, 2020:

September 30,

and other current assets consisted of the following as of March 31, 2022 and December 31, 2021:

Prepaid land lease

Prepayment for purchase of materials

Prepayment for purchase of equipment

Value-added tax recoverable

Property, plant and equipment, net

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

equipment consisted of the following:

September 30,

of March 31, 2022 and December 31, 2021, property, plant and equipment consisted of the following:

Property, Plant, and Equipment:

9 unchanged sentences

$ 126,587,428

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

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

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

Construction in progress mainly represents payments for paper machine

of a new tissue paper production line PM10.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

certain property, plant and equipment of Dongfang Paper with net values of $ 1,313,720 and $ 2,349,796 , respectively, have been pledged

pursuant to a long-term loan from credit union of Dongfang Paper.

Land use right of Dongfang Paper with net values of $ 5,937,242 and $ 6,010,359 ,

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

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

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

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

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

credit union of Baoding Shengde.

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

and asset collaterals.

Depreciation and amortization of property, plant

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

Depreciation and amortization

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

of March 31, 2022 and December 31, 2021, land use rights represented twenty three parcels of state-owned lands located in Xushui District

and Wei County of Hebei Province in China, with lease terms of 50 years expiring in 2061 and 2068, respectively.

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of March 31, 2022 and December 31, 2021, certain property, plant and equipment of Dongfang Paper with net values of $ 928,347 and $ 1,130,333 ,

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

Land use right of Dongfang Paper with

net values of $ 5,990,831 and $ 6,002,195 , respectively, as of March 31, 2022 and December 31, 2021 was pledged for the bank loan from

Industrial & Commercial Bank of China.

Land use right of Hebei Tengsheng with net value of $5,704,148 and $5,690,261 , respectively,

as of March 31, 2022 and December 31, 2021 was pledged for a long-term loan from credit union of Baoding Shengde.

In addition, land use

right of Hebei Tengsheng with net value of $ 4,417,524 and $ 4,407,889 , respectively, as of March 31, 2022 and December 31, 2021 was pledged

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

See “ Short-term bank loans ” under Note (7), Loans

Payable, for details of the transaction and asset collaterals.

and amortization of property, plant and equipment was $ 3,773,236 and $ 4,089,067 for the three months ended March 31, 2022 and 2021, respectively.

Financing with Sale-Leaseback

The Company entered into a sale-leaseback arrangement

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

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

Under the sale-leaseback arrangement, Hebei Tengsheng sold the

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

Concurrent with the sale of equipment, Hebei Tengsheng leases

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

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

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

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

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

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

Hebei Tengsheng made payments due according to

the schedule.

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

31, 2020, respectively.

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

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

Amortization of the Leased Equipment was $ 41,208

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

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

the nine months ended September 30, 2021 and 2020.

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

the three months ended September 30, 2021 and 2020.

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

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

As a result of the sale and leaseback, a deferred

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

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

Leased Equipment.

The future minimum lease payments of the capital

lease as of September 30, 2021 were as follows:

September 30,

The Company entered into a sale-leaseback arrangement (the “Lease Financing Agreement”) with TAC Leasing Co., Ltd.(“TLCL”) on August 6, 2020, for a total financing proceeds in the amount of RMB 16 million (approximately US$ 2.5 million).

Under the sale-leaseback arrangement, Hebei Tengsheng sold the Leased Equipment to TLCL for 16 million (approximately US$ 2.5 million).

Concurrent with the sale of equipment, Hebei Tengsheng leases back the equipment sold to TLCL for a lease term of three years .

At the end of the lease term, Hebei Tengsheng may pay a nominal purchase price of RMB 100 (approximately $ 16 ) to TLCL and buy back the Leased Equipment.

The Leased Equipment in amount of $ 2,349,452 was recorded as right of use assets and the net present value of the minimum lease payments was recorded as lease liability and calculated with TLCL’s implicit interest rate of 15.6 % per annum and stated at $ 567,099 at the inception of the lease on August 17, 2020.

Tengsheng made payments due according to the schedule.

The balance of Leased Equipment net of amortization was $ 2,254,357 and $ 2,286,459

as of March 31, 2022 and December 31, 2021, respectively.

The lease liability was $ 312,255 and $ 362,394 , and its current portion in the

amount of $ 228,051 and $ 210,161 as of March 31, 2022 and December 31, 2021, respectively.

of the Leased Equipment was $ 42,006 and $ 40 ,997for the three months ended March 31, 2022 and 2021.

Total interest expenses for the sale-leaseback

arrangement was $ 13,507 and $ 20,418 for the three months ended March 31, 2022 and 2021.

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

The deferred gain is amortized over the lease

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

future minimum lease payments of the capital lease as of March 31, 2022 were as follows:

unearned discount

1 unchanged sentence

Loans Payable

Short-term bank loans

September 30,

Industrial and Commercial Bank of China (“ICBC”)

Total short-term bank loans

On December 11, 2020, the Company entered into

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

2020, respectively.

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

November 25, 2021, the Company entered into a working capital loan agreement with the ICBC, with a balance of $ 5,984,374 and $ 5,958,561

as of March 31, 2022 and December 31, 2021, respectively.

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

as collateral for the benefit of the bank and guaranteed by Mr.

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

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

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2021, there were guaranteed

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

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

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

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

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

Long-term loans from credit union

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

will be due and repaid at various installments by November 17, 2022.

of March 31, 2022, there were guaranteed short-term borrowings of $ 5,984,374 and unsecured bank loans of $ nil .

As of December 31, 2021,

there were guaranteed short-term borrowings of $ 5,958,561 and unsecured bank loans of $ nil .

average short-term borrowing rates for the three months ended March 31, 2022 and 2021 were approximately 4.79 %.

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

loans from credit union

As of Mar 31, 2022 and December 31, 2021, loans payable to Rural

Credit Union of Xushui District, amounted to $ 9,861,063 and $ 9,818,530 , respectively.

September 30,

Rural Credit Union of Xushui District Loan 1

6 unchanged sentences

Long-term loans from credit union

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

for the next coming years were as follows:

of Mar 31, 2022, the Company’s long-term debt repayments for the next coming years were as follows:

Remainder of 2022

On April 16, 2014, the Company entered into a

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

from June 21, 2014 to November 18, 2018.

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

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

The loan is guaranteed by an independent third party.

Interest payment is due quarterly and bears

the rate of 0.64 % per month.

On November 6, 2018, the loan was renewed for additional 5 years and will be due and payable in various installments

from December 21, 2018 to November 5, 2023.

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

and $ 1,318,028 , respectively.

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

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

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

and December 31, 2020, respectively.

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

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

from December 21, 2013 to July 26, 2018.

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

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

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

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

Interest payment is due

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

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

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

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

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

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

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

On April 17, 2019, the Company entered into a

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

from August 21, 2019 to April 16, 2021.

The loan is secured by Hebei Tengsheng with its land use right as collateral for the benefit of

the credit union.

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

On March 22, 2021, the loan was renewed

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

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

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

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

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

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

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On December 12, 2019, the Company entered into

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

from June 21, 2020 to December 11, 2021.

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

of the credit union.

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

On March 22, 2021, the loan was extended

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

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

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

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

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

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

Total interest expenses for the short-term bank

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

Total interest

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

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

On November 6, 2018, the loan was renewed for additional 5 years

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

As of March 31, 2022 and December 31,

2021, total outstanding loan balance was $ 1,354,715 and$ 1,348,871 , respectively, Out of the total outstanding loan balance, current portion

amounted were $ 330,802 and $ 329,376 as of March 31, 2022 and December 31, 2021, respectively, which are presented as current liabilities

in the consolidated balance sheet and the remaining balance of $ 1,023,913 and $ 1,019,495 are presented as non-current liabilities in

the consolidated balance sheet as of March 31, 2022 and December 31, 2021, respectively.

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

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

On June 21, 2018, the loan was extended

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

The loan is secured

by certain of the Company’s manufacturing equipment with net book value of $ 928,347 and $ 1,130,333 as of March 31, 2022 and December

31, 2021, respectively.

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

As of March 31, 2022 and December

31, 2021, the total outstanding loan balance was $ 3,938,124 and $ 3,921,139 , respectively.

Out of the total outstanding loan balance,

current portion amounted were $ 1,969,062 and $ 1,960,569 as of March 31, 2022 and December 31, 2021 respectively, which are presented

as current liabilities in the consolidated balance sheet and the remaining balance of $ 1,969,062 and $ 1,960,570 are presented as non-current

liabilities in the consolidated balance sheet as of March 31, 2022 and December 31, 2021, respectively.

On April 17, 2019, the Company entered into a loan

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

August 21, 2019 to April 16, 2021.

The loan was renewed on March 22, 2021 and December 24, 2021 and extended for additional 3 years in

total, which will be due on April 16, 2024 according to the new schedule.

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

as collateral for the benefit of the credit union.

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

31, 2022 and December 31, 2021, the total outstanding loan balance was $ 2,520,399 and $ 2,509,528 , respectively, which are presented as

current liabilities in the consolidated balance sheet as of March 31, 2022 and December 31, 2021.

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

The loan was renewed on March 22, 2021 and December

24, 2021 and extended for additional 3 years in total, which will be due on December 11, 2024 according to the new schedule.

is secured by Hebei Tengsheng with its land use right as collateral for the benefit of the credit union.

Interest payment is due monthly

and bears a fixed rate of 7.56 % per annum.

As of March 31, 2022 and December 31, 2021, the total outstanding loan balance was $ 2,047,825

and $ 2,038,992 , respectively, which are presented as current liabilities in the consolidated balance sheet as of March 31, 2022 and December

interest expenses for the short-term bank loans and long-term loans for the three months ended March 31, 2022 and 2021 were $ 257,306

and $ 258,483 , respectively.

Related Party Transactions

Zhenyong Liu, the Company’s CEO has

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

On January 1, 2013, Dongfang Paper and Mr.

Liu renewed the three-year term loan previously entered on January 1, 2010, and extended the maturity date further to December 31, 2015.

On December 31, 2015, the Company paid off the loan of $ 2,249,279 , together with interest of $ 391,374 for the period from 2013 to 2015.

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

1, 2013, Dongfang Paper and Mr.

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

maturity date further to December 31, 2015.

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

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

Approximately $ 403,791 and $ 402,047 of interest were outstanding to Mr.

Zhenyong Liu, which were recorded in other payables and accrued

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

On December 10, 2014, Mr.

Zhenyong Liu provided

a loan to the Company, amounted to $ 8,742,278 to Dongfang Paper for working capital purpose with an interest rate of 4.35 % per annum,

which was based on the primary lending rate of People’s Bank of China.

The unsecured loan was provided on December 10, 2014, and

would be originally due on December 10, 2017.

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

Zhenyong Liu, together with

interest of $ 288,596 .

In February 2018, the company paid off the remaining balance, together with interest of $ 20,400 .

As of September

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

Zhenyong Liu, which

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

On March 1, 2015, the Company entered an agreement

Zhenyong Liu which allows Dongfang Paper to borrow from Mr.

Zhenyong Liu an amount up to $ 17,201,342 (RMB 120,000,000 ) for working

capital purposes.

The advances or funding under the agreement are due three years from the date each amount is funded.

The loan is unsecured

and carries an annual interest rate set on the basis of the primary lending rate of the People’s Bank of China at the time of the

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

On October 14, 2016, an unsecured amount of

$ 2,883,091 was drawn from the facility.

In February 2018, the Company repaid $ 1,507,432 to Mr.

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

31, 2022 and December 31, 2021, respectively.

December 10, 2014, Mr.

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

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

The unsecured

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

During the year of 2016, the Company repaid

$ 6,012,416 to Mr.

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

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

with interest of $ 20,400 .

As of March 31, 2022 and December 31, 2021, approximately $ 47,257 and $ 47,054 of interest, respectively were

outstanding to Mr.

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

consolidated balance sheet.

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

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

to $ 17,201,342 (RMB 120,000,000 ) for working capital purposes.

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

date each amount is funded.

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

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

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

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

In February 2018, the company repaid $ 1,507,432

Zhenyong Liu.

The loan would be originally

due on July 12, 2018.

Zhenyong Liu agreed to extend the loan for additional 3 years and the remaining balance will be due on July

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

Zhenyong Liu agreed to extend the loan for additional 3 years

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

On November 23, 2018, the company repaid $ 3,768,579 to Mr.

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

In December 2019,

the Company paid off the remaining balance, together with interest of $ 94,636 .

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

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

liabilities in the consolidated balance sheet.

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

total amount of loans due to Mr.

Zhenyong Liu, together

with interest of $ 158,651 .

In December 2019, the company paid off the remaining balance, together with interest of 94,636 .

31, 2022 and December 31, 2021, the outstanding interest was $ 216,498 and $ 215,565 , respectively, which was recorded in other payables

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

of March 31, 2022 and December 31, 2021, total amount of loans due to Mr.

Zhenyong Liu were $ nil .

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

and nine months ended September 30, 2021 and 2020.

The interest expense incurred for such

related party loans were $ nil for the three months ended March 31, 2022 and 2021.

The accrued interest owing to Mr.

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

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

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

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

amount is due on demand with interest free.

Lease of Headquarters Compound Real Properties from a Related Party

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

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

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

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

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

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

In connection with the sale of the Industrial

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

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

The lease agreement expired in August 2016.

6, 2016 and August 6, 2018, the Company entered into two supplementary agreements with Hebei Fangsheng, who agreed to extend the lease

term for another four years in total, with the same rental payment as original lease agreement.

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Zhenyong Liu was

approximately $ 667,546 and $ 664,666 , as of March 31, 2022 and December 31, 2021, respectively, which was recorded in other payables and

accrued liabilities.

December 8, 2021, the Company entered an agreement with Mr.

Zhenyong Liu, which allows Mr.

Zhenyong Liu to borrow from the Company an

amount of $ 6,915,176 (RMB 44,089,085 ).

The loan will be due on June 29, 2022 .

The loan is unsecured and carries a fixed interest rate of

3 % per annum.

The loan was repaid by Mr.

Zhenyong Liu in February 2022.

As of March 31, 2022 and December 31, 2021, amount

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

is due on demand with interest free.

of Headquarters Compound Real Properties from a Related Party

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

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

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

to Hebei Fangsheng for cash prices of approximately $ 2.77 million, $ 1.15 million, and $ 4.31 million respectively.

Sales of the LUR and

the Industrial Buildings were completed in year 2013.

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

its original use for a term of up to three years , with an annual rental payment of approximately $ 157,522 (RMB 1,000,000 ).

The lease agreement

expired in August 2016.

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

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

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Other payables and accrued liabilities

Other payables and accrued liabilities consist of the following:

September 30,

payables and accrued liabilities consist of the following:

Accrued electricity

Accrued rental

Value-added tax payable

4 unchanged sentences

Derivative Liabilities

The Company analyzed warrants for derivative accounting

consideration under ASC 815, “Derivatives and Hedging, and hedging,” and determined that the instrument should be classified

as a liability since the warrant becomes effective at issuance resulting in there being no explicit limit to the number of shares to be

delivered upon settlement of the above conversion options.

ASC 815 requires we assess the fair market value

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

The Company determined our derivative liabilities

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

Company analyzed the warrant for derivative accounting consideration under ASC 815, “Derivatives and Hedging, and hedging,”

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

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

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

the fair market value as other income or expense item.

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

the fair value as of March 31, 2022.

The Black-Scholes model requires six basic data inputs:

the exercise or strike price, time to expiration, the risk-free interest rate,

the current stock price, the estimated volatility of the stock price in the future, and the dividend rate.

Changes to these inputs could

produce a significantly higher or lower fair value measurement.

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

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

Nine months ended

September 30,

the exercise or strike price, time to expiration,

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

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

The fair value of each warrant is estimated

using the Black-Scholes valuation model.

The following weighted-average assumptions were used in the March 31, 2022:

Three months ended

Expected term

4 unchanged sentences

The following table summarizes the changes in the derivative liabilities

during the three months ended September 30, 2021:

during the three months ended March 31, 2022:

Fair Value Measurements Using Significant Observable Inputs (Level

3 unchanged sentences

Exercise of warrants

( 2,902,119 )

Change in fair value of derivative liability

( 13,624,260 )

Balance at September 30, 2021

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(12) Common Stock

Issuance of common stock to investors

On April 29, 2020, the Company and certain institutional

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

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

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

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

The purchase price for each share of Common Stock and the

corresponding warrant was $ 0.58 .

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

On January 20, 2021, the Company offered and sold

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

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

The purchase price for each

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

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

On March 1, 2021, the Company offered and sold

to the public investors an aggregate of 29,277,866 shares of common stock and 14,638,933 warrants to purchase up to 14,638,933 shares

of common stock in a firm commitment underwritten public offering for gross proceeds of approximately $ 21.9 million.

The purchase price

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

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

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

2015 Omnibus Equity Incentive and 2019 Omnibus Equity Incentive

On January 12, 2016, the Company granted an aggregate

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

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

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

Please see Note (14),

Stock Incentive Plans for more details.

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

On September 13, 2018, the compensation committee

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

which were granted under the 2015 Omnibus Equity Incentive Plan.

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

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

On April 2, 2020, the compensation committee granted

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

under the 2019 Omnibus Equity Incentive Plan.

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

the date of issuance at $ 0.60 per share.

Issuance of common stock to a consultant

On January 2, 2020, the Company entered into an

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

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

60,000 shares of common stock were issued

to this consultant on April 28, 2020.

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

Issuance of common stock to a consultant

On November 2, 2020, the Company entered into

an agreement with a consultant and agreed as compensation to issue to the consultant in the aggregate of 21,000 shares of common stock

for investor relations consulting service rendered from November 2, 2020 to November 2, 2021.

21,000 shares of common stock were issued

to this consultant on November 30, 2020.

Total fair value of the shares of common stock issued was calculated at $14,700 at $0.70 per

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(13) Warrants

Pursuant to the 2020 Purchase Agreement, the Company

agreed to sell to such investors an aggregate of 4,400,000 shares of common stock and warrants to purchase up to 4,400,000 shares of common

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

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

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

issuance till July 23, 2025.

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

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

The Company classified warrant as liabilities and accounted for

the issuance of the May 2020 Warrants as a derivative.

On January 20, 2021, the Company offered and sold

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

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

The January 2021 Warrants are exercisable commencing on January 20,

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

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

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

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

On March 1, 2021, the Company offered and sold

to the public investors an aggregate of 29,277,866 shares of common stock and 14,638,933 warrants to purchase up to 14,638,933 shares

of common stock (the “March 2021 Warrants”).

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

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

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

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

The Company classified warrants as liabilities and accounted for the

issuance of the warrants as a derivative.

A summary of warrant activities is as below:

Nine months Ended

September 30, 2021

Balance at March 31, 2022

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of common stock to investors

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

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

$14.4 million.

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

The exercise price of the warrant

was $ 0.55 per share.

March 1, 2021, the Company offered and sold to the public investors an aggregate of 29,277,866 shares of common stock and 14,638,933

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

approximately $ 21.9 million.

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

The exercise price

of the warrant was $ 0.75 per share,

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

to purchase up to 4,400,000 shares of common stock in a concurrent private placement (the “May 2020 Warrants”).

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

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

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

880,000 May 2020 Warrants were exercised in February 2021

at the exercise price of $0.7425 per share and 3,520,000 May 2020 Warrants were outstanding as of March 31, 2022.

The Company classified

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

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

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

The January 2021 Warrants

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

14,106,900 January

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

12,074,918 January 2021 Warrants

were outstanding as of March 31, 2022 .

March 1, 2021, the Company offered and sold to the public investors an aggregate of 29,277,866 shares of common stock and 14,638,933

warrants to purchase up to 14,638,933 shares of common stock (the “March 2021 Warrants”).

The March 2021Warrants are exercisable

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

67,500 March 2021 Warrants were exercised

in January and March 2021 at the exercise price of $0.75 per share and 14,571,433 March 2021 Warrants were outstanding as of March 31,

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

summary of stock warrant activities is as below:

Three months Ended

exercise price

Outstanding and exercisable at beginning of the period

1 unchanged sentence

Exercised during the period

( 15,054,400 )

Cancelled or expired during the period

Outstanding and exercisable at end of the period

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes information relating to outstanding

and exercisable warrants as of September 30, 2021.

Warrants Outstanding

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes information relating to outstanding and exercisable warrants as of March 31, 2022.

Warrants Exercisable

1 unchanged sentence

Contractual life

Weighted Average

Exercise Price

Aggregate intrinsic value is the sum of the amounts

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

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

The intrinsic value

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

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

the warrants at March 31, 2022 for those warrants for which the quoted market price was in excess of the exercise price (“in-the-money”

The intrinsic value of the warrants as of March 31, 2022and December 31, 2021 are nil.

Earnings Per Share

For the three months ended September 30, 2021

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

the three months ended March 31, 2022 and 2021, basic and diluted net income per share are calculated as follows:

Three Months Ended

September 30,

Basic income (loss) per share

Net income (loss) for the period - numerator

$ ( 520,974 )

Weighted average common stock outstanding - denominator

Net income (loss) per share

Diluted income per share

Net income for the period- numerator

$ ( 520,974 )

Weighted average common stock outstanding - denominator

Effect of dilution

Weighted average common stock outstanding - denominator

Diluted income (loss) per share

For the nine months ended September 30, 2021 and

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

Nine Months Ended

September 30,

Basic loss per share

4 unchanged sentences

Net loss per share

Diluted loss per share

Net loss for the period - numerator

Diluted income per share

Net income for the period- numerator

$ ( 2,488,214 )

4 unchanged sentences

Diluted loss per share

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

were no securities with dilutive effect issued and outstanding.

the three months ended March 31, 2022 and 2021 there were no securities with dilutive effect issued and outstanding.

TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(15) Income Taxes

United States

The Company and Shengde Holdings are incorporated

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

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

22, 2017, the U.S.

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

TCJAlowered the Company’s U.S.

statutory federal income tax rate from the highest rate of 35 % to 21 % effective January 1, 2018,

while also imposing a deemed repatriation tax on deferred foreign income which requires companies to pay a one-time transition tax on

previously unremitted earnings of non-U.S.

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

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

SAB 118 provides a measurement period of up to one year from the 2017 TCJA’s enactment date for companies to complete

their accounting under ASC 740.

In accordance with SAB 118, to the extent that a company’s accounting for certain income tax effects

of the 2017 TCJA is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in its financial

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

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

Transition tax:

The transition tax is a tax on

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

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

federal tax and state statutory tax

rates up to 34 %and 0 %, respectively.

On December 22, 2017, the U.S.

enacted the Tax Cuts and Jobs Act (the “2017 TCJA”),

which significantly changed U.S.

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

statutory federal income tax rate from the highest

rate of 35 % to 21 % effective January 1, 2018, while also imposing a deemed repatriation tax on deferred foreign income which requires

companies to pay a one-time transition tax on previously unremitted earnings of non-U.S.

subsidiaries that were previously tax deferred

and creates new taxes on certain foreign sourced earnings.

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

on accounting for enactment effects of the 2017 TCJA.

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

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

In accordance with SAB 118, to the extent that a company’s

accounting for certain income tax effects of the 2017 TCJA is incomplete but it is able to determine a reasonable estimate, it must record

a provisional estimate in its financial statements.

If a company cannot determine a provisional estimate to be included in its financial

statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before

the enactment of the 2017 TCJA.

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

subsidiaries.

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

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

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

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

income taxes paid on such earnings.

Further, the transition tax is based

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

The Company was able to make a reasonable estimate of

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

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

compute and account for the amount of the transition tax.

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

foreign E&P previously deferred from U.S.

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

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

Dongfang Paper and Baoding Shengde are

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

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

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

The provisions for income taxes for three

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

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

The Company was able to make

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

$ 80,000 in the fourth quarter of 2017.

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

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

This amount may change when the Company

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

federal taxation and finalizes the amounts held

in cash or other specified assets.

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

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

Pursuant to the PRC New Enterprise

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

provisions for income taxes for three months ended March 31, 2022 and 2021 were as follows:

Three Months Ended

September 30,

Provision for Income Taxes

Current Tax Provision U.S.

Current Tax Provision PRC

1 unchanged sentence

Total Provision for (Deferred tax benefit)/ Income Taxes

The provisions for income taxes for nine

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

Nine Months Ended

September 30,

Provision for Income Taxes

Current Tax Provision U.S.

Current Tax Provision PRC

Deferred Tax Provision PRC

$ ( 348,989 )

Total Provision for (Deferred tax benefit)/ Income Taxes

$ ( 100,205 )

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In addition to the reversible future PRC income

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

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

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

The net operating loss carried forward may be available to

reduce future years’ taxable income.

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

As of September 30, 2021, management believed that the realization of all the U.S.

income tax benefits from these losses, which generally

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

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

Accordingly, As of September 30, 2021, the Company

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

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

for the PRC income tax purposes.

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

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

September 30,

TECH PACKAGING, INC.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

income tax purposes for the years ended December 31, 2021 and 2019, respectively.

The net operating

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

These carry forwards would expire, if not utilized,

during the period of 2030 through 2035.

As of March 31, 2022,management believed that the realization of all the U.S.

income tax benefits

from these losses, which generally would generate a deferred tax asset if it can be expected to be utilized in the future, appears not

more than likely due to the Company’s limited operating history and continuing losses for United States income tax purposes.

As of March 31, 2022, the Company provided a 100 % valuation allowance on the U.S.

deferred tax asset benefit to reduce the total deferred

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

Management reviews this valuation allowance periodically and will

make adjustments as warranted.

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

Deferred tax assets (liabilities)

5 unchanged sentences

Valuation allowance

( 5,000,000 )

Total deferred tax assets, net

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

effective tax rate:

Three Months Ended

September 30,

PRC Statutory rate

Effect of different tax jurisdiction

Effect of reconciling items in the PRC for tax purposes

Change in valuation allowance

Effective income tax rate

Nine Months Ended

September 30,

PRC Statutory rate

Effect of different tax jurisdiction

Effect of reconciling items in the PRC for tax purposes

Effect of tax and book difference

(Over) Under-provision in previous year

Change in valuation allowance

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

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

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

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

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

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

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

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

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

other substantial current U.S.

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

Nor does it believe that the amount

of the repatriation of the VIE’s earnings and profits for purposes of paying dividends will change the Company’s position

that its PRC subsidiary Baoding Shengde and the VIE, Dongfang Paper are considered or are expected to be indefinitely reinvested offshore

to support our future capacity expansion.

Effective income tax rate

the three months ended March 31, 2022 and 2021, the effective income tax rate was estimated by the Company to be 12.3 % and 2.3 %, respectively.

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

tax liability on all unrepatriated

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

tax deductions and net operating

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

federal or state corporate income tax liability in the

Nor does it believe that the amount of the repatriation of the VIE’s earnings and profits for purposes of paying dividends

will change the Company’s position that its PRC subsidiary Baoding Shengde and the VIE, Dongfang Paper are considered or are expected

to be indefinitely reinvested offshore to support our future capacity expansion.

If these earnings are repatriated to the U.S.

resulting in U.S.

taxable income in the future,

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

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

tax provisions would be required.

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

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

financial position, results of operations, or cash flows.

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

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

review by taxing authorities.

Audit periods remain open for review until the statute of limitations has passed, which in the PRC is usually

The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment

to the Company’s liability for income taxes.

Any such adjustment could be material to the Company’s results of operations

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

As of March 31, 2022 and

December 31, 2021, management considered that the Company had no uncertain tax positions affecting its consolidated financial position

and results of operations or cash flows, and will continue to evaluate for any uncertain position in future.

There are no estimated interest

costs and penalties provided in the Company’s consolidated financial statements for the three months ended March 31, 2022 and 2021,

respectively.

The Company’s tax positions related to open tax years are subject to examination by the relevant tax authorities

and the major one is the China Tax Authority.

TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company has adopted ASC Topic 740-10-05, Income

To date, the adoption of this interpretation has not impacted the Company’s financial position, results of operations, or

The Company performed self-assessment and the Company’s liability for income taxes includes the liability for unrecognized

tax benefits, interest and penalties which relate to tax years still subject to review by taxing authorities.

Audit periods remain open

for review until the statute of limitations has passed, which in the PRC is usually 5 years.

The completion of review or the expiration

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

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

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

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

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

will continue to evaluate for any uncertain position in future.

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

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

The Company’s tax positions

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

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Stock Incentive Plans

Incentive Stock Plan

On October 31, 2019, the shareholders of the Company

at the Company’s Annual Shareholders General Meeting adopted and approved the 2019 Omnibus Equity Incentive Plan of IT Tech Packaging,

(the “2019 ISP”).

Under the 2019 ISP, the Company has reserved a total of 2,000,000 shares of common stock for issuance

as or under awards to be made to the directors, officers, employees and/or consultants of the Company and its subsidiaries.

2020, 2,000,000 shares of common stock were granted under the 2019 ISP.

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

at $ 1,200,000 as of the date of issuance at $ 0.60 per share.

On November 12, 2021, the Company’s Annual General

Meeting adopted and approved the 2021 Omnibus Equity Incentive Plan of IT Tech Packaging, Inc.

(the”2021 Plan”).Under the

2021 ISP, the Company has reserved a total of 1,500,000 shares of common stock for issuance as or under awards to be made to the directors,

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

Commitments and Contingencies

Operating Lease

The Company leases 32.95 acres of land from a

local government in Xushui District, Baoding City, Hebei, China through a real estate lease with a 30 -year term, which expires on December

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

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

The lease requires an annual rental payment of approximately $ 18,903 (RMB 120,000 ).

This operating lease is renewable at the

end of the 30-year term.

As mentioned in Note (8) Related Party Transactions,

in connection with the sale of Industrial Buildings to Hebei Fangsheng, Hebei Fangsheng agrees to lease the Industrial Buildings back

to the Company at an annual rental of $ 154,579 (RMB 1,000,000 ), for a total term of up to five years .

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

September 30,

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

mentioned in Note (8) Related Party Transactions, in connection with the sale of Industrial Buildings to Hebei Fangsheng, Hebei Fangsheng

agrees to lease the Industrial Buildings back to the Company at an annual rental of $ 157,522 (RMB 1,000,000 ), for a total term of up to

minimum lease payments of all operating leases are as follows:

Total operating lease payments

Capital commitment

As of September 30, 2021, the Company has entered

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

Total outstanding commitments under these contracts

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

The Company expected to pay off all the

balances within 1-3 years.

On June 25, 2019, Dongfang Paper entered into

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

(“Hebei Tengsheng”), a limited liability company

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

The consideration for the acquisition

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

is payable by December 31, 2021.

Guarantees and Indemnities

The Company agreed with Baoding Huanrun Trading

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

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

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

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

could be materially adversely affected.

of March 31, 2022, the Company has entered into several contracts for the purchase of paper machine of a new tissue paper production

line PM10 and the improvement of Industrial Buildings.

Total outstanding commitments under these contracts were $ 4,749,646 and $ 4,700,927

as of March 31, 2022 and December 31, 2021, respectively.

The Company expected to pay off all the balances within 1 - 3 years.

and Indemnities

Company agreed with Baoding Huanrun Trading Co., a major supplier of raw materials, to guarantee certain obligations of this third party,

and as of March 31, 2022 and December 31, 2021, the Company guaranteed its long-term loan from financial institutions amounting to $ 4,883,274

(RMB 31,000,000 ) and $ 4,862,211 (RMB 31,000,000 ), respectively, that matured at various times in 2018-2023.

If Huanrun Trading Co., were

to become insolvent, the Company could be materially adversely affected.

Segment Reporting

Since March 10, 2010, Baoding Shengde started

its operations and thereafter the Company manages its operations through two business operating segments:

Dongfang Paper, which produces

offset printing paper and corrugating medium paper, and Baoding Shengde, which produces digital photo paper.

They are managed separately

because each business requires different technology and marketing strategies.

The Company evaluates performance of its operating

segments based on net income.

Administrative functions such as finance, treasury, and information systems are centralized.

However, where

applicable, portions of the administrative function expenses are allocated between the operating segments based on gross revenue generated.

The operating segments do share facilities in Xushui County, Baoding City, Hebei Province, China.

All sales were sold to customers located

March 10, 2010, Baoding Shengde started its operations and thereafter the Company manages its operations through two business operating

Dongfang Paper, which produces offset printing paper and corrugating medium paper, and Baoding Shengde, which produces digital

They are managed separately because each business requires different technology and marketing strategies.

Company evaluates performance of its operating segments based on net income.

Administrative functions such as finance, treasury, and

information systems are centralized.

However, where applicable, portions of the administrative function expenses are allocated between

the operating segments based on gross revenue generated.

The operating segments do share facilities in Xushui County, Baoding City, Hebei

Province, China.

All sales were sold to customers located in the PRC.

TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Summarized financial information for the three reportable segments

is as follows:

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

financial information for the three reportable segments is as follows:

Three Months Ended

September 30, 2021

Not Attributable

March 31, 2022

Elimination of

1 unchanged sentence

Inter-segment

$ ( 2,333,866 )

Depreciation and amortization

4 unchanged sentences

( 1,605,442 )

Three Months Ended

September 30, 2020

Not Attributable

Enterprise-wide,

of Inter-segment

Depreciation and amortization

Interest income

Interest expense

Income tax expense(benefit)

Net income (loss)

( 2,488,214 )

Nine Months Ended

September 30, 2021

Not Attributable

Enterprise-wide,

of Inter-segment

$ 108,949,261

( 5,318,563 )

Depreciation and amortization

Interest income

Interest expense

Income tax expense(benefit)

Net income (loss)

( 9,219,504 )

( 3,249,528 )

Nine Months Ended

September 30, 2020

Not Attributable

Three Months Ended

March 31, 2021

Elimination of

Enterprise-wide,

of Inter-segment

Gross profit (loss)

( 1,430,934 )

Inter-segment

Depreciation and amortization

2 unchanged sentences

Income tax expense(benefit)

( 1,586,876 )

Net income (loss)

1 unchanged sentence

( 3,879,416 )

IT TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2021

Not Attributable

Elimination of

Enterprise-wide,

Inter-segment

( 4,338,856 )

As of March 31, 2022

As of December 31, 2021

Not Attributable

Elimination of

Enterprise-wide,

Inter-segment

(19) Concentration and Major Customers and Suppliers

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

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

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

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

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

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

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

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

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

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

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

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

$ 109,369,166

TECH PACKAGING, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Concentration and Major Customers and Suppliers

the three months ended March 31, 2022, the Company had no single customer contributed over 10 % of total sales.

the three months ended March 31, 2021, the Company had no single customer contributed over 10 % of total sales.

the three months ended March 31, 2022, the Company had two major suppliers accounted for 77 % and 13 % of total purchases.

the three months ended March 31, 2021, the Company had two major suppliers accounted for 81 % and 10 % of total purchases.

Concentration of Credit Risk

Financial instruments for which the Company is

potentially subject to concentration of credit risk consist principally of cash.

The Company places its cash in reputable financial institutions

in the PRC and the United States.

Although it is generally understood that the PRC central government stands behind all of the banks in

China in the event of bank failure, there is no deposit insurance system in China that is similar to the protection provided by the Federal

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

Financial instruments for which the Company is potentially

subject to concentration of credit risk consist principally of cash.

The Company places its cash in reputable financial institutions in

the PRC and the United States.

Although it is generally understood that the PRC central government stands behind all of the banks in China

in the event of bank failure, there is no deposit insurance system in China that is similar to the protection provided by the Federal

Deposit Insurance Corporation (“FDIC”) of the United States as of as of March 31, 2022 and December 31, 2021.

On May 1, 2015,

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

(US$ 77,096 ) per depositor per insured financial intuition, including both principal and interest.

78,762) per depositor per insured financial intuition, including both principal and interest.

For the cash placed in financial institutions

in the United States, the Company’s U.S.

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

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

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

bank accounts are all fully covered by the FDIC insurance as of March 31, 2022 and December

31, 2021, while for the cash placed in financial institutions in the PRC, the balances exceeding the maximum coverage of RMB 500,000 amounted

to RMB 39,944,290 ($ 6,292,223 ) as of March 31, 2022.

Risks and Uncertainties

The Company is subject to substantial risks from,

among other things, intense competition associated with the industry in general, other risks associated with financing, liquidity requirements,

rapidly changing customer requirements, foreign currency exchange rates, and operating in the PRC under its various laws and restrictions.

Company is subject to substantial risks from, among other things, intense competition associated with the industry in general, other

risks associated with financing, liquidity requirements, rapidly changing customer requirements, foreign currency exchange rates, and

operating in the PRC under its various laws and restrictions.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial

Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

ASU 2016-13 replaced the incurred loss impairment

methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of

reasonable and supportable information to inform credit loss estimates.

ASU 2016-13 requires use of a forward-looking expected credit

loss model for accounts receivables, loans, and other financial instruments.

ASU 2016-13 is effective for fiscal years beginning after

December 15, 2019, with early adoption permitted.

In October 2019, the FASB issued ASU No.

2019-10, “Financial Instruments-Credit

Losses (Topic 326):

Effective Dates”, to finalize the effective date delays for private companies, not-for-profits, and smaller

reporting companies applying the CECL standards.

The ASU is effective for reporting periods beginning after December 15, 2022 and interim

periods within those fiscal years.

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

Measurement of Credit Losses on Financial Instruments.ASU

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

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

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

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

In October 2019, the FASB issued ASU

2019-10, “Financial Instruments-Credit Losses (Topic326):

Effective Dates”, to finalize the effective date delays for

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

The ASU is effective for reporting periods

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

Early adoption is permitted.

We are currently evaluating the impact of the adoption of ASU 2016-13

on our condensed consolidated financial statements.

We are currently evaluating

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

Subsequent Event

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

What changed 10-Q

Item 1. Financial Statements