What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-09 compared with 2022-05-10 · 339 added, 192 removed, 315 unchanged (63% of the section changed)

1 unchanged sentence

Notice Regarding Forward-Looking Statements

following discussion of the financial condition and results of operations of the Company for the periods ended March 31, 2022 and 2021

following discussion of the financial condition and results of operations of the Company for the periods ended June 30, 2022 and 2021

should be read in conjunction with the financial statements and the notes to the financial statements that are included elsewhere in

55 unchanged sentences

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

December 7, 2021, the Company announced that it has officially started its surgical masks production after a month of trial production

since the end of November 2021.

The Company’s surgical masks comply with China’s pharmaceutical industry standard YY0469-2011.

of Operations

of the Three months ended March 31, 2022 and 2021

Revenue for the three months ended March 31, 2022

was $15,481,618, a decrease of $8,727,809, or 36.05%, from $24,209,427 for the same period in the previous year.

This was mainly due to

the decrease in sales volume of Regular corrugating medium paper, Offset Printing Paper and tissue paper products.

of the Three months ended June 30, 2022 and 2021

for the three months ended June 30, 2022 was $31,788,884, a decrease of $14,746,031, or 31.69%, from $46,534,915 for the same period

in the previous year.

This was mainly due to the decrease in sales volume of regular corrugating medium paper, Offset Printing Paper

and tissue paper products.

of Offset Printing Paper, Corrugating Medium Paper and Tissue Paper Products

from sales of offset printing paper, corrugating medium paper (“CMP”) and tissue paper products for the three months ended

March 31, 2022 was $15,425,022, a decrease of $8,653,947, or 35.94%, from $24,078,969 for the first quarter of 2021.

Total offset printing

paper, CMP and tissue paper products sold during the three months ended March 31, 2022 amounted to 29,483 tonnes, a decrease of 16,075

tonnes, or 35.28%, compared to 45,558 tonnes sold in the comparable period in the previous year.

Production of CMP was suspended during

January and February and offset printing paper suspended in the first quarter of 2022, due to China’s New Year and restriction

on production during Beijing Winter Olympics as required by the government.

The changes in revenue dollar amount and in quantity sold

for the three months ended March 31, 2022 and 2021 are summarized as follows:

Revenue from sales of offset printing paper, corrugating

medium paper (“CMP”) and tissue paper products for the three months ended June 30, 2022 was $31,701,305, a decrease of $14,724,740,

or 31.72%, from $46,426,045 for the second quarter of 2021.

Total offset printing paper, CMP and tissue paper products sold during the

three months ended June 30, 2022 amounted to 65,968 tonnes, a decrease of 20,641tonnes, or 23.83%, compared to 86,609 tonnes sold in the

comparable period in the previous year.

Due to the sporadic situation of COVID-19 in China, our factory facilities were operated in a

limited, transitional basis during the three months ended June 30, 2022.

The changes in revenue dollar amount and in quantity sold for

the three months ended June 30, 2022 and 2021 are summarized as follows:

Three Months Ended

March 31, 2022

March 31, 2021

June 30, 2022

June 30, 2021

Sales Revenue

Quantity (Tonne)

$ (4,398,814 )

5 unchanged sentences

Tissue Paper Products

$ (2,016,806 )

Total CMP, Offset Printing Paper and Tissue Paper Revenue

$ (14,724,740 )

Monthly sales revenue for the 24 months ended March 31, 2022, are summarized

Average Selling Prices (ASPs) for our main products in the three months ended March 31, 2022 and 2021 are summarized as follows:

Three Months ended March 31, 2021

Three Months ended March 31, 2022

Increase (Decrease) from comparable period in the previous year

Increase (Decrease) by percentage

following chart shows the month-by-month ASPs for the 24-month period ended March 31, 2022:

sales revenue for the 24 months ended June 30, 2022, are summarized below:

Average Selling Prices (ASPs) for our main products in the three months ended June 30, 2022 and 2021 are summarized as follows:

Offset Printing Paper ASP

Regular CMP ASP

Light-Weight CMP ASP

Three Months ended June 30, 2021

Three Months ended June 30, 2022

Decrease from comparable period in the previous year

Decrease by percentage

following chart shows the month-by-month ASPs for the 24-month period ended June 30, 2022:

from CMP amounted to $31,289,918 (98.70% of the total offset printing paper, CMP and tissue paper products revenues) for the three months

ended March 31, 2022, representing a decrease of $5,685,137, or 27.45%, from $20,711,771 for the comparable period in 2021, as a result

of production suspension of CMP.

sold 29,086 tonnes of CMP in the three months ended March 31, 2022 as compared to 41,296 tonnes for the same period in 2021, representing

a 29.57% decrease in quantity sold.

for regular CMP increased from $504/tonne for the three months ended March 31, 2021 to $519/tonne for the three months ended March 31,

2022, representing a 2.98% increase.

ASP in RMB for regular CMP for the first quarter of 2021 and 2022 was RMB3,282 and RMB3,294, respectively,

representing a 0.37% increase.

The quantity of regular CMP sold decreased by 8,381 tonnes, from 33,626 tonnes in the first quarter of

2021 to 25,245 tonnes in the first quarter of 2022.

for light-weight CMP increased from $489/tonne for the three months ended March 31, 2021 to $502/tonne for the three months ended March

31, 2022, representing a 2.66% increase.

ASP in RMB for light-weight CMP for the first quarter of 2021 and 2022 was RMB3,178 and RMB3,186,

respectively, representing a 0.25% increase.

ended June 30, 2022, representing a decrease of $5,523,713, or 15.00%, from $36,813,631 for the comparable period in 2021.

sold 65,585 tonnes of CMP in the three months ended June 30, 2022 as compared to 73,998 tonnes for the same period in 2021, representing

an 11.37% decrease in quantity sold.

for regular CMP dropped from $500/tonne for the three months ended June 30, 2021 to $479/tonne for the three months ended June 30, 2022,

representing a 4.20% decrease.

ASP in RMB for regular CMP for the second quarter of 2021 and 2022 was RMB3,224 and RMB3,156, respectively,

representing a 2.11% decrease.

The quantity of regular CMP sold decreased by 6,564 tonnes, from 60,507 tonnes in the second quarter of

2021 to 53,943 tonnes in the second quarter of 2022.

for light-weight CMP decreased from $486/tonne for the three months ended June 30, 2021 to $467/tonne for the three months ended June

30, 2022, representing a 3.91% decrease.

ASP in RMB for light-weight CMP for the second quarter of 2021 and 2022 was RMB3,136 and RMB3,064,

respectively, representing a 2.30% decrease.

The quantity of light-weight CMP sold decreased by 1,849 tonnes, from 13,491 tonnes in the

first quarter of 2021, to 3,841 tonnes in the first quarter of 2022.

second quarter of 2021, to 11,642 tonnes in the second quarter of 2022.

PM6 production line, which produces regular CMP, has a designated capacity of 360,000 tonnes /year.

The utilization rates for the first

The utilization rates for the second

quarter of 2022 and 2021 were 58.98% and 68.20%, respectively, representing a decrease of 9.22%.

sold for regular CMP that was produced by the PM6 production line from April 2020 to March 2022 are as follows:

sold for regular CMP that was produced by the PM6 production line from July 2020 to June 2022 are as follows:

printing paper

from offset printing paper was $nil for the three months ended March 31, 2022, representing a decrease of $2,115,782, or 100.00%, from

$2,115,782 for the three months ended March 31, 2021.

Production ceased in the first quarter of 2022.

We sold 0 tonne of offset printing

paper in the first quarter of 2022, as compared to 3,142 tonnes in the comparable period of 2021, a decrease of 3,142 tonnes, or 100.00%.

from offset printing paper was $nil for the three months ended June 30, 2022 compared to the revenue of $7,184,221 for the three months

ended June 30, 2021.

Due to the Winter Olympic held in Beijing, China in 2022 and the requirement by the government to stem the sporadic

spread of COVID-19, our production of offset printing paper was suspended in the first half of 2022.

Paper Products

from tissue paper products was $411,387 (1.30% of the total offset printing paper, CMP and tissue paper products revenues) for the three

months ended March 31, 2022, representing a decrease of $853,028, or 68.17%, from $1,251,416 for the three months ended March 31, 2021.

We sold 397 tonnes of tissue paper in the first quarter of 2022, as compared to 1,120 tonnes in the comparable period of 2021, representing

months ended June 30, 2022, representing a decrease of $2,016,806, or 83.06%, from $2,428,193 for the three months ended June 30, 2021.

We sold 383 tonnes of tissue paper in the second quarter of 2022, as compared to 2,196 tonnes in the comparable period of 2021, representing

a decrease of 1,813 tonnes, or 82.56%.

for tissue paper products decreased from $1,117/tonne for the three months ended March 31, 2021 to $1,003/tonne for the three months

ended March 31, 2022, representing a 10.21% decrease.

ASP in RMB for tissue paper products for the first quarter of 2021 and 2022 was

RMB7,267 and RMB6,375, respectively, representing a 12.27% decrease.

April 29, 2020, we launched production line of non-medical single-use face masks, following completion of raw materials preparation,

trial run of the equipment and the sample products inspection.

Revenue generated from selling face mask were $56,596 and $130,458 for

the three months ended March 31, 2022 and 2021, respectively, representing a decrease of $73,862, or 56.62%.

We sold 3,014 thousand pieces

of face masks in the first quarter of 2022, as compared to 3,836 thousand pieces in the comparable period of 2021, a decrease of 822

thousand pieces, or 21.43%.

cost of sales for CMP, offset printing paper and tissue paper products for the quarter ended March 31, 2022 was $15,131,254, a decrease

for tissue paper products decreased from $1,106/tonne for the three months ended June 30, 2021 to $1,074/tonne for the three months ended

June 30, 2022, representing a 2.89% decrease due to the appreciation of USD against RMB during the period.

ASP in RMB for tissue paper

products for the second quarter of 2021 and 2022 was RMB7,130 and RMB7,153, respectively, representing a 0.32% increase.

Revenue generated from selling face mask were

$87,579 and $108,869 for the three months ended June 30, 2022 and 2021, respectively, representing a decrease of $21,290, or 19.56%.

sold 3,014 thousand pieces of face masks in the second quarter of 2022, as compared to 2,635 thousand pieces in the comparable period

of 2021, an increase of 379 thousand pieces, or 14.38%.

cost of sales for CMP, offset printing paper and tissue paper products for the quarter ended June 30, 2022 was $31,085,472, a decrease

of $12,322,383, or 28.39%, from $43,407,855 for the comparable period in 2021.

This was mainly due to the decrease in sales quantity of

regular CMP, offset printing paper and tissue paper products.

of sales for CMP was $14,169,089 for the quarter ended March 31, 2022, as compared to $18,858,935 for the comparable period in 2021.

The decrease in the cost of sales of $4,689,846 for CMP was mainly due to the decrease in sales volume of regular CMP.

Average cost of

sales per tonne for CMP increased by 6.56%, from $457 in the first quarter of 2021 to $487 in the first quarter of 2022.

in average cost of sales was mainly attributable to the increase in repair and maintenance costs.

of sales for offset printing paper was $nil for the quarter ended March 31, 2022, as compared to $1,705,938 for the comparable period

Cost of sales for tissue paper products was $962,165

for the quarter ended March 31, 2022, as compared to $1,707,623 for the comparable period in 2021.

The decrease in the cost of sales of

$745,458 for tissue paper products was mainly due to the decrease in sales volume of tissue paper products and the increase in average

cost of sales.

Average cost of sales per tonne of tissue paper products increased by 58.95%, from $1,525 in the three months ended March

31, 2021, to $2,424 for the comparable period in 2022.

in cost of sales and cost per tonne by product for the quarters ended March 31, 2022 and 2021 are summarized below:

This was mainly due to the decrease in sales quantity

of regular CMP, offset printing paper and tissue paper products.

of sales for CMP was $29,859,737 for the quarter ended June 30, 2022, as compared to $34,838,381 for the comparable period in 2021.

decrease in the cost of sales of $4,978,644 for CMP was mainly due to the decrease in sales volume of regular CMP and the decrease in

average cost of sales.

Average cost of sales per tonne for CMP decreased by 3.40%, from $471 in the second quarter of 2021 to $455 in

the second quarter of 2022.

The decrease in average cost of sales was mainly attributable to the lower average unit purchase costs (net

of applicable value added tax) of recycled paper board in the second quarter of 2022 compared to the second quarter of 2021.

of sales for offset printing paper was $nil for the quarter ended June 30, 2022, as compared to $5,909,029 for the comparable period

of sales for tissue paper products was $1,225,735 for the quarter ended June 30, 2022, as compared to $2,660,444 for the comparable period

The decrease in the cost of sales of $1,434,709 for tissue paper products was mainly due to the decrease in sales volume of

tissue paper products, partially offset by the increase in average cost of sales.

Average cost of sales per tonne of tissue paper products

increased by 164.24%, from $1,211 in the three months ended June 30, 2021, to $3,200 for the comparable period in 2022.

This was mainly

due to the increase in cost of tissue base paper.

in cost of sales and cost per tonne by product for the quarters ended June 30, 2022 and 2021 are summarized below:

Three Months Ended

March 31, 2022

March 31, 2021

June 30, 2022

June 30, 2021

Change in percentage

Cost of Sales

Cost per Tonne

Cost of Sales

Cost per Tonne

Cost of Sales

Cost per Tonne

Cost of Sales

Cost per Tone

$ (3,970,645 )

5 unchanged sentences

Tissue Paper Products

$ (1,434,709 )

Total CMP, Offset Printing Paper and Tissue Paper

$ (12,322,383 )

average unit purchase costs (net of applicable value added tax) of recycled paper board in the three months ended March 31, 2022 was

RMB 1,858/tonne (approximately $293/tonne), as compared to RMB 1,878/tonne (approximately $289/tonne) for the three months ended March

These changes (in US dollars) represent a year-over-year increase of 1.38% for the recycled paper board.

average unit purchase costs (net of applicable value added tax) of recycled paper board in the three months ended June 30, 2022 was RMB

1,776/tonne (approximately $273/tonne), as compared to RMB 2,112/tonne (approximately $327/tonne) for the three months ended June 30,

These changes (in US dollars) represent a year-over-year decrease of 16.51% for the recycled paper board.

We use domestic recycled

3 unchanged sentences

paper bears some correlation to the pricing of imported recycled paper.

pricing trends of our major raw materials for the 24-month period from April 2020 to March 2022 are shown below:

pricing trends of our major raw materials for the 24-month period from July 2020 to June 2022 are shown below:

and gas are our two main energy sources.

Electricity and gas accounted for approximately 3% and 9.6% of total sales in the first quarter

of 2022, respectively, compared to 4% and 9.7% of total sales in the first quarter of 2021.

The monthly energy cost as a percentage of

total monthly sales of our main paper products for the 24 months ended March 31, 2022 are summarized as follows:

profit for the three months ended March 31, 2022 was $310,445 (2.01% of the total revenue), representing a decrease of $1,520,560, or

83.05%, from the gross profit of $1,831,005 (7.56% of the total revenue) for the three months ended March 31, 2021, as a result of factors

Electricity and gas accounted for approximately 4% and 15.4% of total sales in the second quarter

of 2022, respectively, compared to 4% and 10.2% of total sales in the second quarter of 2021.

The monthly energy cost as a percentage

of total monthly sales of our main paper products for the 24 months ended June 30, 2022 are summarized as follows:

profit for the three months ended June 30, 2022 was $634,037 (1.99% of the total revenue), representing a decrease of $2,394,982, or

79.07%, from the gross profit of $3,029,019 (6.51% of the total revenue) for the three months ended June 30, 2021, as a result of factors

described above.

Printing Paper, CMP and Tissue Paper Products

profit for offset printing paper, CMP and tissue paper products for the three months ended March 31, 2022 was $293,768, a decrease of

$1,512,706, or 83.74%, from the gross profit of $1,806,474 for the three months ended March 31, 2021.

The decrease was mainly the result

of the factors discussed above.

profit for offset printing paper, CMP and tissue paper products for the three months ended June 30, 2022 was $615,833, representing a

decrease of $2,402,358, or 79.60%, from the gross profit of $3,018,191 for the three months ended June 30, 2021.

The decrease was mainly

the result of the factors discussed above.

overall gross profit margin for offset printing paper, CMP and tissue paper products decreased by 4.56 percentage points, from 6.50%

for the three months ended March 31, 2021, to 1.90% for the three months ended March 31, 2022.

profit margin for regular CMP for the three months ended March 31, 2022 was 5.35%, or 3.15 percentage points lower, as compared to gross

profit margin of 8.50% for the three months ended March 31, 2021.

Such decrease was mainly due to the increase average cost of sales.

profit margin for light-weight CMP for the three months ended March 31, 2022 was 8.15%, or 2.79 percentage points lower, as compared

to gross profit margin of 10.94% for the three months ended March 31, 2021.

Gross profit margin for tissue paper products for

the three months ended March 31, 2022 was -141.51%, or 105.05 percentage points lower, as compared to gross profit margin of -36.46% for

the three months ended March 31, 2021.

The increase in gross loss was mainly due to the increase in cost of base paper.

gross profit margins on the sales of our CMP and offset printing paper for the 24-month period ended March 31, 2022 are as follows:

profit for face mask for the three months ended March 31, 2022 and 2021 were $16,677 and $24,531, representing a gross margin of 29.47%

for the three months ended June 30, 2021, to 1.94% for the three months ended June 30, 2022.

Gross profit margin for regular CMP for the three

months ended June 30, 2022 was 4.28%, or 0.79 percentage points lower, as compared to gross profit margin of 5.07% for the three months

ended June 30, 2021.

Such decrease was mainly due to the decrease of ASP of regular CMP, partially offset by the decrease in cost of recycled

paper board in the second quarter of 2022.

profit margin for light-weight CMP for the three months ended June 30, 2022 was 5.95%, or 0.76 percentage points lower, as compared to

gross profit margin of 6.71% for the three months ended June 30, 2021.

The decrease was mainly due to the decrease in ASP of light-weight

CMP, partially offset by the decrease in cost of recycled paper board in the second quarter of 2022.

profit margin for tissue paper products for the three months ended June 30, 2022 was -197.95%, or 188.39 percentage points lower, as

compared to gross profit margin of -9.56% for the three months ended June 30, 2021.

The decrease in gross loss was mainly due to the

decrease in ASP of tissue paper products and the increase in cost of base paper in the second quarter of 2022.

gross profit margins on the sales of our CMP and offset printing paper for the 24-month period ended June 30, 2022 are as follows:

profit for face masks for the three months ended June 30, 2022 and 2021 were $18,204 and $10,829, representing a gross margin of 20.79%

and 9.95%, respectively.

General and Administrative Expenses

general and administrative expenses for the three months ended March 31, 2022 were $3,300,881, an increase of $745,563, or 29.18% from

$2,555,318 for the three months ended March 31, 2021.

The increase was mainly due to the deprecation of idle fixed assets during production

suspension in first quarter of 2022.

from Operations

loss for the quarter ended March 31, 2022 was 2,956,433, a decrease of $2,232,120, or 308.17%, from $724,313 for the quarter ended March

The decrease in income from operations was primarily due to the decrease in gross profit and increase in selling, general and

administrative expenses.

general and administrative expenses for the three months ended June 30, 2022 were $1,869,802, a decrease of $727,809, or 28.02% from

$2,597,611 for the three months ended June 30, 2021.

The decrease was mainly due to the savings in manpower costs and appreciation of

USD against RMB.

Income from Operations

loss for the quarter ended June 30, 2022 was $1,237,605, a decrease of $1,669,013, or 386.88%, from income from operations of $431,408

for the quarter ended June 30, 2021.

The decrease in income from operations was primarily due to the decrease in gross profit, partially

offset by the decrease in selling, general and administrative expenses.

Income and Expenses

expense for the three months ended March 31, 2022 decreased by $8,088, from $278,901 in the three months ended March 31, 2021, to $270,813.

expense for the three months ended June 30, 2022 decreased by $24,793, from $283,899 in the three months ended June 30, 2021, to $259,106.

The Company had short-term and long-term interest-bearing loans, related party loans and leasing obligations that aggregated $15,530,449

as of March 31, 2022, as compared to $16,406,559 as of March 31, 2021.

as of June 30, 2022, as compared to $16,566,327 as of June 30, 2021.

on derivative liability

3 unchanged sentences

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

gain recognized on addition and change in fair value of derivative liability for the three months ended March 31, 2022 was $386,588.

a result and the factors discussed above, net loss was $2,488,214 for the quarter ended March 31, 2022, representing an increase of $1,850,642,

or 42.65%, from $4,338,856 for the quarter ended March 31, 2021.

accounts receivable increased by $115,804, or 2.38%, to $4,984,738 as of March 31, 2022, as compared with $4,868,934 as of December 31,

gain recognized on addition and change in fair value of derivative liability for the three months ended June 30, 2022 and 2021 was $386,588

and $4,509,007, respectively.

a result and the factors discussed above, net loss was $287,913 for the quarter ended June 30, 2022, representing an increase of $165,335,

or 36.48%, from $453,248 for the quarter ended June 30, 2021.

of the six months ended June 30, 2022 and 2021

for the six months ended June 30, 2022 was $47,270,502, representing a decrease of $23,473,840, or 33.18%, from $70,744,342 for the same

period in the previous year.

This was mainly due to the decrease in sales volume of corrugating medium paper (“CMP”) and

offset printing paper and tissue paper products.

of Offset Printing Paper, Corrugating Medium Paper and Tissue Paper Products

from sales of offset printing paper, CMP and tissue paper products for the six months ended June 30, 2022 was $47,126,327, a decrease

of $23,378,688, or 33.16%, from $70,505,015 for the six months ended June 30, 2021.

This was mainly due to the decrease in sales volume

of regular CMP, light-weight CMP, offset printing paper and tissue paper products, and the decrease in ASPs of CMP and tissue paper products.

Total quantities of offset printing paper, CMP and tissue paper products sold during the six months ended June 30, 2022 amounted to 95,451

tonnes, a decrease of 36,717 tonnes, or 27.78%, compared to 132,168 tonnes sold during the six months ended June 30, 2021.

Total quantities

of CMP and offset printing paper sold decreased by 34,180 tonnes in the six months of 2022 as compared to the same period of 2021.

sold 780 tonnes of tissue paper products in the six months of 2022 as opposed to 3,317 tonnes in the same period of 2021.

of CMP was suspended during January and February 2022 and offset printing paper suspended in the first quarter of 2022, due to Chinese

New Year and restriction on production during Winter Olympics held in Beijing in 2022 as required by the government.

The changes in revenue

and quantity sold for the six months ended June 30, 2022 and 2021 are summarized as follows:

summary of the above changes and further analyses of the changes in our sales revenue are as follows:

Six Months Ended

June 30, 2022

June 30, 2021

Sales Revenue

Quantity (Tonne)

$ (8,263,631 )

Light-Weight CMP

$ (2,945,221 )

$ (11,208,852 )

Offset Printing Paper

$ (9,300,003 )

Tissue Paper Products

$ (2,869,833 )

Total CMP, Offset Printing Paper and Tissue Paper Revenue

$ (23,378,688 )

for our main products in the six-month period ended June 30, 2022 and 2021 are summarized as follows:

Offset Printing Paper ASP

Light-Weight CMP ASP

Tissue Paper Products ASP

Six Months Ended June 30, 2021

Six Months Ended June 30, 2022

Decrease from comparable period in the previous year

Decrease by percentage

of Face Masks

generated from selling face masks were $144,175 and $239,327 for the six months ended June 30, 2022 and 2021.

We sold 12,664 thousand

pieces of face masks for the six months ended June 30, 2022, as compared to 6,470 thousand pieces in the comparable period of 2021, an

increase of 6,194 thousand pieces, or 95.73%.

cost of sales for CMP, offset printing paper and tissue paper products in the six months ended June 30, 2022 was $46,216,727, a decrease

of $19,463,623, or 29.63%, from $65,680,350 for the six months ended June 30, 2021.

This was mainly a result of the decrease in sales

volume of CMP and offset printing paper.

Cost of sales for CMP was $44,028,827 for the six months ended June 30, 2022, as compared to

$53,697,316 in the same period of 2021.

Cost of sales for tissue paper products was $2,187,900 for the six months ended June 30, 2022,

as compared to $4,368,067 in the same period of 2021.

Average cost of sales per tonne of tissue paper products increased by 112.98%,

from $1,317 for the six months ended June 30, 2021, to $2,805 for the same period of 2022.

The increase in average cost of sales of tissue

paper products was mainly due to the increase in average cost of tissue base paper.

in cost of sales and cost per tonne by product for the six months ended June 30, 2022 and 2021 are summarized below:

in percentage

$ (7,093,325 )

$ (2,575,164 )

$ (9,668,489 )

Printing Paper

$ (7,614,967 )

Paper Products

$ (2,180,167 )

CMP, Offset Printing Paper and Tissue Paper Revenue

$ (19,463,623 )

Gross profit for the six months ended June 30,

2022 was $944,482 (2.00% of the total revenue), representing a decrease of $3,915,542, or 80.57%, from the gross profit of $4,860,024

(6.87% of the total revenue) for the six months ended June 30, 2021.

The decrease was mainly due to (i) the decrease in quantities sold

of CMP, offset printing paper and tissue paper products, and (ii) the increase in material costs of tissue paper products.

Printing Paper, CMP and Tissue Paper Products

profit for offset printing paper, CMP and tissue paper products for the six months ended June 30, 2022 was $909,600, a decrease of $3,915,065,

or 81.15%, from the gross profit of $4,824,665 for the six months ended June 30, 2021.

The decrease was mainly the result of the factors

discussed above.

overall gross profit margin for offset printing paper, CMP and tissue paper products decreased by 4.91 percentage points, from 6.84%

for the six months ended June 30, 2021, to 1.93% for the six months ended June 30, 2022.

profit margin for regular CMP for the six months ended June 30, 2022 was 4.64%, or 1.67 percentage points lower, as compared to gross

profit margin of 6.31% for the six months ended June 30, 2021.

profit margin for light-weight CMP for the six months ended June 30, 2022 was 6.52%, or 1.73 percentage points lower, as compared to

gross profit margin of 8.25% for the six months ended June 30, 2021.

profit margin for tissue paper products was -170.19% for the six months ended June 30, 2022, a decrease of 151.48 percentage points,

as compared to -18.71% for the six months ended June 30, 2021.

The decrease was mainly due to the increase in cost of tissue base paper.

profit for face masks for the six months ended June 30, 2022 was $34,882, representing a gross margin of 24.19% compared with a gross

profit of $35,359, representing a gross margin of 14.77% for the six months ended June 30, 2021.

General and Administrative Expenses

general and administrative expenses for the six months ended June 30, 2022 were $5,170,683, an increase of $17,754, or 0.34% from $5,152,929

for the six months ended June 30, 2021.

Income from Operations

loss for the six months ended June 30, 2022 was $4,194,038, an increase of $3,901,133, or 1331.88%, from loss from operations of $292,905

for the six months ended June 30, 2021.

The increase in loss from operations was primarily due to the decrease in gross profit.

Income and Expenses

expense for the six months ended June 30, 2022 decreased by $32,881, from $562,800 for the six months ended June 30, 2021, to $529,919.

The Company had short-term and long-term interest-bearing loans and lease obligation that aggregated $15,530,449 as of June 30, 2022,

as compared to $16,566,327 as of June 30, 2021.

on derivative liability

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.

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 item.

change in fair value of derivative liability for the six months ended June 30, 2022 and 2021 were $1,346,633 and $872,040, respectively.

a result of the above, net loss was $2,776,127 for the six months ended June 30, 2022, representing a decrease of $2,015,977, or 42.07%,

from net loss of $4,792,104 for six months ended June 30, 2021.

accounts receivable decreased by $1,048,811, or 21.54%, to $3,820,123 as of June 30, 2022, as compared with $4,868,934 as of December

We usually collect accounts receivable within 30 days of delivery and completion of sales.

consist of raw materials (accounting for 61.98% of total value of inventory as of March 31, 2022), semi-finished goods and finished goods.

As of March 31, 2022, the recorded value of inventory decreased by 25.50% to $4,354,676 from $5,844,895 as of December 31, 2021.

March 31, 2022, the inventory of recycled paper board, which is the main raw material for the production of CMP, was $2,373,036, approximately

consist of raw materials (accounting for 85.96% of total value of inventory as of June 30, 2022), semi-finished goods and finished goods.

As of June 30, 2022, the recorded value of inventory increased by 13.43% to $6,629,657 from $5,844,895 as of December 31, 2021.

June 30, 2022, the inventory of recycled paper board, which is the main raw material for the production of CMP, was $5,289,833, approximately

$3,192,771, or 152.25%, higher than the balance as of December 31, 2021.

Due to the volatility of recycled paper board price, a minimum

level of inventory was maintained at the end of 2021.

summary of changes in major inventory items is as follows:

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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 to August 9, 2022 with the same rental payment as original lease agreement.

Expenditure Commitment as of March 31, 2022

agreed to extend the lease term to August 9, 2022 with the same rental payment as provided for in the original lease agreement

Expenditure Commitment as of June 30, 2022

May 5, 2020, the Company announced it planned the commercial launch of a new tissue paper production line PM10 and the Company signed

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after the completion of trial run.

of March 31, 2022, we had approximately $4.7 million in capital expenditure commitments that were mainly related to the purchase of paper

of June 30, 2022, we had approximately $4.5 million in capital expenditure commitments that were mainly related to the purchase of paper

machine of PM10.

The infrastructure work of PM10 has been completed and the associated ancillary facilities are working in the progress.

The infrastructure work of PM10 has been completed and the associated ancillary facilities are working in progress.

These commitments are expected to be financed by bank loans and cash flows generated from our business operations.

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The balance of Leased Equipment net of amortization was $2,092,625and $2,286,459

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

as of June 30, 2022 and December 31, 2021, respectively.

The lease liability was $244,518 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 $40,997 for 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.

amount of $224,219 and $210,161 as of June 30, 2022 and December 31, 2021, respectively.

of the Leased Equipment was $39,972 and $41,457for the three months ended June 30, 2022 and 2021.

Amortization of the Leased Equipment

was $81,978 and $82,454for the six months ended June 30, 2022 and 2021.

Total interest expenses for the sale-leaseback arrangement was

$10,862 and $18,932 for the three months ended June 30, 2022 and 2021.Total interest expenses for the sale-leaseback arrangement was

$24,369 and $39,350 for the six months ended June 30, 2022 and 2021.

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

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and Cash Equivalents

cash, cash equivalents and restricted cash as of March 31, 2022 was $15,358,443, an increase of $4,156,831, from $11,201,612 as of December

The increase of cash and cash equivalents for the three months ended March 31, 2022 was attributable to a number of factors:

cash, cash equivalents and restricted cash as of June 30, 2022 was $14,344,077, an increase of $3,142,465, from $11,201,612 as of December

The increase of cash and cash equivalents for the six months ended June 30, 2022 was attributable to a number of factors including:

Net cash provided by (used in) operating activities

cash provided by operating activities was $4,411,418 for the three months ended March 31, 2022.

The balance represented an increase of

cash of $12,691,750, or 153.28%, from -$8,280,332 used in operating activities for the three months ended March 31, 2021.

the three months ended March 31, 2022 was $2,488,214, representing a decrease of loss of $1,850,642, or 42.65%, from a net loss of $4,338,856

for the three months ended March 31, 2021.

Changes in various asset and liability account balances throughout the three months ended

March 31, 2022 also contributed to the net change in cash from operating activities in three months ended March 31, 2022.

such changes is the increase of accounts receivable in the amount of $98,921 during the three months of 2022.

There was also a decrease

of $1,515,515 in the ending inventory balance as of March 31, 2022 (an increase to net cash for the three months ended March 31, 2022

cash flow purposes).

cash provided by operating activities was $3,949,782 for the six months ended June 30, 2022.

The balance represented an increase of cash

of $19,520,145, or 125.37%, from -$15,570,363 used in operating activities for the six months ended June 30, 2021.

Net loss for the six

months ended June 30, 2022 was $2,776,127, representing a decrease of loss of $2,015,977, or 42.07%, from a net loss of $4,792,104 for

the six months ended June 30, 2021.

Changes in various asset and liability account balances throughout the six months ended June 30,

2022 also contributed to the net change in cash from operating activities in six months ended June 30, 2022.

Chief among such changes

is the decrease of accounts receivable in the amount of $845,450 during the six months of 2022.

There was also an increase of $1,111,160

in the ending inventory balance as of June 30, 2022 (a decrease to net cash for the six months ended June 30, 2022 cash flow purposes).

In addition, the Company had non-cash expenses relating to depreciation and amortization in the amount of $7,592,319.

The Company also had a net decrease of $3,056,189 in prepayment and other current assets (an increase to net cash) and a net decrease

of $469,485 in other payables and accrued liabilities and related parties (an increase to net cash), as well as a decrease in income

tax payable of $1,112,820 (a decrease to net cash) during the three months ended March 31, 2022.

The Company also

had a net decrease of $1,963,348 in prepayment and other current assets (an increase to net cash) and a net increase of $503,774 in other

payables and accrued liabilities and related parties (an increase to net cash), as well as a decrease in income tax payable of $859,643

(a decrease to net cash) during the six months ended June 30, 2022.

Net cash used in investing activities

incurred $7,175,972 in net cash expenditures for investing activities during the three months ended March 31, 2022, as compared to $44,599

incurred $7,324,305 in net cash expenditures for investing activities during the six months ended June 30, 2022, as compared to $171,541

for the same period of 2021.

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Net cash provided by financing activities

cash provided by financing activities was $6,893,314 for the three months ended March 31, 2022, as compared to net cash provided by financing

activities in the amount of $41,794,323 for the three months ended March 31, 2021.

A $6.9 million loan was repaid by a related party

during the period.

cash provided by financing activities was $6,673,987 for the six months ended June 30, 2022, as compared to net cash provided by financing

activities in the amount of $41,671,591 for the six months ended June 30, 2021.

A $6.8 million loan was repaid by a related party during

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

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.

Total short-term bank loans

November 25, 2021, the Company entered into a working capital loan agreement with ICBC, with a balance of $5,660,518 and $5,958,561 as

of June 30, 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.

Zhenyong Liu.

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

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.

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

of June 30, 2022, there were guaranteed short-term borrowings of $5,660,518 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%.

average short-term borrowing rates for the three months ended June 30, 2022 and 2021 were approximately 4.79%.

The average short-term

borrowing rates for the six months ended June 30, 2022 and 2021 were approximately 4.79%.

loans from credit union

of March 31, 2022 and December 31, 2021, loans payable to Rural Credit Union of Xushui District, amounted to $9,861,063 and $9,818,530,

of June 30, 2022 and December 31, 2021, loans payable to Rural Credit Union of Xushui District, amounted to $9,327,413 and $9,818,530,

respectively.

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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,

As of June 30, 2022 and December 31,

2021, total outstanding loan balance was $1,281,402 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.

amounted were $685,401 and $329,376 as of June 30, 2022 and December 31, 2021, respectively, which are presented as current liabilities

in the consolidated balance sheet and the remaining balance of $596,001 and $1,019,495 are presented as non-current liabilities in the

consolidated balance sheet as of June 30, 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

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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

by certain of the Company’s manufacturing equipment with net book value of $682,421 and $1,130,333 as of June 30, 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

As of June 30, 2022 and December

31, 2021, the total outstanding loan balance was $3,725,005 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.

current portion amounted were $3,725,005 and $1,960,569 as of June 30, 2022 and December 31, 2021 respectively, which are presented as

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

in the consolidated balance sheet as of June 30, 2022 and December 31, 2021, respectively.

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

5 unchanged sentences

and bears a fixed rate of 0.6% per month.

As of March 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

As of June 30, 2022 and December 31, 2021, the total outstanding loan balance was $2,384,003

and $2,509,528, respectively.

Out of the total outstanding loan balance, current portion amounted were $nil and $2,509,528 as of June

30, 2022 and December 31, 2021 respectively, which are presented as current liabilities in the consolidated balance sheet and the remaining

balance of $2,384,003 and $nil are presented as non-current liabilities in the consolidated balance sheet as of June 30, 2022 and December

31, 2021, respectively.

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

5 unchanged sentences

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

As of June 30, 2022 and December 31, 2021, the total outstanding loan balance was $1,937,003

and $2,038,992, respectively.

Out of the total outstanding loan balance, current portion amounted were $nil and $2,038,992 as of June

30, 2022 and December 31, 2021 respectively, which are presented as current liabilities in the consolidated balance sheet and the remaining

balance of $1,937,003 and $nil are presented as non-current liabilities in the consolidated balance sheet as of June 30, 2022 and December

31, 2021, respectively.

interest expenses for the short-term bank loans and long-term loans for the three months ended June 30, 2022 and 2021 were $248,244 and

$264,967, respectively.

Total interest expenses for the short-term bank loans and long-term loans for the six months ended June 30, 2022

and 2021 were $505,550 and $523,450, respectively.

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

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Zhenyong Liu, which

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

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

30, 2022 and December 31, 2021, respectively.

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with interest of $20,400.

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

As of June 30, 2022 and December 31, 2021, approximately $44,700 and $47,054 of interest, respectively were

outstanding to Mr.

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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.

of June 30, 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 were $nil for the three months ended March 31, 2022 and 2021.

related party loans were $nil for the three and six months ended June 30, 2022 and 2021.

The accrued interest owing to Mr.

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.

was approximately $631,420 and $664,666, as of June 30, 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.

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amount of $6,915,176(RMB44,089,085).

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.

The loan is unsecured and carries a fixed interest rate of 3% per annum.

The loan was repaid by

Zhenyong Liu in February 2022.

of March 31, 2022 and December 31, 2021, amount due to shareholder was$727,433, which represents funds from shareholders to pay for various

of June 30, 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.

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performance of our businesses, and possible government policy toward operating efficiency of the Chinese paper manufacturing industry.

For the three months ended March 31, 2022 and 2021, no events or circumstances occurred for which an evaluation of the recoverability

For the three months ended June 30, 2022 and 2021, no events or circumstances occurred for which an evaluation of the recoverability

of long-lived assets was required.

5 unchanged sentences

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

current exchange rates used by the Company as of March 31, 2022 and December 31, 2021 to translate the Chinese RMB to the U.S.

current exchange rates used by the Company as of June 30, 2022 and December 31, 2021 to translate the Chinese RMB to the U.S.

are 6.7114:1 and 6.3757:1, respectively.

Revenues and expenses are translated using the prevailing average exchange rates at 6.5058:1

and 6.5045:1 for the three months ended March 31, 2022 and 2021, respectively.

and 6.4682:1 for the three months ended June 30, 2022 and 2021, respectively.

Translation adjustments are included in other comprehensive

28 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis