What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-27 compared with 2023-03-24 · 313 added, 330 removed, 277 unchanged (70% of the section changed)

4 unchanged sentences

financial statements, and the notes to those statements that are included elsewhere in this annual report.

This discussion contains forward-looking

statements that involve risks and uncertainties.

For a complete discussion of forward-looking statements,

see the section in this report entitled “Forward-Looking Statements.” Certain risk factors may cause our actual results, performance

or achievements to differ materially from those expressed or implied by the following discussion.

For a discussion of such risk factors,

see the sections in this report entitled “Risk Factors” and “Forward-Looking Statements” .

Our historical

results are not necessarily indicative of the results that may be expected for any period in the future.

Results of Operations

1 unchanged sentence

December 31, 2023 was $86,546,950, representing a decrease of $13,805,484, or 13.76%, from $100,352,434 for the previous year.

mainly due to the decrease in sales volume of corrugating medium paper (“CMP”) and offset printing paper and tissue paper

mainly due to the decrease in average selling price (“ASP”) of CMP.

Revenue of Offset Printing Paper, Corrugating Medium Paper and Tissue

3 unchanged sentences

from $100,081,664 for the year ended December 31, 2022.

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 products.

This was mainly due to the decrease in ASP of CMP, partially offset by increase

in sales volume of regular CMP, light-weight CMP and offset printing paper.

Total quantities of offset

printing paper, CMP and tissue paper products sold during the year ended December 31, 2022 amounted to 219,604 tonnes, a decrease of 72,855

printing paper, CMP and tissue paper products sold during the year ended December 31, 2023 amounted to 230,601 tonnes, an increase of

10,997 tonnes, or 5.01%, compared to 219,604 tonnes sold during the year ended December 31, 2022.

Total quantities of CMP and offset printing

paper sold decreased by 65,873 tonnes in the year of 2022 as compared to 2021.

paper sold increased by 11,065 tonnes in the year of 2023 as compared to 2022.

We sold 1,205 tonnes of tissue paper products in the year

of 2023 as opposed to 1,273 tonnes in 2022.

Production of CMP was suspended during January and February 2022 and offset printing paper

suspended during the year.

Production was restricted due to Winter Olympics held in Beijing 2022 and COVID-19 control measures during

the year as required by the government.

The changes in revenue and quantity sold for the year ended December 31, 2022 and 2021 are summarized

Production of offset printing paper was resumed in May 2023.

The changes in revenue and quantity

sold for the year ended December 31, 2023 and 2022 are summarized as follows:

December 31, 2023

December 31, 2022

Sales Revenue

Percentage Change

Quantity (Tonne)

1 unchanged sentence

Quantity (Tonne)

$ 111,079,432

Sales Revenue

$ (14,925,584 )

2 unchanged sentences

$ (16,833,733 )

$ (35,786,346 )

Offset Printing Paper

$ (17,062,564 )

Tissue Paper Products

$ (7,413,346 )

Total CMP, Offset Printing Paper and Tissue Paper Revenue

1 unchanged sentence

$ (13,669,606 )

$ (60,262,256 )

Monthly revenue (excluding revenue of digital

2 unchanged sentences

for the years ended December 31, 2023 and 2022 are summarized as follows:

Offset Printing Paper ASP

Regular CMP ASP

Light-Weight CMP ASP

Tissue Paper Products ASP

Year Ended December 31, 2023

2 unchanged sentences

Increase (Decrease) by percentage

The following is a chart showing the month-by-month ASPs

for the 24 month period ended December 31, 2022:

The following is a chart showing the month-by-month ASPs for

the 24 month period ended December 31, 2023:

Corrugating Medium Paper

3 unchanged sentences

We sold 223,823 tonnes of

CMP in the year ended December 31, 2022 as compared to 259,691 tonnes in the year ended December 31, 2021, representing a 15.93% decrease

CMP in the year ended December 31, 2023 as compared to 218,331 tonnes in the year ended December 31, 2022, representing a 2.52% increase

in quantity sold.

3 unchanged sentences

and RMB2,599, respectively, representing a 15.42% decrease.

The quantity of regular CMP sold decreased by 32,513 tonnes, from 213,490 tonnes

The quantity of regular CMP sold increased by 1,893 tonnes, from 180,977 tonnes

in 2022 to 182,870 tonnes in 2023.

3 unchanged sentences

was RMB2,972 and RMB2,502, respectively, representing a 15.82% decrease.

The quantity of light-weight CMP sold decreased by 8,847 tonnes,

The quantity of light-weight CMP sold increased by 3,599 tonnes,

from 37,354 tonnes in 2022, to 40,953 tonnes in 2023.

2 unchanged sentences

The utilization rates for the year ended December 31, 2023

and 2021 were 49.28% and 60.94%, respectively, representing a decrease of 11.66%.

and 2022 were 51.98% and 49.28%, respectively, representing an increase of 2.70%.

Quantities sold for regular

1 unchanged sentence

Offset Printing Paper

Revenue from offset printing

paper was $nil for the year ended December 31, 2022 compared to the revenue of $17,062,564 for the year ended December 31, 2021.

COVID-19, our paper production was restricted and production of offset printing paper was suspended in 2022.

Revenue from offset

printing paper was $3,215,190 (3.72% of the total offset printing paper, CMP and tissue paper products revenues) for the year ended December

31, 2023, representing an increase of $3,215,190, or 100%, from year of 2022.

We sold 5,573 tonnes of offset printing paper in the year

ended December 31, 2023.

Tissue Paper Products

2 unchanged sentences

31, 2023, representing a decrease of $51,063, or 3.76%, from $1,356,255 in 2022.

We sold 1,273 tonnes of tissue paper products in

the year ended December 31, 2022, as compared to 8,255 tonnes in 2021, a decrease of 6,982 tonnes, or 84.58%.

We sold 1,205 tonnes of tissue paper products in the

year ended December 31, 2023, as compared to 1,273 tonnes in 2022, a decrease of 68 tonnes, or 5.34%.

ASP for tissue paper products

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face masks were $106,064 and $257,820 for the year ended December 31, 2023 and 2022.

We sold 5,625 thousand pieces of face masks in the

fourth quarter of 2022, as compared to 12,664 thousand pieces in the comparable period of 2021, a decrease of 7,039 thousand pieces, or

We sold 3,383 thousand pieces of face masks in 2023,

as compared to 5,625 thousand pieces in 2022, a decrease of 2,242 thousand pieces, or 39.86%.

Cost of Sales

Total cost of sales for CMP,

offset printing paper and tissue paper products in the year ended December 31, 2022 was $95,384,334, a decrease of $54,045,377, or 36.17%,

from $149,429,711 for the year ended December 31, 2021.

This was mainly a result of the decrease in sales volume of CMP and offset printing

paper and decrease of material costs of CMP.

Cost of sales for CMP was

Total cost of sales for CMP, offset printing paper

and tissue paper products in the year ended December 31, 2023 was $85,418,822, a decrease of $9,965,512, or 10.45%, from $95,384,334 for

the year ended December 31, 2022.

This was mainly due to the decrease of material costs of CMP.

Cost of sales for CMP was $77,962,837 for the

year ended December 31, 2023, as compared to $91,093,891 in 2022.

The decrease in the cost of sales of $13,131,054 for CMP was mainly

due to the decrease in average cost of sales, partially offset by the increase in the quantities of regular CMP sold in the year of 2023.

Average cost of sales per tonne for CMP decreased by 16.55%, from $417 for the year ended December 31, 2022, to $348 in 2023.

mainly attributable to the lower average unit purchase costs (net of applicable value added tax) of recycled paper board.

Cost of sales for offset printing paper was $3,134,832

for the year ended December 31, 2023.

Cost of sales for tissue paper products was $4,318,339

for the year ended December 31, 2023, as compared to $4,290,443 in 2022.

The decrease in the cost of sales of $34,351,266

for CMP was mainly due to the decrease in the quantities of regular CMP sold and the decrease in average cost of sales in the year of

Average cost of sales per tonne for CMP decreased by 13.66%, from $483 for the year ended December 31, 2021, to $417 in 2022.This

is mainly attributable to the lower average unit purchase costs (net of applicable value added tax) of recycled paper board.

Cost of sales for offset

printing paper was $nil for the year ended December 31, 2022, as compared to $13,963,983 in 2021.

Cost of sales for tissue

paper products was $4,290,443 for the year ended December 31, 2022, as compared to $10,020,571 in 2021.

The decrease in the cost of sales

of $5,730,128 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 177.59%, from $1,214 in 2021

to $ 3,370 in 2022.

This was mainly due to the increase in cost of tissue base paper and higher manufacturing overhead costs absorbed

in the unit cost of sales due to low production yield.

Average cost of sales per tonne of tissue paper products increased

by 6.35%, from $3,370 for the year ended December 31, 2022, to $3,584 for 2023.

Changes in cost of sales and cost per tonne by product for

2 unchanged sentences

December 31, 2022

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

$ 104,057,538

$ (27,844,134 )

Light-Weight CMP

$ (6,507,132 )

$ 125,445,157

$ (34,351,266 )

Offset Printing Paper

$ (13,963,983 )

Tissue Paper Products

in percentage

$ (12,394,895 )

Total CMP, Offset Printing Paper and Tissue Paper Revenue

$ (13,131,054 )

Printing Paper

Paper Products

CMP, Offset Printing Paper and Tissue Paper Revenue

$ (9,965,512 )

Our average unit purchase

costs (net of applicable value added tax) of recycled paper board for the year ended December 31, 2022 were RMB 1,690/tonne (approximately

$250/tonne), as compared to RMB 1,997/tonne (approximately $310/tonne) for the year ended December 31, 2021.

These changes (in US dollars)

represent a year-over-year decrease of 19.35% for the unit purchase cost of recycled paper board.

We use domestic recycled paper (sourced

mainly from the Beijing-Tianjin metropolitan area) exclusively.

Although we do not rely on imported recycled paper, the pricing of which

tends to be more volatile than domestic recycled paper, our experience suggests that the pricing of domestic recycled paper bears some

correlation to the pricing of imported recycled paper.

costs (net of applicable value added tax) of recycled paper board and recycled white scrap paper for the year ended December 31, 2023

were RMB 1,350/tonne (approximately $191/tonne) as compared to RMB 1,690/tonne (approximately $250/tonne) for the year ended December

These changes (in US dollars) represent a year-over-year decrease of 23.60% for the unit purchase cost of recycled paper board.

We use domestic recycled paper (sourced mainly from the Beijing-Tianjin metropolitan area) exclusively.

Although we do not rely on imported

recycled paper, the pricing of which tends to be more volatile than domestic recycled paper, our experience suggests that the pricing

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

The pricing trends of our major raw materials for the 24-month

period from January 2022 to December 2023 are shown below:

Electricity and gas are our

two main energy sources.

Electricity and gas accounted for approximately 4% and 12.4% of total sales in 2022, respectively, compared to

4% and 10.5% of total sales 2021.

The monthly energy cost (electricity and gas) as a percentage of total monthly sales of our main paper

products for the 24 months ended December 31, 2022 are summarized as follows:

Electricity and gas are

our two main energy sources.

Electricity and gas accounted for approximately 5% and 15.3% of total sales in 2023, respectively, compared

to 4% and 12.4% of total sales 2022.

The monthly energy cost (electricity and gas) as a percentage of total monthly sales of our main

paper products for the 24 months ended December 31, 2023are summarized as follows:

Gross profit for December

31, 2022 was $4,754,196 (4.74% of the total revenue), representing a decrease of $6,263,363, or 56.85%, from the gross profit of $11,017,559

(6.85% of the total revenue) for the year ended December 31, 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.

31, 2023 was $999,885 (representing 1.16% of the total revenue), representing a decrease of $3,754,311, or 78.97%, from the gross profit

of $4,754,196 (representing 4.74% of the total revenue) for the year ended December 31, 2022.

The decrease was mainly due to the decrease

in ASP of CMP, partially offset by the decrease of material costs of CMP, and (ii) the increase in material costs of tissue paper products.

Corrugating Medium Paper, Offset Printing Paper and Tissue Paper

Gross profit for offset printing paper, CMP

and tissue paper products for the year ended December 31, 2022 was $4,697,330, a decrease of $6,216,879, or 56.96%, from the gross profit

of $10,914,209 for the year ended December 31, 2021.

The decrease was mainly the result of the factors discussed above.

The overall gross profit margin for offset printing

paper, CMP and tissue paper products decreased by 2.12 percentage points, from 6.81% for the year ended December 31, 2021, to 4.69% for

the year ended December 31, 2022.

Gross profit margin for regular CMP for the year

ended December 31, 2022 was 7.39%, or 1.07 percentage points higher, as compared to gross profit margin of 6.32% for the year ended December

Such increase was primarily due to decrease in material costs, partially offset by the decrease in ASP of regular CMP.

Gross profit margin for light-weight CMP for

the year ended December 31, 2022 was 9.42%, or 0.69 percentage points higher, as compared to gross profit margin of 8.73% for the year

ended December 31, 2021.

Such increase was primarily due to the decrease in material costs, partially offset by the decrease in ASP of

light-weight CMP.

Gross profit margin for tissue paper products

was -216.34% for the year ended December 31, 2022, a decrease of 202.08 percentage points, as compared to -14.26% for the year ended December

Gross profit for offset

printing paper, CMP and tissue paper products for the year ended December 31, 2023 was $993,236, a decrease of $3,704,094, or 78.86%,

from the gross profit of $4,697,330 for the year ended December 31, 2022.

The decrease was mainly the result of the factors discussed

The overall gross profit

margin for offset printing paper, CMP and tissue paper products decreased by 3.54 percentage points, from 4.69% for the year ended December

31, 2022, to 1.15 for the year ended December 31, 2023.

Gross profit margin for

regular CMP for the year ended December 31, 2023 was 5.27%, or 2.12 percentage points lower, as compared to gross profit margin of 7.39%

for the year ended December 31, 2022.

Such decrease was primarily due to the decrease in ASP of regular CMP, partially offset by the decrease

in material costs.

Gross profit margin for

light-weight CMP for the year ended December 31, 2023 was 2.59%, or 6.83 percentage points lower, as compared to gross profit margin of

9.42% for the year ended December 31, 2022.

Such decrease was primarily due to the decrease in ASP of light-weight CMP, partially offset

by the decrease in material costs.

Gross profit margin for

offset printing paper was 2.41% for the year ended December 31, 2023.

Gross profit margin for

tissue paper products was -230.86% for the year ended December 31, 2023, a decrease of 14.52 percentage points, as compared to -216.34%

for the year ended December 31, 2022.

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

Monthly gross profit margins for our corrugating

medium paper and offset printing paper for the 24-month period ended December 31, 2022 are as follows:

Gross profit for face mask

Monthly gross profit margins

for our corrugating medium paper and offset printing paper for the 24-month period ended December 31, 2023 are as follows:

Gross loss for face mask

for the year ended December 31, 2023 was $11,127, representing a gross margin of -10.49% compared with a gross profit of $67,328, representing

2 unchanged sentences

Selling, general and administrative

expenses for the year ended December 31, 2022 were $10,058,723, an increase of $500,533, or 5.24% from $9,558,190 for the year ended December

The increase was mainly due to 150,000 shares of common stock granted under our compensatory incentive plan in August 2022,

value at $156,000 and additional bad debt provision.

Income (Loss) from Operations

expenses for the year ended December 31, 2023 were $9,075,475, a decrease of $983,248, or 9.78% from $10,058,723 for the year ended December

The decrease was mainly due to the decrease in depreciation of idle fixed assets during production suspension.

Loss from Operations

Operating loss for

the year ended December 31, 2022 was $5,304,527, a decrease of $6,763,896, or 463.48%, from income from operations of $1,459,369 for

the year ended December 31, 2021.

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

administrative expenses.

the year ended December 31, 2023 was $9,575,888, a decrease of $4,271,361, or 80.52%, from $5,304,527 for the year ended December 31,

The decrease was primarily due to the decrease in gross profit and recognition of impairment and disposal loss on assets, partially

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

Other Income and Expenses

5 unchanged sentences

Provision for Income Taxes

Full allowance for deferred

tax asset loss was provided in the year of 2022.

Income tax for the year ended December 31, 2022 is $11,711,339 as compared to the income

tax $5,546,954 for the year ended December 31, 2021.

Net Income (Loss)

Full allowance for

deferred tax asset loss was provided in the year of 2023 and 2022.

Income tax for the year ended December 31, 2023 is $346,954 as compared

to the income tax $11,711,339 for the year ended December 31, 2022.

As a result of the above,

net loss was $16,571,308 for the year ended December 31, 2022, representing a decrease of $17,476,843, or 1930.0%, from net income of

$905,535 for year ended December 31, 2021.

net loss was $9,946,035 for the year ended December 31, 2023, representing an increase of $6,625,273, or 39.98%, from $16,571,308 for

the year ended December 31, 2022.

Accounts Receivable

Net accounts receivable decreased

by $3,987,056, or 81.89%, to $881,878 as of December 31, 2022, as compared with $4,868,934 as of December 31, 2021.

We usually collect

accounts receivable within 30 days of delivery and completion of sales.

Net accounts receivable

was $575,526 as of December 31, 2023, as compared with $nil as of December 31, 2022.

We usually collect accounts receivable within 30

days of delivery and completion of sales.

Inventories consist of raw

materials (accounting for 10.48% of total value of inventory as of December 31, 2023), semi-finished goods and finished goods.

December 31, 2022, the recorded value of inventory decreased by 50.85% to $2,872,622 from $5,844,895 as of December 31, 2021.

As of December

31, 2022, the inventory of recycled paper board, which is the main raw material for the production of CMP, was $1,258,161, approximately

$838,901, or 40.00%, lower than the balance as of December 31, 2021.

As a result of better control over stock turnover, recycled paper

board and finished goods were reduced by 40% and 62.7%, respectively, as at December 31, 2022 as compared to finished goods at the end

31, 2023, the recorded value of inventory increased by 23.87% to $3,558,193 from $2,872,622 as of December 31, 2022.

The increase is mainly

due to the increase of finished goods, partially offset by the decrease of recycle paper board.

More CMP products were produced in December

2023 to mitigate the impact of energy price rise starting from January 2024.

As of December 31, 2023, the inventory of recycled paper

board, which is the main raw material for the production of CMP, was $198,744, approximately $1,059,417, or 84.20%, lower than the balance

as of December 31, 2022.

As a result of better control over stock turnover and volatility of recycled paper board price, inventory was

kept in a minimum level.

A summary of changes in

48 unchanged sentences

due according to the schedule.

As of December 31, 2022 and 2021, the balance of Leased Equipment net of amortization was $1,939,970 and

$2,286,459, respectively.

The lease liability were $131,772 and $362,394, and its current portion in the amount of $131,772 and $210,161

as of December 31, 2022 and 2021, respectively.

Amortization of the Leased

Equipment was $157,854 and $165,441 for the year ended December 31, 2022 and 2021, respectively.

Total interest expenses for the sale

lease back arrangement was $38,954 and $71,798 for the year ended December 31, 2022 and 2021, respectively.

As 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.

On July 17, 2023, the Company made a final payment on outstanding obligations and bought back the Lease

Equipment at nominal price according to the agreement.

The lease assets were reclassified as own assets and balance of Leased Equipment

net of amortization were $nil and $1,939,970 as of December 31, 2023 and 2022, respectively.

Cash, Cash Equivalents and restricted cash

6 unchanged sentences

activities was $12,871,086 for the year ended December 31, 2023.

The balance represented a decrease of cash of $13,155,459, or 540.03%,

from $2,436,071 used in operating activities for the year ended December 31, 2021.

Net loss for the year ended December 31, 2022 was $

$16,571,308, representing a decrease of $17,476,843, or 1930.0%, from a net income of $905,535 for the year ended December 31, 2021.

in various asset and liability account balances throughout the year ended December 31, 2022 also contributed to the net change in cash

from operating activities in year ended December 31, 2022.

Chief among such changes is the decrease of accounts receivable in the amount

of $3,750,196 (an increase to net cash) during the year of 2022.

There was also a decrease of $2,554,072 in the ending inventory balance

as of December 31, 2022 (an increase to net cash for the year ended December 31, 2022 cash flow purposes).

In addition, the Company had

non-cash expenses relating to depreciation and amortization in the amount of $14,788,036, net deferred tax allowance of $10,261,104 and

allowance for bad debts of $843,779.

The Company also had a net increase of $3,976,010 in prepayment and other current assets (a decrease

to net cash) and a net increase of $1,018,448 in other payables and accrued liabilities and related parties (a decrease to net cash),

as well as a decrease in income tax payable of $614,738 (a decrease to net cash) during the year ended December 31, 2022.

The balance represented an increase of cash of $2,151,698, or 20.07%,

from $10,719,388 provided for the year ended December 31, 2022.

Net loss for the year ended December 31, 2023 was $9,946,035, representing

a decrease of loss $6,625,273, or 39.98%, from a net loss of $16,571,308 for the year ended December 31, 2022.

Changes in various asset

and liability account balances throughout the year ended December 31, 2023 also contributed to the net change in cash from operating activities

in year ended December 31, 2023.

Chief among such changes is the decrease of accounts receivable in the amount of $280,970 during the

year of 2023.

There was also an increase of $736,267 in the ending inventory balance as of December 31, 2023 (a decrease to net cash for

the year ended December 31, 2023 cash flow purposes).

In addition, the Company had non-cash expenses relating to depreciation and amortization

in the amount of $14,225,990.

The Company also had a net decrease of $9,322,532 in prepayment and other current assets (an increase to

net cash) and a net decrease of $999,812 in other payables and accrued liabilities and related parties (a decrease to net cash), as well

as a decrease in income tax payable of $412,504 (a decrease to net cash) during the year ended December 31, 2023.

Net cash used in investing activities

We incurred $10,898,531 in

net cash expenditures for investing activities during the year ended December 31, 2022, as compared to $25,071,372 for the year ended

We incurred $22,239,297

in net cash expenditures for investing activities during the year ended December 31, 2023, as compared to $10,898,531 for the year ended

December 31, 2022.

Payments in 2022 were mainly for the last installments for the Tengsheng land acquisition.

Payments in 2023 were mainly for the payment for Land Use Right.

Net cash provided by financing activities

Net cash used in financing

activities was $879,596 for the year ended December 31, 2022, as compared to net cash provided by financing activities in the amount of

Net cash provided by financing

activities was $4,410,099 for the year ended December 31, 2023, as compared to net cash used in financing activities in the amount of

$879,596 for the year ended December 31, 2022.

2 unchanged sentences

Total short-term bank loans

On November 25, 2021, the Company entered into

a working capital loan agreement with the ICBC, with a balance of $5,958,561 as of December 31, 2021.

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 was fully repaid in November 2022.

On November 10, 2022, the Company entered into

a working capital loan agreement with the ICBC, with a balance of $5,023,978 as of December 31, 2022.

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 by November 13, 2023.

On November 30, 2022, the Company entered into

a working capital loan agreement with the ICBC, with a balance of $287,167 as of December 31, 2022.

The loan bears a fixed interest rate

of 4.3% per annum.

The loan will be due by May 29, 2023.

On November 30, 2022, the Company entered into

a working capital loan agreement with the ICBC, with a balance of $143,583 as of December 31, 2022.

The loan bears a fixed interest rate

of 4.3% per annum.

The loan will be due by May 29, 2023.

On July 29, 2022, the Company entered into a

working capital loan agreement with the China Construction Bank, with a balance of $143,583 as of December 31, 2022.

The loan bears a

fixed interest rate of 3.95% per annum.

The loan will be due by July 29, 2023.

On November 10, 2022, the

Company entered into a working capital loan agreement with the ICBC.

The 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 bore a fixed interest rate of 4.785% per annum.

The Company repaid $71,743

in May 2023 and paid off the remaining balance of the loan in August 2023.

The balance of the loan was $nil and $5,023,978 as of December

31, 2023 and 2022, respectively.

On November 30, 2022, the

Company entered into a working capital loan agreement with the ICBC, with a balance of $nil and $287,167 as of December 31, 2023 and 2022,

respectively.

The loan bore an interest rate of 4.25% per annum.

The loan was fully repaid in May 2023.

On November 30, 2022, the

Company entered into a working capital loan agreement with the ICBC, with a balance of $nil and $143,583 as of December 31, 2023 and 2022,

respectively.

The loan bore an interest rate of 4.25% per annum.

The loan was fully repaid in May 2023.

On May 29, 2023, the Company

entered into a working capital loan agreement with the ICBC, to borrow $423,567 at a fixed interest rate of 4.25% per annum.

was repaid in November 2023.

On July 29, 2022, the Company

entered into a working capital loan agreement with the China Construction Bank, with a balance of $nil and $143,583 as of December 31,

2023 and 2022, respectively.

The loan bore a fixed interest rate of 3.95% per annum.

The loan was fully repaid in July 2023.

On June 29, 2023, the Company

entered into a working capital loan agreement with the ICBC, to borrow $423,567 at a fixed interest rate of 3.55% per annum.

was repaid in September, 2023.

On September 15, 2023, the

Company entered into a working capital loan agreement with the ICBC, with a balance of $2,824 as of December 31, 2023.

The loan bears

a fixed interest rate of 3.45% per annum.

The loan will be due by September 14, 2024.

On September 22, 2023, the

Company entered into a working capital loan agreement with the ICBC, with a balance of $ 70,594 as of December 31, 2023.

The loan bears

a fixed interest rate of 3.45% per annum.

The loan will be due by September 21, 2024.

On September 22, 2023, the

Company entered into a working capital loan agreement with the ICBC, with a balance of $ 350,149 as of December 31, 2023.

The loan bears

a fixed interest rate of 3.45% per annum.

The loan will be due by September 21, 2024.

As of December 31, 2022,

there were guaranteed short-term borrowings of $5,023,978 and unsecured bank loans of $574,333.

As of December 31, 2023, there were guaranteed

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

As of December 31, 2022, there were guaranteed short-term borrowings

of $5,023,978 and unsecured bank loans of $574,333.

The average short-term borrowing

rates for the years ended December 31, 2022, and 2021 were approximately 4.72% and 4.73%, respectively.

short-term borrowings of $nil and unsecured bank loans of $423,567.

The average short-term borrowing rates for the

years ended December 31, 2023, and 2022 were approximately 4.48% and 4.72%, respectively.

Long-term loans

As of December 31, 2022, and 2021, long-term

loans balance is $9,040,002 and $9,818,530, respectively.

On April 16, 2014, the Company

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

installments from June 21, 2014 to November 18, 2018.

The loan is guaranteed by an independent third party.

Interest payment is due quarterly

and bore a rate of 7.68% per annum.

With effective from November 15, 2022, the interest rate is reduced to 7% per annum.

As of December 31, 2023, and 2022, long-term loan balance

is $11,378,429 and $9,040,002, respectively.

On April 16, 2014, the Company entered into a

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

from June 21, 2014 to November 18, 2018.

The loan was guaranteed by an independent third party.

Interest payment was due quarterly and

bore a rate of 7.68% per annum.

Effective from November 15, 2022, the interest rate was reduced to 7% per annum.

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,

As of December 31, 2022, and 2021, total outstanding loan balance was $1,234,816 and $1,348,871, respectively, Out of the total

outstanding loan balance, current portion amounted were $1,234,816 and $329,376 as of December 31, 2022, and 2021, respectively, which

are presented as current liabilities in the consolidated balance sheet and the remaining balance of $nil and $1,019,495 are presented

as non-current liabilities in the consolidated balance sheet as of December 31, 2022, and 2021, 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 $280,466 and $1,130,333 as of December 31, 2022, and 2021, respectively.

Interest payment

is due quarterly and bore a rate of 7.68% per annum.

With effective from November 15, 2022, the interest rate is reduced to 7% per annum.

As of December 31, 2022, and 2021, the total outstanding loan balance was $3,589,582 and $3,921,139, respectively.

Out of the total outstanding

loan balance, current portion amounted were $3,589,582 and $1,960,569 as of December 31, 2022, and 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 December 31, 2022, and 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 Tengsheng Paper with its land

use right as collateral for the benefit of the credit union.

The loan was fully repaid in December 2023.

As of December 31, 2023 and 2022, total outstanding loan balance was $nil and $1,234,816,

respectively, which are presented as current liabilities in the consolidated balance sheet.

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 was due and payable in various

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

On August 24, 2023, the loan was extended for another 3 years and will be due and

payable on August 24, 2026.

The loan is secured by certain of the Company’s manufacturing equipment with net book value of $nil

and $280,466 as of December 31, 2023 and 2022, respectively.

Interest payment is due monthly and bore a rate of 7.68% per annum.

from November 15, 2022, the interest rate was reduced to 7% per annum.

As of December 31, 2023 and 2022, the total outstanding loan balance

was $3,528,315 and $3,589,582.

Out of the total outstanding loan balance, current portion amounted was $1,269,290, which is presented

as current liabilities in the consolidated balance sheet and the remaining balance of $2,259,025 is presented as non-current liabilities

in the consolidated balance sheet as of December 31, 2023.

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 Tengsheng Paper with its land use

right as collateral for the benefit of the credit union.

Interest payment is due quarterly and bore a rate of 7.68% per annum.

effective from November 15, 2022, the interest rate is reduced to 7% per annum.

As of December 31, 2022, and 2021, the total outstanding

loan balance was $2,297,332 and $2,509,528, respectively.

Out of the total outstanding loan balance, current portion amounted were $nil

and $2,509,528 as of December 31, 2022 and 2021 respectively, which are presented as current liabilities in the consolidated balance sheet

and the remaining balance of $2,297,332 and $nil are presented as non-current liabilities in the consolidated balance sheet as of December,

2022 and 2021, respectively.

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 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.

The loan is secured by Tengsheng

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

Interest payment is due monthly and bore a rate of 7.68%

With effective from November 15, 2022, the interest rate is reduced to 7% per annum.

As of December 31, 2022, and 2021, the

total outstanding loan balance was $1,866,582 and $2,038,992, respectively.

Out of the total outstanding loan balance, current portion

amounted were $nil and $2,038,992 as of December 31, 2022, and 2021 respectively, which are presented as current liabilities in the consolidated

balance sheet and the remaining balance of $1,866,582 and $nil are presented as non-current liabilities in the consolidated balance sheet

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

On July 1, 2022, the Company

entered into a loan agreement with Jiangna Yu, a customer of the Company, pursuant to which the Company borrowed RMB400,000 from Jiangna

Yu for a term of five years.

from November 15, 2022, the interest rate was reduced to 7% per annum.

As of December 31, 2023 and 2022, the total outstanding loan balance

was $2,259,026 and $2,297,332, respectively, which are presented as current liabilities and non-current liabilities in the consolidated

balance sheet as of December 31, 2023 and 2022, respectively.

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 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.

The loan is secured by Tengsheng Paper with its land use

right as collateral for the benefit of the credit union.

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

from November 15, 2022, the interest rate was reduced to 7% per annum.

As of December 31, 2023 and 2022, the total outstanding loan balance

was $1,835,458 and $1,866,582, respectively, which are presented as current liabilities and non-current liabilities in the consolidated

balance sheet as of December 31, 2023 and 2022, respectively.

On February 26, 2023, 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 August 21, 2023 to February 24, 2025.

The loan is secured by Dongfang Paper with its land use right as collateral for the benefit

of the credit union.

Interest payment is due monthly and bore a rate of 7% per annum.

As of December 31, 2023, the total outstanding loan

balance was $2,541,404.

Out of the total outstanding loan balance, current portion amounted was $1,284,820, which is presented as current

liabilities in the consolidated balance sheet and the remaining balance of $1,256,584 is presented as non-current liabilities in the consolidated

balance sheet as of December 31, 2023.

On July 1, 2022, the Company entered into a loan

agreement with Jiangna Yu, a customer of the Company, pursuant to which the Company borrowed RMB 400,000 from Jiangna Yu for a term of

The loan is payable in monthly installment of RMB10,667 from July 2022 to July 2027.

As of December 31, 2022,

the total outstanding loan balance was $51,690.

Out of the total outstanding loan balance, the current portion amounted $11,486, which

is presented as current liabilities and the remaining balance of $40,204 is presented as non-current liabilities in the consolidated balance

sheet as of December 31, 2022.

Total interest expenses for

the short-term bank loans and long-term loans for the years ended December 31, 2022, and 2021 were $988,997 and $1,052,904 respectively.

The company repaid the loan in November

As of December 31, 2023 and 2022, the total outstanding loan balance was $nil and $51,690, respectively.

Out of the total outstanding

loan balance, current portion amounted $nil and $11,486, respectively, which are presented as current liabilities and the remaining balance

of $nil and $40,204 are presented as non-current liabilities in the consolidated balance sheet as of December 31, 2023 and 2022, respectively.

On December 5, 2023, the

Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 3 years, which was due in various installments

from June 21, 2024 to December 5, 2026.

The loan was guaranteed by an independent third party.

Interest payment was due monthly and bore

a rate of 7% per annum.

As of December 31, 2023, total outstanding loan balance was $1,214,226.

Out of the total outstanding loan balance,

current portion amounted $225,903, which is presented as current liabilities and the remaining balance of $ 988,323 is presented as non-current

liabilities in the consolidated balance sheet as of December 31, 2023.

Total interest expenses

for the short-term bank loans and long-term loans for the years ended December 31, 2023, and 2022 were $977,678 and $988,997 respectively.

Related party transactions

22 unchanged sentences

On March 1, 2015, the Company

entered into an agreement with Mr.

entered an agreement with Mr.

Zhenyong Liu which allows Dongfang Paper to borrow from the CEO an amount up to $17,201,342 (RMB120,000,000)

22 unchanged sentences

for the years ended December 31, 2023, and 2022.

The accrued interest payable to Mr.

The accrued interest owe to Mr.

Zhenyong Liu was approximately $598,319 and $608,465,

2 unchanged sentences

Company entered into an agreement with Mr.

Zhenyong Liu, which allowed Mr.

Zhenyong Liu, which allows Mr.

Zhenyong Liu to borrow from the Company an amount of $6,507,431

(RMB44,089,085).

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

The loan was unsecured and carried a fixed interest rate of 3% per annum.

The loan was repaid by Mr.

Zhenyong Liu in February

Zhenyong Liu in

February 2022.

In October 2022 and November

4 unchanged sentences

The loans were unsecured and carried a fixed interest rate of 4.35% per annum.

The loans were

fully repaid by Mr.

Zhenyong Liu in February 2023.

As of December 31, 2022 and

2021, amount due to shareholder are $727,433, which represent funds from shareholders to pay for various expenses incurred in the U.S.

$4,235,673 (RMB30,000,000)

was repaid by Mr.

Zhengyong Liu in August 2023 and the remaining balance was repaid in December 2023.

Interest income of the loan for

the year ended December 31, 2023 was $290,275.

As of December 31, 2023,

and 2022, amount due to shareholder are $727,433, which represent funds from shareholders to pay for various expenses incurred in the

The amount is due on demand with interest free.

17 unchanged sentences

The Company evaluates the

recoverability of long-lived assets and the related estimated remaining useful lives when events or circumstances lead management to

believe that the carrying value of an asset may not be recoverable and the undiscounted cash flows estimated to be generated by those

assets are less than the assets’ carrying amount.

recoverability of long-lived assets and the related estimated remaining useful lives when events or circumstances lead management to believe

that the carrying value of an asset may not be recoverable and the undiscounted cash flows estimated to be generated by those assets are

less than the assets’ carrying amount.

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

Our judgments regarding the existence of impairment indicators are based on market conditions, assumptions for operational performance

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

For the years

ended December 31, 2022 and 2021, no events or circumstances occurred for which an evaluation of the recoverability of long-lived assets

was required.

We are currently not aware of any events or circumstances that may indicate any need to record such impairment in the future.

Our judgments

regarding the existence of impairment indicators are based on market conditions, assumptions for operational performance of our businesses,

and possible government policy toward operating efficiency of the Chinese paper manufacturing industry.

For the years ended December 31,

2023 and 2022, no events or circumstances occurred for which an evaluation of the recoverability of long-lived assets was required.

are currently not aware of any events or circumstances that may indicate any need to record such impairment in the future.

Foreign Currency Translation

The functional currency of

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

The functional currency

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

Under ASC Topic 830-30, all assets and liabilities

18 unchanged sentences

Recent Accounting Pronouncements

In May 2019, the FASB issued

ASU 2019-05, which is an update to ASU Update No.

2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit

Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial

assets measured at amortized cost basis, replacing the previous incurred loss methodology.

The amendments in Update 2016-13 added Topic

326, Financial Instruments—Credit Losses, and made several consequential amendments to the Codification.

Update 2016-13 also modified

the accounting for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than

the amortized cost basis, in accordance with Subtopic 326-30, Financial Instruments— Credit Losses—Available-for-Sale Debt

The amendments in this Update address those stakeholders’ concerns by providing an option to irrevocably elect the fair

value option for certain financial assets previously measured at amortized cost basis.

For those entities, the targeted transition relief

will increase comparability of financial statement information by providing an option to align measurement methodologies for similar financial

Furthermore, the targeted transition relief also may reduce the costs for some entities to comply with the amendments in Update

2016-13 while still providing financial statement users with decision-useful information.

In November 2019, the FASB issued ASU No.

which to update the effective date of ASU No.

2016-02 for private companies, not-for-profit organizations and certain smaller reporting

companies applying for credit losses, leases, and hedging standard.

The new effective date for these preparers is for fiscal years beginning

after December 15, 2022.

The Company is currently evaluating the impact of ASU 2019-05 will have on its consolidated financial statements.

In October 2021, the

FASB issued ASU 2021-08, “Business Combinations”.

The amendments in this Update address how to determine whether a contract

liability is recognized by the acquirer in a business combination and resolve the inconsistency of measuring revenue contracts with customers

acquired in a business combination by providing specific guidance on how to recognize and measure acquired contract assets and contract

liabilities from revenue contracts in a business combination.

The amendments in this Update apply to all entities that enter into a business

combination within the scope of Subtopic 805-10, Business Combination-Overalls.

For public business entities, ASU 2021-08 is

effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

application is permitted.

The amendments in this Update should be applied prospectively to business combinations occurring on or after

the effective date of the amendments.

The Company does not expect the adoption of this standard to have a material impact on its consolidated

financial statements.

In October 2021, the FASB

issued ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with

Customers (ASU 2021-08), which clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities

in a business combination in accordance with Topic 606, Revenue from Contracts with Customers.

The new amendments are effective for fiscal

years beginning after December 15, 2023, including interim periods within those fiscal years.

The amendments should be applied prospectively

to business combinations occurring on or after the effective date of the amendments, with early adoption permitted.

The Company does not

expect the adoption of this standard to have a material impact on its consolidated financial statements.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis