Item 2. Properties
Item 2. Properties
Our headquarters are located
at Hebei Baoding Dongfang Paper Milling Company Limited, Juli Road, Xushui District, Baoding City, Hebei Province, China. We have two
main production bases, one production base located approximately 4 kilometers away from our headquarters, and the second production base
located in Wei County, Xingtai City, Hebei Province.
All land in the PRC is owned
by the government and cannot be sold to any individual or entity. Instead, the government grants landholders a “land use right”
after a purchase price for such “land use right” is paid to the government. The “land use right” allows the holder
the right to use the land for a specified long-term period of time and enjoys all the incidents of ownership of the land. The following
are the details regarding Dongfang Paper’s land use rights with regard to the land that it uses in its business.
The land of our first production
base (the “Xushui Paper Mill”), comprising 200 mu, or approximately 33 acres, of land, is leased from the local government
pursuant to a 30 year lease that expires December 31, 2031. The lease requires an annual payment of approximately $ 17,406 (RMB 120,000)
due by June 30 every year.
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The land of the second production
base (the “Xingtai Paper Mill”), comprising 300 mu, or approximately 50 acres, of land, is owned by Hebei Tengsheng Paper
Co., Ltd., a limited liability company organized under the laws of the PRC. (“Tengsheng Paper”). On June 25, 2019, Dongfang
Paper entered into an acquisition agreement with the shareholder of Hebei Tengsheng Paper Co., Ltd., pursuant to which Dongfang Paper
agreed to acquire Tengsheng Paper for the consideration in the amount of RMB 320 million (approximately $45 million) which was fully paid
on February 23, 2022.
The office building and
essentially all industrial-use buildings at our headquarters (the “Industrial Buildings”) are leased to us by a third party,
Hebei Fangsheng Real Estate Development Co. Ltd. (“Hebei Fangsheng”), for a term of up to three years starting August 2013,
with an annual rental payment of approximately $155,101 (RMB1,000,000). The lease agreement expired in August 2016. The lease agreement
was renewed in August 2022 with a term of six years with the same rental payments as provided for in the original lease agreement., with
the same rental payment as original lease agreement.”
In the spring of 2010, we
initiated the process of acquiring approximately 667,000 square meters of land adjacent to our first production base, Xushui Paper Mill
and subsequently received governmental approval for our capacity expansion plan. On April 13, 2012, we closed our acquisition of 58,566
square meters of land and secured all associated land use right permits (the “Xushui Mill Annex”). For land acquisition of
the Xushui Mill Annex, we paid a total of $7.5 million for various payments of compensation, taxes, and recording fees to the sellers
and the local government. On October 26, 2012, we made a prepayment in the amount of $1,404,460 for the purchase of land use right from
the local residents’ council for approximately 65,023 square meters of land located inside of our Xushui Paper Mill. In December
2016, the Company completed the purchase of such land use right, with a land use term of 50 years expiring in 2066.
As of December 31, 2023,
our facilities include a total of nine production lines, among which PM7 is currently idle and under renovation, and each PM4 and PM5
(both for digital photo paper) has been suspended, nine warehouses, two office buildings, two cafeterias, and five dormitories.