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Item 2. Management’s Discussion and Analysis

2024-05-10 compared with 2023-11-09 · 505 added, 581 removed, 29 unchanged (97% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Notice Regarding Forward-Looking Statements

following discussion of the financial condition and results of operations of the Company for the periods ended September 30, 2023 and

2022 should be read in conjunction with the financial statements and the notes to the financial statements that are included elsewhere

in this quarterly report.

this quarterly report, references to “the Company,” “we,” “our” and “us” refer to IT

Tech Packaging, Inc.

and its PRC subsidiary and variable interest entity unless the context requires otherwise.

make certain forward-looking statements in this report.

Statements concerning our future operations, prospects, strategies, financial

condition, future economic performance (including growth and earnings), demand for our products, and other statements of our plans, beliefs,

or expectations, including the statements contained under the captions “Management’s Discussion and Analysis of Financial

Condition and Results of Operations” as well as captions elsewhere in this document, are forward-looking statements.

In some cases

these statements are identifiable through the use of words such as “anticipate”, “believe”, “estimate”,

“expect”, “intend”, “plan”, “project”, “target”, “can”, “could”,

“may”, “should”, “will”, “would”, and similar expressions.

We intend such forward-looking

statements to be covered by the safe harbor provisions contained in Section 27A of the Securities Act of 1933, as amended (the “Securities

Act”) and in Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The forward-looking

statements we make are not guarantees of future performance and are subject to various assumptions, risks, and other factors that could

cause actual results to differ materially from those suggested by these forward-looking statements.

Because such statements are subject

to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements.

it is likely that some of our assumptions may prove to be incorrect.

Our actual results and financial position may vary from those projected

or implied in the forward-looking statements and the variances may be material.

You are cautioned not to place undue reliance on such

forward-looking statements.

These risks and uncertainties, together with the other risks described from time to time in reports and documents

that we file with the Securities and Exchange Commission (the “SEC”) should be considered in evaluating forward-looking statements.

In evaluating the forward-looking statements contained in this report, you should consider various factors, including, without limitation,

the following:

(a) those risks and uncertainties related to general economic conditions, (b) whether we are able to manage our planned

growth efficiently and operate profitably, (c) whether we are able to generate sufficient revenues or obtain financing to sustain and

grow our operations, and (d) whether we are able to successfully fulfill our primary requirements for cash.

We assume no obligation to

update forward-looking statements, except as otherwise required under federal securities laws.

of Operations

of the Three months ended September 30, 2023 and 2022

for the three months ended September 30, 2023 was $15,771,560, a decrease of $15,937,654, or 50.26%, from $31,709,214 for the same period

in the previous year.

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

in average selling prices of CMP 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

September 30, 2023 was $15,756,399, representing a decrease of $15,895,944, or 50.22%, from $31,652,343 for the third quarter of 2022.

Total offset printing paper, CMP and tissue paper products sold during the three months ended September 30, 2023 amounted to 44,807 tonnes,

representing a decrease of 27,808 tonnes, or 38.30%, compared to 72,615 tonnes sold in the comparable period in the previous year.

of regular CMP was limited in August 2023 due to unfavorable weather conditions (i.e.

continuous rainstorm in August 2023).

of offset printing paper had been suspended in year 2022 and first nine months of 2023 except for an intermittent production in May and

The production of offset print paper was resumed in early October 2023.

The changes in revenue dollar amount and in quantity

sold for the three months ended September 30, 2023 and 2022 are summarized as follows:

$ (14,109,184 )

$ (1,826,929 )

$ (15,936,113 )

Printing Paper

Paper Products

CMP, Offset Printing Paper and Tissue Paper Revenue

$ (15,895,944 )

Monthly sales

revenue for the 24 months ended September 30, 2023, are summarized below:

Average Selling Prices (ASPs) for our main products in the three months ended September 30, 2023 and 2022 are summarized as follows:

Months ended September 30, 2023

Discussion and Analysis of Financial Condition and Results of Operations Cautionary Notice Regarding Forward-Looking Statements

The following discussion of the financial condition and results

of operations of the Company for the periods ended March 31, 2024 and 2023 should be read in conjunction with the financial statements

and the notes to the financial statements that are included elsewhere in this quarterly report.

In this quarterly report, references to “the Company,”

“we,” “our” and “us” refer to IT Tech Packaging, Inc.

and its PRC subsidiary and variable interest

entity unless the context requires otherwise.

We make certain forward-looking

statements in this report.

Statements concerning our future operations, prospects, strategies, financial condition, future economic performance

(including growth and earnings), demand for our products, and other statements of our plans, beliefs, or expectations, including the statements

contained under the captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

as well as captions elsewhere in this document, are forward-looking statements.

In some cases these statements are identifiable through

the use of words such as “anticipate”, “believe”, “estimate”, “expect”, “intend”,

“plan”, “project”, “target”, “can”, “could”, “may”, “should”,

“will”, “would”, and similar expressions.

We intend such forward-looking statements to be covered by the safe

harbor provisions contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and in Section

21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The forward-looking statements we make are not

guarantees of future performance and are subject to various assumptions, risks, and other factors that could cause actual results to differ

materially from those suggested by these forward-looking statements.

Because such statements are subject to risks and uncertainties, actual

results may differ materially from those expressed or implied by the forward-looking statements.

Indeed, it is likely that some of our

assumptions may prove to be incorrect.

Our actual results and financial position may vary from those projected or implied in the forward-looking

statements and the variances may be material.

You are cautioned not to place undue reliance on such forward-looking statements.

risks and uncertainties, together with the other risks described from time to time in reports and documents that we file with the Securities

and Exchange Commission (the “SEC”) should be considered in evaluating forward-looking statements.

In evaluating the forward-looking

statements contained in this report, you should consider various factors, including, without limitation, the following:

(a) those risks

and uncertainties related to general economic conditions, (b) whether we are able to manage our planned growth efficiently and operate

profitably, (c) whether we are able to generate sufficient revenues or obtain financing to sustain and grow our operations, and (d) whether

we are able to successfully fulfill our primary requirements for cash.

We assume no obligation to update forward-looking statements, except

as otherwise required under federal securities laws.

Results of Operations

Comparison of the Three months ended March 31,

2024 and 2023

Revenue for the three months ended

March 31, 2024 was $6,863,841, representing a decrease of $12,927,036, or 65.32%, from $19,790,877 for the same period in the previous

This was mainly due to the production suspension of corrugating medium paper (“CMP”) in January and February of 2024,

and production suspension of tissue paper products in the first quarter of 2024.

Revenue of Offset Printing Paper, Corrugating Medium Paper

and Tissue Paper Products

sales of offset printing paper, CMP and tissue paper products for the three months ended March 31, 2024 was $6,826,800, representing a

decrease of $12,924,348, or 65.44%, from $19,751,148 for the first quarter of 2023.

Total offset printing paper, CMP and tissue paper

products sold during the three months ended March 31, 2024 amounted to 18,670 tonnes, representing a decrease of 31,203 tonnes, or 62.56%,

compared to 49,873 tonnes sold in the comparable period in the previous year.

Production orders of CMP were arranged ahead of schedule

(in December 2023), in order to mitigate the impact of energy price rise in 2024.

Production of CMP was suspended in January and February

2024 due to the change of production schedule and Chinese New Year holiday.

Production of CMP was resumed in mid of March 2024.

of offset printing paper and tissue paper products were suspended due to the higher natural gas price and Chinese New Year in the first

quarter of 2024 and expected to resume in the third quarter of 2024.

The changes in revenue dollar amount and in quantity sold for the

three months ended March 31, 2024 and 2023 are summarized as follows:

Three Months Ended

September 30, 2022

from comparable period in the previous year

by percentage

The following

chart shows the month-by-month ASPs for the 24-month period ended September 30, 2023:

from CMP amounted to $15,423,073 (97.88% of the total offset printing paper, CMP and tissue paper products revenues) for the three months

ended September 30, 2023, representing a decrease of $15,936,113, or 50.82%, from $31,359,186 for the comparable period in 2022.

sold 44,396 tonnes of CMP in the three months ended September 30, 2023 as compared to 72,355 tonnes for the same period in 2022, representing

a 38.64% decrease in quantity sold.

for regular CMP decreased from $435/tonne for the three months ended September 30, 2022 to $350/tonne for the three months ended September

30, 2023, representing a 19.54% decrease.

ASP in RMB for regular CMP for the third quarter of 2022 and 2023 was RMB2,980 and RMB2,532,

respectively, representing a 15.03% decrease.

The quantity of regular CMP sold decreased by 25,662 tonnes, from 59,848 tonnes in the

third quarter of 2022 to 34,186 tonnes in the third quarter of 2023.

for light-weight CMP decreased from $423/tonne for the three months ended September 30, 2022 to $340/tonne for the three months ended

September 30, 2023, representing a 19.62% decrease.

ASP in RMB for light-weight CMP for the third quarter of 2022 and 2023 was RMB2,892

and RMB2,439, respectively, representing a 15.66% decrease.

The quantity of light-weight CMP sold decreased by 2,297 tonnes, from 12,507

tonnes in the third quarter of 2022, to 10,210 tonnes in the third quarter of 2023.

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

The utilization rates for the third

quarter of 2023 and 2022 were 38.07% and 66.82%, respectively, representing a decrease of 28.75%.

sold for regular CMP that was produced by the PM6 production line from October 2021 to September 2023 are as follows:

printing paper

from offset printing paper was $69,227 (representing 0.44% of the total offset printing paper, CMP and tissue paper products revenues)

for the three months ended September 30, 2023, representing an increase of $69,227, or 100.00%, from $nil for the three months ended

September 30, 2022.

Production of offset printing paper had been suspended in year 2022 and first nine months of 2023 except for an intermittent

production in May and June 2023.

The production of offset print paper was resumed in early October 2023.

We sold 170 tonnes of offset

printing paper in the third quarter of 2023.

Paper Products

from tissue paper products was $264,099 (representing 1.68% of the total offset printing paper, CMP and tissue paper products revenues)

for the three months ended September 30, 2023, representing a decrease of $29,058, or 9.91%, from $293,157 for the three months ended

September 30, 2022.

We sold 241 tonnes of tissue paper in the third quarter of 2023, as compared to 260 tonnes in the comparable period

of 2022, representing a decrease of 19 tonnes, or 7.31%.

Except for the production suspension in the first quarter of 2020, the production

and sales of tissue paper products have been growing up steadily since the launch of PM8 and PM9 in December 2018 and November 2019.

for tissue paper products decreased from $1,128/tonne for the three months ended September 30, 2022 to $1,096/tonne for the three months

ended September 30, 2023, representing a 2.84% decrease.

ASP in RMB for tissue paper products for the third quarter of 2022 and 2023

was RMB7,913 and RMB7,849, respectively, representing a 0.81% decrease.

generated from selling face mask were $15,198 and $56,871 for the three months ended September 30, 2023 and 2022, respectively, representing

a decrease of $41,673, or 73.28%.

We sold 507 thousand pieces of face masks in the third quarter of 2023, as compared to 1,282 thousand

pieces in the comparable period of 2022, a decrease of 775 thousand pieces, or 60.45%.

cost of sales for CMP, offset printing paper and tissue paper products for the quarter ended September 30, 2023 was $15,907,217, a decrease

of $12,978,386, or 44.93%, from $28,885,603 for the comparable period in 2022.

This was mainly due to the decrease in sales quantity

and the decrease in the unit material costs of CMP.

of sales for CMP was $14,844,637 for the quarter ended September 30, 2023, as compared to $27,834,752 for the comparable period in 2022.

The decrease in the cost of sales of $12,990,115 for CMP was mainly due to the decrease in sales volume and average unit cost of sales

Average cost of sales per tonne for CMP decreased by 13.25%, from $385 in the third quarter of 2022 to $334 in the third quarter

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 third quarter of 2023 compared to the third quarter of 2022.

of sales for tissue paper products was $998,569 for the quarter ended September 30, 2023, as compared to $1,050,851 for the comparable

period in 2022.

The decrease in the cost of sales of $52,282 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 2.50%, from $4,042 in the three months ended September 30, 2022, to $4,143 for the comparable period in 2023.

is 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 September 30, 2023 and 2022 are summarized below:

in percentage

$ (12,102,181 )

$ (12,990,115 )

Printing Paper

Paper Products

CMP, Offset Printing Paper and Tissue Paper

$ (12,978,386 )

average unit purchase costs (net of applicable value added tax) of recycled paper board in the three months ended September 30, 2023

was RMB 1,239/tonne (approximately $176/tonne), as compared to RMB 1,561/tonne (approximately $235/tonne) for the three months ended

September 30, 2022.

These changes (in US dollars) represent a year-over-year decrease of 25.11% for the recycled paper board.

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.

pricing trends of our major raw materials for the 24-month period from October 2021 to September 2023 are shown below:

and gas are our two main energy sources.

Electricity and gas accounted for approximately 5% and 13.3% of total sales in the third quarter

of 2023, respectively, compared to 4% and 11.6% of total sales in the third quarter of 2022.

The monthly energy cost as a percentage

of total monthly sales of our main paper products for the 24 months ended September 30, 2023 are summarized as follows:

Profit (Loss)

loss for the three months ended September 30, 2023 was $153,223 (representing 0.97% of the total revenue), representing a decrease of

$2,936,811, or 105.50%, from the gross profit of $2,783,588 (representing 8.78% of the total revenue) for the three months ended September

30, 2022, as a result of factors described above.

Printing Paper, CMP and Tissue Paper Products

loss for offset printing paper, CMP and tissue paper products for the three months ended September 30, 2023 was $150,818, representing

a decrease of $2,917,558, or 105.45%, from the gross profit of $2,766,740 for the three months ended September 30, 2022.

was mainly the result of the factors discussed above.

overall gross profit margin for offset printing paper, CMP and tissue paper products decreased by 9.70 percentage points, from 8.74%

for the three months ended September 30, 2022, to -0.96% for the three months ended September 30, 2023.

profit margin for regular CMP for the three months ended September 30, 2023 was 7.01%, or 3.90 percentage points lower, as compared to

gross profit margin of 10.91% for the three months ended September 30, 2022.

Such decrease was mainly due to the decrease in ASP of regular

CMP, partially offset by the decrease in cost of recycled paper board in the third quarter of 2023.

profit margin for light-weight CMP for the three months ended September 30, 2023 was -7.47%, or 20.31 percentage points lower, as compared

to gross profit margin of 12.84% for the three months ended September 30, 2022.

The decrease was mainly due to the decrease of ASP of

light-weight CMP, partially offset by the decrease in cost of recycled paper board in the third quarter of 2023.

profit margin for offset printing paper was 7.53% for the three months ended September 30, 2023.

profit margin for tissue paper products for the three months ended September 30, 2023 was -278.10%, or 19.64 percentage points lower,

as compared to gross profit margin of -258.46% for the three months ended September 30, 2022.

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.

gross profit margins on the sales of our CMP and offset printing paper for the 24-month period ended September 30, 2023 are as follows:

profit for face masks was a gross loss of $2,393 and a gross profit of $16,848, respectively, for the three months ended September 30,

2023 and 2022, representing a gross margin of -15.75% and 29.62%, respectively.

General and Administrative Expenses

general and administrative expenses for the three months ended September 30, 2023 were $2,334,746, a decrease of $1,035,795, or 30.73%

from $3,370,541 for the three months ended September 30, 2022.

The decrease was mainly due to the shares of common stock granted and

issued under our compensatory incentive plan in August 2022.

loss for the quarter ended September 30, 2023 was $2,484,513, a decrease of $1,897,560, or 323.29%, from $586,953 for the quarter ended

September 30, 2022.

The increase in loss from operations was primarily due to the decrease in gross profit, partially offset by decrease

in selling, general and administrative expenses.

Income and Expenses

expense for the three months ended September 30, 2023 decreased by $8,860, from $256,678 in the three months ended September 30, 2022,

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

$12,105,731 as of September 30, 2023, as compared to $14,681,595 as of September 30, 2022.

derivative liability

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

and determined that the instrument should be classified as a liability.

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 three months ended September 30, 2023 and 2022 was a gain of $660,429 and a loss

of $617,370, respectively.

a result and the factors discussed above, net loss was $1,975,368 for the quarter ended September 30, 2023, representing a decrease of

$88,050, or 4.67%, from $1,887,318 for the quarter ended September 30, 2022.

of the nine months ended September 30, 2023 and 2022

for the nine months ended September 30, 2023 was $65,582,351, representing a decrease of $13,397,365, or 16.96%, from $78,979,716 for

the same period in the previous year.

This was mainly due to the decrease in ASP of CMP.

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

from sales of offset printing paper, CMP and tissue paper products for the nine months ended September 30, 2023 was $65,483,282, a decrease

of $13,295,389, or 16.88%, from $78,778,671 for the nine months ended September 30, 2022.

This was mainly due to the decrease in ASPs

Total quantities of offset printing paper, CMP and tissue paper products sold during the nine months ended September 30, 2023

amounted to 173,317 tonnes, an increase of 5,251 tonnes, or 3.12%, compared to 168,066 tonnes sold during the nine months ended September

Total quantities of CMP and offset printing paper sold increased by 5,565 tonnes in the nine months of 2023 as compared to

the same period of 2022.

We sold 726 tonnes of tissue paper products in the nine months of 2023 as opposed to 1,040 tonnes in the same

period of 2022.

Production of offset printing paper was resumed in May 2023.

The changes in revenue and quantity sold for the nine months

ended September 30, 2023 and 2022 are summarized as follows:

Three Months Ended

March 31, 2024

March 31, 2023

Sales Revenue

$ (10,717,368 )

Light-Weight CMP

$ (1,984,027 )

$ (12,701,395 )

Printing Paper

Paper Products

CMP, Offset Printing Paper and Tissue Paper Revenue

Offset Printing Paper

Tissue Paper Products

Total CMP, Offset Printing Paper and Tissue Paper Revenue

$ (12,924,348 )

our main products in the nine-month period ended September 30, 2023 and 2022 are summarized as follows:

Months Ended September 30, 2023

Nine Months Ended

September 30, 2022

Monthly sales revenue for the 24 months ended March 31,

2024, are summarized below:

The Average Selling Prices (ASPs) for our main products in

the three months ended March 31, 2024 and 2023 are summarized as follows:

Three Months ended March 31, 2024

Three Months ended March 31, 2023

Decrease from comparable period in the previous year

Decrease by percentage

of Face Masks

generated from selling face masks were $95,080 and $201,045 for the nine months ended September 30, 2023 and 2022.

We sold 3,023 thousand

pieces of face masks for the nine months ended September 30, 2023, as compared to 4,295 thousand pieces in the comparable period of 2022,

a decrease of 1,272 thousand pieces, or 29.62%.

cost of sales for CMP, offset printing paper and tissue paper products in the nine months ended September 30, 2023 was $64,717,786, a

decrease of $10,384,544, or 13.83%, from $75,102,330 for the nine months ended September 30, 2022.

This was mainly due to the decrease

of material costs of CMP.

Cost of sales for CMP was $58,592,582 for the nine months ended September 30, 2023, as compared to $71,863,579

in the same period of 2022.

Average cost of sales per tonne for CMP decreased by 18.37%, from $430 for the nine months ended September

30, 2022, to $351 in the same period of 2023.

This was mainly attributable to the lower average unit purchase costs (net of applicable

value added tax) of recycled paper board.

Cost of sales for tissue paper products was $2,981,708 for the nine months ended September

30, 2023, as compared to $3,238,751 in the same period of 2022.

cost of sales and cost per tonne by product for the nine months ended September 30, 2023 and 2022 are summarized below:

in percentage

The following chart shows the month-by-month ASPs for the

24-month period ended March 31, 2024:

Corrugating Medium Paper

CMP amounted to $6,826,800 (100.00% of the total offset printing paper, CMP and tissue paper products revenues) for the three months ended

March 31, 2024, representing a decrease of $12,701,395, or 65.04%, from $19,528,195 for the comparable period in 2023.

Production of CMP

was suspended in January and February of 2024 and production of offset printing paper was suspended in the first quarter of 2024.

We sold 18,670 tonnes of CMP in

the three months ended March 31, 2024 as compared to 49,682 tonnes for the same period in 2023, representing a 62.42% decrease in quantity

ASP for regular CMP decreased from

$395/tonne for the three months ended March 31, 2023 to $368/tonne for the three months ended March 31, 2024, representing a 6.84% decrease.

ASP in RMB for regular CMP for the first quarter of 2023 and 2024 was RMB2,712 and RMB2,611, respectively, representing a 3.73% decrease.

The quantity of regular CMP sold decreased by 26,023 tonnes, from 41,663 tonnes in the first quarter of 2023 to 15,640 tonnes in the first

quarter of 2024.

ASP for light-weight CMP decreased

from $382/tonne for the three months ended March 31, 2023 to $355/tonne for the three months ended March 31, 2024, representing a 7.07%

ASP in RMB for light-weight CMP for the first quarter of 2023 and 2024 was RMB2,618 and RMB2,522, respectively, representing

a 3.68% decrease.

The quantity of light-weight CMP sold decreased by 4,989 tonnes, from 8,019 tonnes in the first quarter of 2023, to

3,030 tonnes in the first quarter of 2024.

Our PM6 production line, which produces

regular CMP, has a designated capacity of 360,000 tonnes /year.

The utilization rates for the first quarter of 2024 and 2023 were 15.11%

and 44.49%, respectively, representing a decrease of 29.38%.

Quantities sold for regular CMP that was produced by the

PM6 production line from April 2022 to March 2024 are as follows:

Offset printing paper

Revenue from offset printing paper was $nil for the three

months ended March 31, 2024 and 2023.

Production of offset printing paper was suspended in the three months ended March 31, 2024 and 2023.

Tissue Paper Products

Revenue from tissue paper products

was $nil and $222,953 for the three months ended March 31, 2024 and 2023, respectively.

Production of tissue paper products was suspended

during the first quarter of 2024.

Revenue of Face Mask

Revenue generated from selling

face mask were $nil and $35,637 for the three months ended March 31, 2024 and 2023, respectively.

Cost of Sales

Total cost of sales for CMP, offset

printing paper and tissue paper products for the quarter ended March 31, 2024 was $6,464,464, a decrease of $13,553,915, or 67.71%, from

$20,018,379 for the comparable period in 2023.

This was mainly due to the decrease in sales quantity and the decrease in the unit material

costs of CMP.

Cost of sales for CMP was $6,464,464

for the quarter ended March 31, 2024, as compared to $19,089,115 for the comparable period in 2023.

The decrease in the cost of sales

of $12,624,651 for CMP was mainly due to the decreases in sales volume and average unit cost of sales of CMP.

Average cost of sales per

tonne for CMP decreased by 9.90%, from $384 in the first quarter of 2023 to $346 in the first quarter of 2024.

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 first quarter of 2024 compared to the first quarter of 2023.

Cost of sales for tissue paper products

was $nil for the quarter ended March 31, 2024, as compared to $929,264 for the comparable period in 2023.

The production of tissue paper

products was suspended in the first quarter of 2024.

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

the quarters ended March 31, 2024 and 2023 are summarized below:

Three Months Ended

March 31, 2024

March 31, 2023

Change in percentage

$ (10,725,936 )

Light-Weight CMP

$ (1,898,715 )

Printing Paper

Paper Products

CMP, Offset Printing Paper and Tissue Paper Revenue

$ (12,624,651 )

profit for the nine months ended September 30, 2023 was $749,636 (representing 1.14% of the total revenue), representing a decrease of

$2,978,434, or 79.89%, from the gross profit of $3,728,070 (representing 4.72% of the total revenue) for the nine months ended September

The decrease was mainly due to (i) the decrease in ASP of CMP, 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 nine months ended September 30, 2023 was $765,496, a decrease

of $2,910,845, or 79.18%, from the gross profit of $3,676,341 for the nine months ended September 30, 2022.

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 3.50 percentage points, from 4.67%

for the nine months ended September 30, 2022, to 1.17% for the nine months ended September 30, 2023.

profit margin for regular CMP for the nine months ended September 30, 2023 was 5.26%, or 1.89 percentage points lower, as compared to

gross profit margin of 7.15% for the nine months ended September 30, 2022.

Such decrease was primarily due to the decrease in ASP of

profit margin for light-weight CMP for the nine months ended September 30, 2023 was 1.68%, or 7.49 percentage points lower, as compared

to gross profit margin of 9.17% for the nine months ended September 30, 2022.

Such decrease was primarily due to the decrease in ASP

of light-weight CMP.

margin for offset printing paper was 2.53% for the nine months ended September 30, 2023.

profit margin for tissue paper products was -258.64% for the nine months ended September 30, 2023, a decrease of 64.99 percentage points,

as compared to -193.65% for the nine months ended September 30, 2022.

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

loss for face mask for the nine months ended September 30, 2023 was $8,801, representing a gross margin of -9.26% compared with a gross

profit of $51,729, representing a gross margin of 25.73%, for the nine months ended September 30, 2022.

General and Administrative Expenses

general and administrative expenses for the nine months ended September 30, 2023 were $6,153,513, a decrease of $2,387,711, or 27.96%

from $8,541,224 for the nine months ended September 30, 2022.

The decrease was mainly due to the reversal of doubtful debt loss and the

decrease in depreciation of idle fixed assets during production suspension.

loss for the nine months ended September 30, 2023 was $5,775,557, a decrease of $962,403, or 20.00%, from $4,813,154 for the nine months

ended September 30, 2022.

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

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

Income and Expenses

expense for the nine months ended September 30, 2023 decreased by $18,929, from $786,597 for the nine months ended September 30, 2022,

The Company had short-term and long-term interest-bearing loans and lease obligation that aggregated $12,105,731 as of September

30, 2023, as compared to $14,681,595 as of September 30, 2022.

derivative liability

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

and determined that the instrument should be classified as a liability.

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 three months ended September 30, 2023 and 2022 was a gain of $ 646,020 and a gain

of $729,263, respectively.

a result of the above, net loss was $5,962,026 for the nine months ended September 30, 2023, representing an increase of net loss of

$1,298,581, or 27.85%, from $4,663,445 for the nine months ended September 30, 2022.

accounts receivable was $2,794,437 as of September 30, 2023, as compared with $nil as of December 31, 2022.

We usually collect accounts

receivable within 30 days of delivery and completion of sales.

consist of raw materials (accounting for 74.58% of total value of inventory as of September 30, 2023), semi-finished goods and finished

As of September 30, 2023, the recorded value of inventory increased by 86.76% to $5,364,777 from $2,872,622 as of December 31,

As of September 30, 2023, the inventory of recycled paper board, which is the main raw material for the production of CMP, was

$3,580,255, approximately $2,322,094, or 184.56%, higher 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 as of December 2022.

summary of changes in major inventory items is as follows:

September 30,

white scrap paper

fabric and other raw materials

Offset Printing Paper

Tissue Paper Products

Total CMP, Offset Printing Paper and Tissue Paper

$ (13,553,915 )

Our average unit purchase costs (net of applicable value

added tax) of recycled paper board in the three months ended March 31, 2024 was RMB 1,276/tonne (approximately $180/tonne), as compared

to RMB 1,502/tonne (approximately $219/tonne) for the three months ended March 31, 2023.

These changes (in US dollars) represent a year-over-year

decrease of 17.81% for the 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

The pricing trends of our major raw

materials for the 24-month period from April 2022 to March 2024 are shown below:

and gas are our two main energy sources.

Electricity and gas accounted for approximately 4% and 12.4% of total sales in the first quarter

of 2024, respectively, compared to 4% and 14% of total sales in the first quarter of 2023.

The monthly energy cost as a percentage of

total monthly sales of our main paper products for the 24 months ended March 31, 2024 are summarized as follows:

Gross Profit (Loss)

Gross profit for the three months ended March 31, 2024

was $399,113 (representing 5.81% of the total revenue), representing an increase of $676,112, or 244.08%, from the gross loss of $276,999

(representing 1.40% of the total revenue) for the three months ended March 31, 2023.

Offset Printing Paper, CMP and Tissue Paper Products

for offset printing paper, CMP and tissue paper products for the three months ended March 31, 2024 was $362,336, representing an increase

of $629,567, or 235.59%, from the gross loss of $267,231 for the three months ended March 31, 2023.

This was mainly due to the gross loss

incurred for tissue paper products in the first quarter of 2023.

The overall gross profit margin

for offset printing paper, CMP and tissue paper products increased by 6.66 percentage points, from -1.35% for the three months ended March

31, 2023, to 5.31% for the three months ended March 31, 2024.

Gross profit margin for regular

CMP for the three months ended March 31, 2024 was 5.68%, or 3.75 percentage points higher, as compared to gross profit margin of 1.93%

for the three months ended March 31, 2023.

Such increase was mainly due to the decrease in cost of recycled paper board, partially offset

by the decrease in ASP of regular CMP in the first quarter of 2024.

Gross profit margin for light-weight

CMP for the three months ended March 31, 2024 was 3.32%, or 0.64 percentage points lower, as compared to gross profit margin of 3.96%

for the three months ended March 31, 2023.

Monthly gross profit margins on the sales of our CMP and

offset printing paper for the 24-month period ended March 31, 2024 are as follows:

Gross loss for face masks for the three months ended March

31, 2024 and 2023 were gross loss of $nil and $2,839, respectively.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the

three months ended March 31, 2024 were $3,900,783, an increase of $1,405,421, or 56.32% from $2,495,362 for the three months ended March

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

Loss from Operations

Operating loss for the quarter ended

March 31, 2024 was $3,501,670, a decrease of $729,309, or 26.31%, from $2,772,361 for the quarter ended March 31, 2023.

The decrease in

loss from operations was primarily due to the increase in selling, general and administrative expenses, partially offset by the increase

in gross profit.

Other Income and Expenses

Interest expense for the three months ended March 31,

2024 decreased by $38,879, from $249,169 in the three months ended March 31, 2023, to $210,290.

The Company had short-term and long-term

interest-bearing loans, related party loans and leasing obligations that aggregated $12,204,370 as of March 31, 2024, as compared to $18,212,347

as of March 31, 2023.

Gain on derivative liability

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

that the instrument should be classified as a liability.

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.

The change in fair value

of derivative liability for the three months ended March 31, 2024 and 2023 was a gain of $34 and $152,097, respectively.

As a result and the factors discussed above, net loss

was $ 3,746,536 for the quarter ended March 31, 2024, representing a decrease of $1,013,371, or 37.08 %,

from $2,733,165 in net loss for the quarter ended March 31, 2023.

Accounts Receivable

Net accounts receivable increased by $1,810,651, or 314.61%,

to $2,386,177 as of March 31, 2024, as compared with $575,526 as of December 31, 2023.

We usually collect accounts receivable within 30

days of delivery and completion of sales.

Inventories consist of raw materials (accounting for

36.15% of total value of inventory as of March 31, 2024), semi-finished goods and finished goods.

As of March 31, 2024, the recorded value

of inventory decreased by 1.77% to $3,492,364 from $3,555,235 as of December 31, 2023.

As of March 31, 2024, the inventory of recycled

paper board, which is the main raw material for the production of CMP, was $1,031,201, approximately $832,457, or 418.86%, higher than

the balance as of December 31, 2023.

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

was kept in a minimum level as of December 2023.

A summary of changes in major inventory items is as follows:

Raw Materials

Semi-finished

inventory, gross

inventory, net

of operating lease

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

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

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

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

In connection with

the sale of the Industrial Buildings, Hebei Fangsheng agreed to lease the Industrial Buildings back to the Company for its original use

for a term of up to three years, with an annual rental payment of approximately $142,165 (RMB1,000,000).

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.

Expenditure Commitment as of September 30, 2023

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

an agreement to purchase paper machine with paper machine supplier.

The Company expected the new tissue paper production line to be launched

after the completion of trial run.

of September 30, 2023, we had approximately $3.8 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 progress.

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

with Sale-Leaseback

Company entered into a sale-leaseback arrangement (the “Lease Financing Agreement”) with TAC Leasing Co., Ltd.(“TLCL”)

on August 6, 2020, for a total financing proceeds in the amount of RMB 16 million (approximately US$2.5 million).

Under the sale-leaseback

arrangement, Tengsheng Paper sold the Leased Equipment to TLCL for 16 million (approximately US$2.5 million).

Concurrent with the sale

of equipment, Tengsheng Paper leases back the equipment sold to TLCL for a lease term of three years.

At the end of the lease term, Tengsheng

Paper may pay a nominal purchase price of RMB 100 (approximately $16) to TLCL and buy back the Leased Equipment.

The Leased Equipment

in amount of $2,349,452 was recorded as right of use assets and the net present value of the minimum lease payments was recorded as lease

liability and calculated with TLCL’s implicit interest rate of 15.6% per annum and stated at $567,099 at the inception of the lease

on August 17, 2020.

Paper made payments due according to the schedule.

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 September 30, 2023 and December 31, 2022, respectively.

Cash Equivalents

cash, cash equivalents and restricted cash as of September 30, 2023 was $9,437,941, a decrease of $86,927, from $9,524,868 as of December

The decrease of cash and cash equivalents for the nine months ended September 30, 2023 was attributable to a number of factors

cash provided by (used in) operating activities

cash provided by operating activities was $7,494,114 for the nine months ended September 30, 2023.

The balance represented an increase

of cash of $62,847, or 0.85%, from $7,431,267 provided for the nine months ended September 30, 2022.

Net loss for the nine months ended

September 30, 2023 was $5,962,026, representing a decrease of $1,298,581, or 27.85%, from a net loss of $4,663,445 for the nine months

ended September 30, 2022.

Changes in various asset and liability account balances throughout the nine months ended September 30, 2023

also contributed to the net change in cash from operating activities in nine months ended September 30, 2023.

Chief among such changes

is the increase of accounts receivable in the amount of $2,037,003 during the nine months of 2023.

There was also an increase of $2,631,661

in the ending inventory balance as of September 30, 2023 (a decrease to net cash for the nine months ended September 30, 2023 cash flow

In addition, the Company had non-cash expenses relating to depreciation and amortization in the amount of $10,573,288.

Company also had a net decrease of $7,968,553 in prepayment and other current assets (an increase to net cash) and a net increase of

$381,203 in other payables and accrued liabilities and related parties (an increase to net cash), as well as a decrease in income tax

payable of $413,777 (a decrease to net cash) during the nine months ended September 30, 2023.

cash used in investing activities

incurred $9,211,711 in net cash expenditures for investing activities during the nine months ended September 30, 2023, as compared to

$8,189,410 for the same period of 2022.

cash provided by financing activities

cash provided by financing activities was $1,997,269 for the nine months ended September 30, 2023, as compared to net cash provided by

financing activities in the amount of $6,840,080 for the nine months ended September 30, 2022.

September 30,

and Commercial Bank of China (“ICBC”) Loan 1

Construction Bank Loan

Recycled paper board

Recycled white scrap paper

Tissue base paper

Other raw materials

Total Raw Materials

Semi-finished Goods

Finished Goods

Total inventory, gross

Inventory reserve

Total inventory, net

Renewal of operating lease

On August 7, 2013, the Company’s

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

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

and three employee dormitory buildings located within the Headquarters Compound (the “Dormitories”) to Hebei Fangsheng for

cash prices of approximately $2.77 million, $1.15 million, and $4.31 million respectively.

In connection with the sale of the Industrial

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

years, with an annual rental payment of approximately $140,829 (RMB1,000,000).

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.

Capital Expenditure Commitment as of March 31, 2024

On May 5, 2020, the Company announced

it planned the commercial launch of a new tissue paper production line PM10 and the Company signed an agreement to purchase paper machine

with paper machine supplier.

The Company expected the new tissue paper production line to be launched after the completion of trial run.

As of March 31, 2024, we had approximately

$3.5 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 progress.

These commitments are expected to be

financed by bank loans and cash flows generated from our business operations.

Financing with Sale-Leaseback

The Company entered into a sale-leaseback

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

financing proceeds in the amount of RMB 16 million (approximately US$2.3 million).

Under the sale-leaseback arrangement, Tengsheng Paper

sold the Leased Equipment to TLCL for 16 million (approximately US$2.3 million).

Concurrent with the sale of equipment, Tengsheng Paper

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

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

purchase price of RMB 100 (approximately $14) to TLCL and buy back the Leased Equipment.

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

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

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

Tengsheng Paper made payments due

according to the schedule.

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 as of March 31, 2024 and December 31, 2023.

Cash and Cash Equivalents

Our cash, cash equivalents and restricted cash as of March

31, 2024 was $5,417,560, an increase of $1,025,639, from $4,391,921 as of December 31, 2023.

The increase of cash and cash equivalents

for the three months ended March 31, 2024 was attributable to a number of factors including:

Net cash provided by (used in) operating activities

Net cash provided by operating activities

was $624,420 for the three months ended March 31, 2024.

The balance represented a decrease of cash of $4,185,507, or 87.02%, from $4,809,928

provided for the three months ended March 31, 2023.

Net loss for the three months ended March 31, 2024 was $ 3,746,536 ,

representing a decrease of $ 1,013,371 , or 37.08%, from a net loss of $2,733,165 for the three months

ended March 31, 2023.

Changes in various asset and liability account balances throughout the three months ended March 31, 2024 also contributed

to the net change in cash from operating activities in three months ended March 31, 2024.

Chief among such changes is the increase of

accounts receivable in the amount of $1,847,112 during the three months of 2024.

There was also a decrease of $59,612 in the ending inventory

balance as of March 31, 2024 (an increase to net cash for the three months ended March 31, 2024 cash flow purposes).

In addition, the

Company had non-cash expenses relating to depreciation and amortization in the amount of $3,481,788.

The Company also had a net decrease

of $ 1,276,805 in prepayment and other current assets (an increase to net cash) and a net increase

of $ 908,127 in other payables and accrued liabilities and related parties (an increase to net cash)

during the three months ended March 31, 2024.

Net cash used in investing activities

We incurred $9,027 in net cash expenditures for investing

activities during the three months ended March 31, 2024, as compared to $295,018 for the same period of 2023.

Net cash provided by financing activities

was $422,488 for the three months ended March 31, 2024, as compared to net cash provided by financing activities in the amount of $2,564,646

for the three months ended March 31, 2023.

Short-term bank loans

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%

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 September 30, 2023 and December 31, 2022, respectively.

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

September 30, 2023 and December 31, 2022, respectively.

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

The loan was repaid in May

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

September 30, 2023 and December 31, 2022, respectively.

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

The loan was repaid in May

May 29, 2023, the Company entered into a working capital loan agreement with the ICBC, with a balance of $417,839 as of September 30,

Bank of Cangzhou 1

Bank of Cangzhou 2

Industrial and Commercial Bank of China (“ICBC”) Loan 1

Total short-term bank loans

On December 31, 2023, the Company

entered into a working capital loan agreement with the Bank of Cangzhou, to borrow $140,944 at a fixed interest rate of 5.5% per annum.

The loan is secured by certain of the Company’s manufacturing equipment with net book value of $306,528 as of March 31, 2024.

loan will be due by December 30, 2024.

On December 31, 2023, the Company

entered into a working capital loan agreement with the Bank of Cangzhou, to borrow $281,889 at a fixed interest rate of 5.5% per annum.

The loan will be due by December 30, 2024.

On September 15, 2023, the Company

entered into a working capital loan agreement with the ICBC, with a balance of $2,819 and $2,824 as of March 31, 2024 and December 31,

2023, respectively.

The loan bears a fixed interest rate of 3.45% per annum.

The loan will be due by November 25, 2023.

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 September 30, 2023 and December 31, 2022, respectively.

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

was fully repaid in July 2023.

June 29, 2023, the Company entered into a working capital loan agreement with the ICBC, with a balance of $417,839 as of September 30,

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 $70,472 and $70,594 as of March 31, 2024 and December 31,

2023, respectively.

The loan bears a fixed interest rate of 3.45% per annum.

The loan will be due by June 28, 2024.

of September 30, 2023, there were guaranteed short-term borrowings of $nil and unsecured bank loans of $968,751.

As of December 31, 2022,

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

average short-term borrowing rates for the three months ended September 30, 2023 and 2022 were approximately 4.52% and 4.28%.

short-term borrowing rates for the nine months ended September 30, 2023 and 2022 were approximately 4.66% and 4.6%.

of September 30, 2023 and December 31, 2022, long-term loans were $11,270,053 and $9,040,002, respectively.

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.

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, 2023.

As of September 30, 2023 and December 31, 2022, total outstanding loan balance was $1,197,805

and $1,234,816, respectively, which are presented as current liabilities in the consolidated balance sheet.

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 June 19, 2023, the

loan was extended for another 5 years and will be due and payable on June 20, 2028.

The loan is secured by certain of the Company’s

manufacturing equipment with net book value of $29,713 and $280,466 as of September 30, 2023 and December 31, 2022, respectively.

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

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

As of September 30, 2023 and December 31, 2022, the total outstanding loan balance was $3,481,536 and $3,589,582, which are presented

as non-current liabilities and current liabilities in the consolidated balance sheet as of September 30, 2023 and December 31, 2022,

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 $349,542 and $350,149 as of March 31, 2024 and December

31, 2023, 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

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.

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 was reduced to 7% per annum.

As of September

30, 2023 and December 31, 2022, the total outstanding loan balance was $2,228,474 and $2,297,332, respectively, which are presented as

current liabilities and non-current liabilities in the consolidated balance sheet as of September 30, 2023 and December 31, 2022, 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

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

The loan was renewed on March 22, 2021 and December

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

is secured by 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.

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

As of September

30, 2023 and December 31, 2022, the total outstanding loan balance was $1,810,635 and $1,866,582, respectively, which are presented as

non-current liabilities in the consolidated balance sheet as of September 30, 2023 and December 31, 2022, respectively.

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.

The loan bears a fixed interest rate of 3.45% per annum.

The loan will be due by September 21, 2024.

As of March 31, 2024, there were

guaranteed short-term borrowings of $nil and unsecured bank loans of $704,722.

As of December 31, 2023, there were guaranteed short-term

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

The average short-term borrowing

rates for the three months ended March 31, 2024 and 2023 were approximately 4.48% and 4.72%.

Long-term loans

As of March 31, 2024 and December 31, 2023, long-term loans

were $11,358,704 and $11,378,429, 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 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 as of March 31, 2024 and December 31, 2023.

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

of September 30, 2023, the total outstanding loan balance was $2,507,034.

Out of the total outstanding loan balance, current portion

amounted was $1,267,445, which is presented as current liabilities in the consolidated balance sheet and the remaining balance of $1,239,589

is presented as non-current liabilities in the consolidated balance sheet as of September 30, 2023.

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 five years.

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

As of September 30, 2023 and December 31, 2022, the total outstanding loan balance was $44,569 and $51,690, respectively.

the total outstanding loan balance, current portion amounted $11,072 and $13,928, respectively, which are presented as current liabilities

and the remaining balance of $30,641 and $40,204 are presented as non-current liabilities in the consolidated balance sheet as of September

Effective from

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

As of March 31, 2024 and December 31, 2023, the total outstanding loan

balance was $3,522,200 and $3,528,315.

Out of the total outstanding loan balance, current portion amounted was $1,267,090 and $1,269,290,

which is presented as current liabilities in the consolidated balance sheet and the remaining balance of $2,255,110 and $2,259,025 is

presented as non-current liabilities in the consolidated balance sheet as of March 31, 2024 and December 31, 2023, 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.

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

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

As of March 31, 2024 and December 31, 2023, the total outstanding

loan balance was $2,255,109 and $2,259,026, respectively, which are presented as current liabilities in the consolidated balance sheet

as of March 31, 2024 and December 31, 2023.

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 March 31, 2024 and December 31, 2023, the total outstanding

loan balance was $1,832,276 and $1,835,458, respectively, which are presented as current liabilities in the consolidated balance sheet

as of March 31, 2024 and December 31, 2023.

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 March 31, 2024 and December 31, 2023, the

total outstanding loan balance was $2,536,998 and $2,541,404.

Out of the total outstanding loan balance, current portion amounted was

$2,536,998 and $1,284,820, which is presented as current liabilities in the consolidated balance sheet and the remaining balance of $nil

and $1,256,584 is presented as non-current liabilities in the consolidated balance sheet as of March 31, 2024 and December 31, 2023, 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 March 31, 2024 and December 31, 2023, total outstanding loan balance was $1,212,121 and $1,214,226, respectively.

Out of the total outstanding loan balance, current portion amounted $225,511 and $225,903, which is presented as current liabilities and

the remaining balance of $986,610 and $988,323 is presented as non-current liabilities in the consolidated balance sheet as of March 31,

2024 and December 31, 2023, respectively.

interest expenses for the short-term bank loans and long-term loans for the three months ended September 30, 2023 and 2022 were $247,628

and $248,239, respectively.

Total interest expenses for the short-term bank loans and long-term loans for the nine months ended September

30, 2023 and 2022 were $760,807 and $753,789, respectively.

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

1, 2013, Dongfang Paper and Mr.

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

maturity date further to December 31, 2015.

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

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

Total interest expenses for the short-term

bank loans and long-term loans for the three months ended March 31, 2024 and 2023 were $209,586 and $244,679, respectively.

Shareholder Loans

Zhenyong Liu, the Company’s

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

On January 1, 2013,Dongfang Paper and Mr.

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

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

Approximately $361,289 and $361,915 of interest were outstanding to Mr.

Zhenyong Liu, which

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

30, 2023 and December 31, 2022, respectively.

December 10, 2014, Mr.

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

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

The unsecured

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

During the year of 2016, the Company repaid

$6,012,416 to Mr.

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

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

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 31, 2024 and December 31, 2023, respectively.

On December 10, 2014, Mr.

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

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

The unsecured loan was provided on December 10,

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

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

Zhenyong Liu, together

with interest of $288,596.

As of September 30, 2023 and December 31, 2022, approximately $41,784 and $43,075 of interest, respectively

were outstanding to Mr.

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

in the consolidated balance sheet.

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

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

to $17,201,342 (RMB120,000,000) for working capital purposes.

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

date each amount is funded.

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

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

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

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

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

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

31, 2024 and December 31, 2023, approximately $42,283 and $42,357 of interest, respectively were outstanding to Mr.

Zhenyong Liu, which

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

On March 1, 2015, the Company entered

an agreement with Mr.

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

working capital purposes.

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

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

time of the borrowing.

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

On October 14, 2016 an unsecured

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

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

Zhenyong Liu.

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

Zhenyong Liu agreed to extend the loan for additional 3 years

and the remaining balance was due on July 12, 2021.

The loan would

be originally due on July 12, 2018.

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

due on July 12, 2021.

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

Zhenyong Liu, together

with interest of $158,651.

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

As of September

30, 2023 and December 31, 2022, the outstanding interest was $191,422 and $197,338, respectively, which was recorded in other payables

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

of September 30, 2023 and December 31, 2022, total amount of loans due to Mr.

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

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

As of March 31, 2024 and December 31, 2023,

the outstanding interest was $193,710 and $194,047, respectively, which was recorded in other payables and accrued liabilities as part

of the current liabilities in the consolidated balance sheet.

As of March 31, 2024 and December

31, 2023, 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 and nine months ended September 30, 2023 and 2022.

The interest expense incurred for such related party loans were $nil

for the three months ended March 31, 2024 and 2023.

The accrued interest owing to Mr.

Zhenyong Liu was approximately $590,227 and $608,465, as of September 30, 2023 and December 31, 2022, respectively, which was recorded

in other payables and accrued liabilities.

December 8, 2021, the Company entered into an agreement with 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 repaid

Zhenyong Liu in February 2022.

October 2022 and November 2022, the Company entered into two agreements with Mr.

Zhenyong Liu, which allowed Mr.

Zhenyong Liu to borrow

from the Company an amount of $6,963,982 (RMB50,000,000) in total.

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

$4,264,938 (RMB30,000,000) was repaid by Mr.

Zhenyong Liu in August 2023.

The remaining balance will be repaid in November

Interest income of the loan for the nine months ended September 30, 2023 was $263,342.

of September 30, 2023 and December 31, 2022, amount due to shareholder was $727,433, which represents funds from shareholders to pay

for various expenses incurred in the U.S.

The amount is due on demand with interest free.

Accounting Policies and Estimates

Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States, which

require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent

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

Management makes these estimates using the best information available at the time the estimates are made.

However, actual results

could differ materially from those estimates.

Zhenyong Liu was approximately $597,282 and $598,319,

as of March 31, 2024 and December 31, 2023, respectively, which was recorded in other payables and accrued liabilities.

Critical Accounting Policies and

The Company’s financial statements

are prepared in accordance with accounting principles generally accepted in the United States, which require us to make estimates and

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

of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

Management makes these estimates

using the best information available at the time the estimates are made.

However, actual results could differ materially from those estimates.

The most critical accounting policies are listed below:

Recognition Policy

Company recognizes revenue when goods are delivered and a formal arrangement exists, the price is fixed or determinable, the delivery

is completed, no other significant obligations of the Company exist, and collectability is reasonably assured.

Goods are considered delivered

when the customer’s truck picks up goods at our finished goods inventory warehouse.

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.

In such circumstances, those assets are written down to estimated

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 three months ended September 30, 2023 and 2022, 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.

Currency Translation

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

Under ASC Topic 830-30, all

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 September 30, 2023 and December 31, 2022 to translate the Chinese RMB to the U.S.

are 7.1798:1 and 6.9646:1, respectively.

Revenues and expenses are translated using the prevailing average exchange rates at 7.0341:1

and 6.6410:1 for the nine months ended September 30, 2023 and 2022, respectively.

Translation adjustments are included in other comprehensive

income (loss).

Sheet Arrangements

were the guarantor for Baoding Huanrun Trading Co., for its long-term bank loans in an amount of $4,317,669 (RMB31,000,000), which matures

at various times in 2028.

Revenue Recognition Policy

The Company recognizes revenue

when goods are delivered and a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant

obligations of the Company exist, and collectability is reasonably assured.

Goods are considered delivered when the customer’s truck

picks up goods at our finished goods inventory warehouse.

Long-Lived Assets

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.

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 three months ended March 31,

2024 and 2023, 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”).

Under ASC Topic 830-30, all assets and liabilities are translated

into United States dollars using the current exchange rate at the end of each fiscal period.

The current exchange rates used by the Company

as of March 31, 2024 and December 31, 2023 to translate the Chinese RMB to the U.S.

Dollars are 7.0950:1 and 7.0827:1, respectively.

and expenses are translated using the prevailing average exchange rates at 7.1008:1 and 6.8613:1 for the three months ended March 31,

2024 and 2023, respectively.

Translation adjustments are included in other comprehensive income (loss).

Off-Balance Sheet Arrangements

We were the guarantor for Baoding

Huanrun Trading Co., for its long-term bank loans in an amount of $4,369,274 (RMB31,000,000), which matures at various times in 2028.

Baoding Huanrun Trading Co.

is one of our major suppliers of raw materials.

This helps us to maintain a good

relationship with the supplier and negotiate for better terms in payment for materials.

This helps us to maintain a good relationship with the supplier

and negotiate for better terms in payment for materials.

If Huanrun Trading Co.

were to become insolvent,

the Company could be materially adversely affected.

were to become insolvent, the Company could be materially

adversely affected.

Except as aforesaid, we have no material off-balance sheet transactions.

Accounting Pronouncements

October 2021, the FASB issued ASU No.

Recent Accounting Pronouncements

In October 2021, the FASB issued

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

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

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-Q

Item 2. Management’s Discussion and Analysis