What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-15 compared with 2024-08-12 · 360 added, 481 removed, 329 unchanged (72% of the section changed)

Management’s Discussion and Analysis

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

Management’s 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 June 30, 2024 and 2023 should be read in conjunction with the financial

and results of operations of the Company for the periods ended September 30, 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.

36 unchanged sentences

Results of Operations

Comparison of the Three months ended June 30, 2024 and 2023

Revenue for the three months ended June 30, 2024

was $26,249,788, a decrease of $3,770,126, or 12.56%, from $30,019,914 for the same period in the previous year.

This was mainly due to

the production suspension of offset printing paper and tissue paper products in the second quarter of 2024.

Comparison of the Three months ended September 30, 2024 and 2023

Revenue for the three months ended September 30,

2024 was $25,081,500, an increase of $9,309,940, or 59.03%, from $15,771,560 for the same period in the previous year.

This was mainly

due to the increase of sales volume of corrugating medium paper (“CMP”), partially offset by the decrease in average selling

prices (“ASP”) of

Revenue of Offset Printing Paper, Corrugating Medium Paper

1 unchanged sentence

Revenue from sales of offset

printing paper, corrugating medium paper (“CMP”) and tissue paper products for the three months ended June 30, 2024 was $26,212,815,

representing a decrease of $3,762,919, or 12.55%, from $29,975,734 for the second quarter of 2023.

Total offset printing paper, CMP and

tissue paper products sold during the three months ended June 30, 2024 amounted to 75,365 tonnes, representing a decrease of 3,271 tonnes,

or 4.16%, compared to 78,636 tonnes sold in the comparable period in the previous year.

Production of offset printing paper and tissue

paper products was suspended due to the rising natural gas prices in the first half of 2024.

It is expected that production will resume

in the third quarter of 2024.

The changes in revenue dollar amount and in quantity sold for the three months ended June 30, 2024 and 2023

are summarized as follows:

printing paper, CMP and tissue paper products for the three months ended September 30, 2024 was $25,044,375, representing an increase

of $9,287,976, or 58.95%, from $15,756,399 for the third quarter of 2023.

Total offset printing paper, CMP and tissue paper products sold

during the three months ended September 30, 2024 amounted to 74,884 tonnes, representing an increase of 30,077 tonnes, or 67.13%, compared

to 44,807 tonnes sold in the comparable period in the previous year.

Production of offset printing paper and tissue paper products were

suspended due to the rising natural gas price in first half of 2024 and is expected to resume at the end of 2024.

The changes in revenue

dollar amount and in quantity sold for the three months ended September 30, 2024 and 2023 are summarized as follows:

Three Months Ended

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

Sales Revenue

4 unchanged sentences

Offset Printing Paper

$ (3,155,882 )

Tissue Paper Products

Offset Printing Paper and Tissue Paper Revenue

$ (3,762,919 )

Monthly sales revenue for the 24 months ended June 30, 2024, are summarized

The Average Selling Prices (ASPs) for our main

products in the three months ended June 30, 2024 and 2023 are summarized as follows:

Offset Printing Paper ASP

Light-Weight CMP ASP

Tissue Paper Products ASP

Three Months ended June 30, 2024

Three Months ended June 30, 2023

Total CMP, Offset Printing Paper and Tissue Paper Revenue

Monthly sales revenue for the 24 months ended September 30, 2024, are

summarized below:

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

three months ended September 30, 2024 and 2023 are summarized as follows:

Offset Printing

Three Months ended September 30, 2024

Three Months ended September 30, 2023

Decrease from comparable period in the previous year

1 unchanged sentence

The following chart shows the month-by-month ASPs for the 24-month

period ended June 30, 2024:

period ended September 30, 2024:

Corrugating Medium Paper

Revenue from CMP amounted

to $26,212,815 (100.00% of the total offset printing paper, CMP and tissue paper products revenues) for the three months ended June 30,

2024, representing a decrease of $262,705, or 0.99%, from $26,475,520 for the comparable period in 2023.

Production of offset printing

paper and tissue paper products was suspended in the second quarter of 2024.

We sold 75,365 tonnes of CMP in the three months ended June 30, 2024

to $25,044,375 (100.00% of the total offset printing paper, CMP and tissue paper products revenues) for the three months ended September

30, 2024, representing an increase of $9,621,302, or 62.38%, from $15,423,073 for the comparable period in 2023.

We sold 74,884 tonnes of CMP in the three months ended September 30,

2024 as compared to 44,396 tonnes for the same period in 2023, representing a 68.67% increase in quantity sold.

ASP for regular CMP decreased from $365/tonne

for the three months ended June 30, 2023 to $350/tonne for the three months ended June 30, 2024, representing a 4.11% decrease.

RMB for regular CMP for the second quarter of 2023 and 2024 was RMB2,574 and RMB2,488, respectively, representing a 3.35% decrease.

quantity of regular CMP sold increased by 2,750 tonnes, from 60,063 tonnes in the second quarter of 2023 to 62,813 tonnes in the second

quarter of 2024.

ASP for regular CMP decreased from $350/tonne for the three months

ended September 30, 2023 to $337/tonne for the three months ended September 30, 2024, representing a 3.71% decrease.

ASP in RMB for regular

CMP for the third quarter of 2023 and 2024 was RMB2,532 and RMB2,386, respectively, representing a 5.76% decrease.

The quantity of regular

CMP sold increased by 27,935 tonnes, from 34,186 tonnes in the third quarter of 2023 to 62,121 tonnes in the third quarter of 2024.

ASP for light-weight CMP decreased from $340/tonne for the three months

ended September 30, 2023 to $324/tonne for the three months ended September 30, 2024, representing a 4.71% decrease.

ASP in RMB for light-weight

CMP for the third quarter of 2023 and 2024 was RMB2,439 and RMB2,297, respectively, representing a 5.81% decrease.

The quantity of light-weight

CMP sold increased by 2,553 tonnes, from 10,210 tonnes in the third quarter of 2023, to 12,763 tonnes in the third 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 second quarter of 2024 and 2023 were 68.02% and

The utilization rates for the third quarter of 2024 and 2023 were 68.96% and

38.07%, respectively, representing an increase of 30.89%.

Quantities sold for regular CMP that was produced by the PM6

production line from July 2022 to June 2024 are as follows:

Quantities sold for regular CMP that was produced by the PM6 production line

from October 2022 to September 2024 are as follows:

Offset printing paper

Revenue from offset printing paper was $nil for

the three months ended June 30, 2024, representing a decrease of $3,155,882, or 100.00%, from $3,155,882 for the three months ended June

Production of offset printing paper was suspended during the second quarter of 2024.

the three months ended September 30, 2024, representing a decrease of $69,227, or 100.00%, from $69,227 for the three months ended September

Production of offset printing paper was suspended during the third quarter of 2024.

Tissue Paper Products

Revenue from tissue paper products was $nil for

the three months ended June 30, 2024, representing a decrease of $344,332, or 100.00%, from $344,332 for the three months ended June 30,

Production of tissue paper products was suspended during the second quarter of 2024.

the three months ended September 30, 2024, representing a decrease of $264,099, or 100.00%, from $264,099 for the three months ended

September 30, 2023.

Production of tissue paper products was suspended during the third quarter of 2024.

Revenue of Face Mask

Revenue generated from selling face mask were

$nil and $44,246 for the three months ended June 30, 2024 and 2023, respectively.

$nil and $15,198 for the three months ended September 30, 2024 and 2023, respectively.

Cost of Sales

Total cost of sales for CMP, offset printing paper

and tissue paper products for the quarter ended June 30, 2024 was $22,984,488, a decrease of $5,807,701, or 20.17%, from $28,792,189 for

the comparable period in 2023.

This was mainly due to the decrease in sales quantity of offset printing paper and tissue paper products

and the decrease of the unit material cost of CMP products.

Cost of sales for CMP was $22,984,488 for the quarter ended June 30,

2024, as compared to $24,658,830 for the comparable period in 2023.

The decrease in the cost of sales of $1,674,342 for CMP was mainly

due to the decrease in average unit cost of sales of CMP, partially offset by the increase in sales volume of regular CMP.

of sales per tonne for CMP decreased by 9.76%, from $338 in the second quarter of 2023 to $305 in the second quarter of 2024.

in average cost of sales was mainly attributable to the lower average unit purchase costs (net of applicable value added tax) of recycled

paper board in the second quarter of 2024 compared to the second quarter of 2023.

Cost of sales for offset printing paper was $nil for the quarter ended

June 30, 2024, as compared to $3,079,485 for the comparable period in 2023.

The production of offset printing paper was suspended in the

second quarter of 2024.

and tissue paper products for the quarter ended September 30, 2024 was $23,163,835, an increase of $7,256,618, or 45.62%, from $15,907,217

for the comparable period in 2023.

This was mainly due to the increase in sales quantity of CMP, partially offset by and the decrease

of the unit material cost of CMP products.

Cost of sales for CMP was $23,163,835 for the

quarter ended September 30, 2024, as compared to $14,844,637 for the comparable period in 2023.

The increase in the cost of sales of $8,319,198

for CMP was mainly due to the increase in sales volume of CMP, partially offset by the decrease in average unit cost of sales of CMP.

Average cost of sales per tonne for CMP decreased by 7.49%, from $334 in the third quarter of 2023 to $309 in the third 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 third quarter of 2024 compared to the third quarter of 2023.

Cost of sales for offset printing paper was $

nil for the quarter ended September 30, 2024, as compared to $64,011 for the comparable period in 2023.

The production of offset printing

paper was suspended in the third quarter of 2024.

Cost of sales for tissue paper products was $ nil for the quarter ended

June 30, 2024, as compared to $1,053,874 for the comparable period in 2023.

The production of tissue paper products was suspended in the

second quarter of 2024.

September 30, 2024, as compared to $998,569 for the comparable period in 2023.

The production of tissue paper products was suspended in

the third quarter of 2024.

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

ended June 30, 2024 and 2023 are summarized below:

ended September 30, 2024 and 2023 are summarized below:

Three Months Ended

June 30, 2024

June 30, 2023

Cost of Sales

Cost per Tonne

Cost of Sales

Cost per Tonne

Cost of Sales

Cost per Tonne

Cost of Sales

Cost per Tone

$ (1,141,211 )

September 30, 2024

September 30, 2023

Change in percentage

Light-Weight CMP

$ (1,674,342 )

Offset Printing Paper

$ (3,079,485 )

Tissue Paper Products

$ (1,053,874 )

Total CMP, Offset Printing Paper and Tissue Paper

$ (5,807,701 )

Our average unit purchase costs (net of applicable value added tax)

of recycled paper board in the three months ended June 30, 2024 were RMB 1,167/tonne (approximately $164/tonne), as compared to RMB 1,340/tonne

(approximately $192/tonne) for the three months ended June 30, 2023.

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

of 14.58% 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 paper.

The pricing trends of our major raw materials

for the 24-month period from July 2022 to June 2024 are shown below:

Our average unit purchase costs (net of applicable

value added tax) of recycled paper board in the three months ended September 30, 2024 were RMB 1,214/tonne (approximately $171/tonne),

as compared to RMB 1,239/tonne (approximately $176/tonne) for the three months ended September 30, 2023.

These changes (in US dollars)

represent a year-over-year decrease of 2.84% 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 paper.

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

period from October 2022 to September 2024 are shown below:

Electricity and gas are

our two main energy sources.

Electricity and gas accounted for approximately 5% and 12.9% of total sales in the second quarter of 2024,

respectively, compared to 5% and 14.9% of total sales in the second quarter of 2023.

The monthly energy cost as a percentage of total

monthly sales of our main paper products for the 24 months ended June 30, 2024 are summarized as follows:

Electricity and gas accounted for approximately 5% and 14.3% of total sales in the third quarter of 2024,

respectively, compared to 5% and 13.3% of total sales in the third quarter of 2023.

The monthly energy cost as a percentage of total monthly

sales of our main paper products for the 24 months ended September 30, 2024 are summarized as follows:

Gross Profit (Loss)

Gross profit for the three months ended June 30,

2024 was $3,265,300 (representing 12.44% of the total revenue), representing an increase of $2,085,442, or 176.75%, from the gross profit

of $1,179,858 (representing 3.93% of the total revenue) for the three months ended June 30, 2023, as a result of factors described above.

Gross profit for the three months ended September

30, 2024 was $1,917,381 (representing 7.64% of the total revenue), representing an increase of $2,070,604, from the gross loss of $153,223

(representing 0.97% of the total revenue) for the three months ended September 30, 2023, as a result of factors described above.

Offset Printing Paper, CMP and Tissue Paper Products

Gross profit for offset

printing paper, CMP and tissue paper products for the three months ended June 30, 2024 was $3,228,327, representing an increase of $2,044,782,

or 172.77%, from the gross profit of $1,183,544 for the three months ended June 30, 2023.

The increase was mainly the result of the factors

discussed above.

Gross profit for offset printing paper, CMP and

tissue paper products for the three months ended September 30, 2024 was $1,880,540, representing an increase of $2,031,358, from the gross

loss of $150,818 for the three months ended September 30, 2023.

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

The overall gross profit margin for offset printing

paper, CMP and tissue paper products increased by 8.37 percentage points, from 3.95% for the three months ended June 30, 2023, to 12.32%

for the three months ended June 30, 2024.

paper, CMP and tissue paper products increased by 8.47 percentage points, from -0.96% for the three months ended September 30, 2023, to

7.51% for the three months ended September 30, 2024.

Gross profit margin for regular CMP for the three

months ended June 30, 2024 was 12.22%, or 5.41 percentage points higher, as compared to gross profit margin of 6.81% for the three months

ended June 30, 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 second quarter of 2024.

months ended September 30, 2024 was 7.54%, or 0.53 percentage points higher, as compared to gross profit margin of 7.01% for the three

months ended September 30, 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 third quarter of 2024.

Gross profit margin for light-weight CMP for the

three months ended June 30, 2024 was 12.82%, or 5.68 percentage points higher, as compared to gross profit margin of 7.14% for the three

months ended June 30, 2023.

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

of ASP of light-weight CMP in the second quarter of 2024.

three months ended September 30, 2024 was 7.33%, or 14.80 percentage points higher, as compared to gross profit margin of -7.47% for the

three months ended September 30, 2023.

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

the decrease of ASP of light-weight CMP in the third quarter of 2024.

Monthly gross profit margins on the sales of our

CMP and offset printing paper for the 24-month period ended June 30, 2024 are as follows:

CMP and offset printing paper for the 24-month period ended September 30, 2024 are as follows:

Gross loss for face masks for the three months

ended June 30, 2024 and 2023 were $nil and $3,568.

ended September 30, 2024 and 2023 were $nil and $2,393.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for

the three months ended June 30, 2024 were $2,717,548, an increase of $1,394,143, or 105.35% from $1,323,405 for the three months ended

June 30, 2023.

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

Income (Loss) from Operations

Operating income for the quarter ended June 30,

2024 was $547,752, an increase of $1,066,435, or 205.60%, from loss from operations of $518,683 for the quarter ended June 30, 2023.

increase in income from operations was primarily due to the increase gross profit, partially offset by the increase in selling, general

and administrative expenses.

the three months ended September 30, 2024 were $3,381,502, an increase of $1,046,756, or 44.83% from $2,334,746 for the three months ended

September 30, 2023.

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

accrued liability for legal proceeding the Company was jointly liable for repayment of a loan.

Loss from Operations

Operating loss for the quarter ended September

30, 2024 was $1,464,121, a decrease of loss of $1,020,392 or 41.07%, from $2,484,513 for the quarter ended September 30, 2023.

in income from operations was primarily due to the increase in gross profit, partially offset by the increase in selling, general and

administrative expenses.

Other Income and Expenses

Interest expense for the three months ended June

30, 2024 decreased by $91,941, from $270,681 in the three months ended June 30, 2023, to $178,740.

The Company had short-term and long-term

interest-bearing loans, related party loans and leasing obligations that aggregated $12,149,914 as of June 30, 2024, as compared to $17,607,943

as of June 30, 2023.

Interest expense for the three months ended September

30, 2024 decreased by $76,388, from $247,818 in the three months ended September 30, 2023, to $171,430.

The Company had short-term and

long-term interest-bearing loans, related party loans and leasing obligations that aggregated $9,788,224 as of September 30, 2024, as

compared to $12,105,731 as of September 30, 2023.

Gain on derivative liability

The 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.

The change in fair value of

derivative liability for the three months ended June 30, 2024 and 2023 was a gain of $15 and a loss of $166,506, respectively.

The 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.

The change in fair value of derivative liability for

the three months ended September 30, 2024 and 2023 was a gain of $2 and $660,429, respectively.

As a result and the factors discussed above, net

loss was $77,747 for the quarter ended June 30, 2024, representing a decrease of loss of $1,175,746, or 93.80%, from $1,253,493 for the

quarter ended June 30, 2023.

Comparison of the Six months ended June 30, 2024 and 2023

Revenue for the six months ended June 30, 2024

loss was $1,973,946 for the quarter ended September 30, 2024, representing a decrease of loss of $1,422, or 0.07%, from $1,975,368 for

the quarter ended September 30, 2023.

Comparison of the Nine months ended September 30, 2024

Revenue for the nine months ended September 30,

2024 was $58,195,129, representing a decrease of $7,387,222, or 11.26%, from $65,582,351 for the same period in the previous year.

mainly due to the production suspension of CMP in January and February of 2024, and production suspension of offset printing paper and

tissue paper products in the first half of 2024.

was mainly due to the decrease in ASP of CMP, partially offset by the increase in sales quantity of regular CMP.

Revenue of Offset Printing Paper, Corrugating Medium Paper and Tissue

Paper Products

Revenue from sales of offset printing paper, CMP and tissue paper products

for the six months ended June 30, 2024 was $33,039,615, a decrease of $16,687,267, or 33.56%, from $49,726,882 for the six months ended

June 30, 2023.

This was mainly due to the decrease in sales volume of CMP, offset printing paper and tissue paper products, and the decrease

in ASPs of CMP.

Total quantities of offset printing paper, CMP and tissue paper products sold during the six months ended June 30, 2024

amounted to 94,034 tonnes, a decrease of 34,475 tonnes, or 26.83%, compared to 128,509 tonnes sold during the six months ended June 30,

Total quantities of CMP and offset printing paper sold decreased by 33,991 tonnes in the six months of 2024 as compared to the same

period of 2023.

Production of CMP was suspended in January and February of 2024 and resumed in mid of March 2024, and production of offset

printing paper and tissue paper products was suspended in the first half of 2024 due to energy price rise and Chinese New Year holiday.

The production of offset printing paper and tissue paper products is expected to resume in the third quarter of 2024.

The changes in revenue

and quantity sold for the six months ended June 30, 2024 and 2023 are summarized as follows:

Six Months Ended

June 30, 2024

June 30, 2023

Revenue from sales of offset printing paper, CMP

and tissue paper products for the nine months ended September 30, 2024 was $58,083,990, a decrease of $7,399,292, or 11.30%, from $65,483,282

for the nine months ended September 30, 2023.

This was mainly due to the decrease in sales volume of CMP, offset printing paper and tissue

paper products, and the decrease in ASPs of CMP.

Total quantities of offset printing paper, CMP and tissue paper products sold during

the nine months ended September 30, 2024 amounted to 168,919 tonnes, a decrease of 4,398 tonnes, or 2.54%, compared to 173,317 tonnes

sold during the nine months ended September 30, 2023.

Total quantities of CMP and offset printing paper sold decreased by 3,672 tonnes

in the nine months of 2024 as compared to the same period of 2023.

Production of CMP was suspended in January and February of 2024 and

resumed in mid of March 2024, and production of offset printing paper and tissue paper products was suspended in the nine months ended

September 30, 2024.

The changes in revenue and quantity sold for the nine months ended September 30, 2024 and 2023 are summarized as follows:

Nine Months Ended

September 30, 2024

Nine Months Ended

September 30, 2023

Sales Revenue

Quantity (Tonne)

$ (1,708,568 )

Light-Weight CMP

$ (1,634,230 )

$ (3,342,798 )

Offset Printing Paper

$ (3,225,109 )

Tissue Paper Products

Total CMP, Offset Printing Paper and Tissue Paper Revenue

ASPs for our main products in the six-month period ended June

$ (7,399,292 )

ASPs for our main products in the nine-month period ended September

30, 2024 and 2023 are summarized as follows:

Offset Printing

Light-Weight CMP ASP

Six Months Ended June 30, 2024

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2024

Nine Months Ended September 30, 2023

Decrease from comparable period in the previous year

1 unchanged sentence

Revenue of Face Masks

Revenue generated from selling face masks were $nil and $79,883 for

the six months ended June 30, 2024 and 2023.

Cost of Sales

Total cost of sales for CMP, offset printing paper and tissue paper

products in the six months ended June 30, 2024 was $29,448,953, a decrease of $19,361,616, or 39.67%, from $48,810,569 for the six months

ended June 30, 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 $29,448,953for the six months ended June

30, 2024, as compared to $43,747,945 in the same period of 2023.

The decrease in the cost of sales of $14,298,992 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 12.32%, from

$357 for the six months ended June 30, 2023, to $313 in the same period of 2024.

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 offset printing paper was $nil for the six months

ended June 30, 2024, as compared to $3,079,485 in the same period of 2023.

Cost of sales for tissue paper products was $nil for the six months

ended June 30, 2024, as compared to $1,983,139 in the same period of 2023.

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

months ended June 30, 2024 and 2023 are summarized below:

Six Months Ended

June 30, 2024

June 30, 2023

Change in percentage

Cost of Sales

Cost per Tonne

Cost of Sales

Cost per tonne

Cost of Sales

Cost per Tonne

Revenue generated from selling face masks were

$nil and $95,080 for the nine months ended September 30, 2024 and 2023.

Cost of Sales

Cost per Tone

Total cost of sales for CMP, offset printing paper

and tissue paper products in the nine months ended September 30, 2024 was $52,612,788, a decrease of $12,104,998, or 18.70%, from $64,717,786

for the nine months ended September 30, 2023.

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

Cost of sales for CMP was $52,612,788 for the

nine months ended September 30, 2024, as compared to $58,592,582 in the same period of 2023.

The decrease in the cost of sales of $5,979,794

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 nine months of 2024.

Average cost of sales per tonne for CMP decreased by 11.40%, from $351 for the nine months ended September

30, 2023, to $311 in the same period of 2024.

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 offset printing paper was $nil

for the nine months ended September 30, 2024, as compared to $3,143,496 in the same period of 2023.

Cost of sales for tissue paper products was $nil

for the nine months ended September 30, 2024, as compared to $2,981,708 in the same period of 2023.

Changes in cost of sales and cost per tonne by

product for the nine months ended September 30, 2024 and 2023 are summarized below:

September 30, 2024

September 30, 2023

$ (3,650,688 )

6 unchanged sentences

$ (2,981,708 )

Total CMP, Offset Printing Paper and Tissue Paper Revenue

CMP, Offset Printing Paper and Tissue Paper Revenue

$ (12,104,998 )

Gross profit for the six months ended June 30, 2024 was $3,664,413

(representing 11.07% of the total revenue), representing an increase of $2,761,554, or 305.87%, from the gross profit of $902,859 (representing

1.81% of the total revenue) for the six months ended June 30, 2023.

The increase was mainly due to the decrease in unit cost of materials

of CMP, partially offset by the decrease in ASP of CMP.

Offset Printing Paper, CMP and Tissue Paper Products

Gross profit for the nine months ended September

30, 2024 was $5,581,794 (representing 9.59% of the total revenue), representing an increase of $4,832,158, or 644.60%, from the gross

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

The increase was mainly due

to the decrease in unit cost of materials of CMP, partially offset by the decrease in ASP of CMP.

Offset Printing Paper, CMP and Tissue Paper

Gross profit for offset printing paper, CMP and

tissue paper products for the six months ended June 30, 2024 was $3,590,662, an increase of $2,674,349, or 291.86%, from the gross profit

of $916,313 for the six months ended June 30, 2023.

tissue paper products for the nine months ended September 30, 2024 was $5,471,202, an increase of $4,705,706, or 614.73%, from the gross

profit of $765,496 for the nine months ended September 30, 2023.

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

The overall gross profit margin for offset printing paper, CMP and

tissue paper products increased by 9.03 percentage points, from 1.84% for the six months ended June 30, 2023, to 10.87% for the six months

ended June 30, 2024.

Gross profit margin for regular CMP for the six months ended June 30,

2024 was 10.86%, or 6.15 percentage points higher, as compared to gross profit margin of 4.71% for the six months ended June 30, 2023.

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 six months ended June

30, 2024 was 10.90%, or 5.04 percentage points higher, as compared to gross profit margin of 5.86% for the six months ended June 30, 2023.

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

Gross loss for face mask for the six months ended June 30, 2024 and

2023 was $nil and $6,407, respectively.

The overall gross profit margin for offset printing

paper, CMP and tissue paper products increased by 8.25 percentage points, from 1.17% for the nine months ended September 30, 2023, to

9.42% for the nine months ended September 30, 2024.

Gross profit margin for regular CMP for the nine months ended September

30, 2024 was 9.44%, or 4.18 percentage points higher, as compared to gross profit margin of 5.26% for the nine months ended September

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

Gross profit margin for light-weight CMP for the

nine months ended September 30, 2024 was 9.33%, or 7.65 percentage points higher, as compared to gross profit margin of 1.68% for the

nine months ended September 30, 2023.

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

in ASP of light-weight CMP.

Gross loss for face mask for the nine months ended

September 30, 2024 and 2023 was $nil and $8,801, respectively.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the six months ended

June 30, 2024 were $6,618,331, an increase of $2,799,564, or 73.31% from $3,818,767 for the six months ended June 30, 2023.

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

Selling, general and administrative expenses for

the nine months ended September 30, 2024 were $9,999,833, an increase of $3,846,320, or 62.51% from $6,153,513 for the nine months ended

September 30, 2023.

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

accrued liability for legal proceeding the Company was jointly liable for repayment of a loan.

Loss from Operations

Operating loss for the six months ended June 30, 2024 was $2,953,918,

a decrease of loss of $337,126, or 10.24%, from $3,291,044 for the six months ended June 30, 2023.

The decrease of loss was primarily

due to the increase in gross profit, partially offset by the increase in selling, general and administrative expenses.

Operating loss for the nine months ended September

30, 2024 was $4,418,039, a decrease of loss of $1,357,518, or 23.50%, from $5,775,557 for the nine months ended September 30, 2023.

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

and administrative expenses.

Other Income and Expenses

Interest expense for the six months ended June 30, 2024 decreased by

$130,820, from $519,850 for the six months ended June 30, 2023, to $389,030.

The Company had short-term and long-term interest-bearing

loans and lease obligation that aggregated $12,149,914 as of June 30, 2024, as compared to $17,607,943 as of June 30, 2023.

Gain (Loss) on derivative liability

The 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.

The change in fair value of derivative liability for the six months ended June

30, 2022 and 2023 was a gain of $49 and a loss of $14,409, respectively.

As a result of the above, net loss was $3,824,283 for the six months

ended June 30, 2024, representing a decrease of loss of $162,375, or 4.07%, from $3,986,658 for the six months ended June 30, 2023.

Interest expense for the nine months ended September

30, 2024 decreased by $174,397, from $767,668 for the nine months ended September 30, 2023, to $593,271.

The Company had short-term and

long-term interest-bearing loans and lease obligation that aggregated $9,788,224 as of September 30, 2024, as compared to $12,105,731

as of September 30, 2023.

Gain on derivative liability

The 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.

The change in fair value of derivative liability for

the nine months ended September 30, 2022 and 2023 was a gain of $51 and $646,020, respectively.

As a result of the above, net loss was $5,798,229

for the nine months ended September 30, 2024, representing a decrease of loss of $163,797, or 2.75%, from $5,962,026 for the nine months

ended September 30, 2023.

Accounts Receivable

Net accounts receivable increased by $1,151,844,

or 358.40%, to $2,638,219 as of June 30, 2024, as compared with $575,526 as of December 31, 2023.

or 200.14%, to $1,727,370 as of September 30, 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 70.41% of total value of inventory as of June 30, 2024), semi-finished goods and finished goods.

As of June 30, 2024, the recorded

value of inventory increased by 48.58% to $5,282,420 from $3,555,235 as of December 31, 2023.

As of June 30, 2024, the inventory of recycled

Inventories consist of raw materials (accounting for 71.70% of total

value of inventory as of September 30, 2024), semi-finished goods and finished goods.

As of September 30, 2024, the recorded value of

inventory increased by 61.24% to $5,732,539 from $3,555,235 as of December 31, 2023.

As of September 30, 2024, the inventory of recycled

paper board, which is the main raw material for the production of CMP, was $3,873,233, approximately $3,674,489, or 1848.86%, higher than

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

September 30,

Raw Materials

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rental payments as provided for in the original lease agreement.

Capital Expenditure Commitment as of June 30, 2024

Capital Expenditure Commitment as of September 30, 2024

On May 5, 2020, the Company announced it planned

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

As of June 30, 2024, we had approximately $3.5

As of September 30, 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 is complete, while work on the related ancillary facilities is ongoing.

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 June 30, 2024 and December 31, 2023.

The infrastructure

work of PM10 is complete, while work on the related ancillary facilities is ongoing.

These commitments are expected to be financed by

bank loans and cash flows generated from our business operations.

Cash and Cash Equivalents

Our cash, cash equivalents and restricted cash

as of June 30, 2024 was $6,043,922, an increase of $1,652,001, from $4,391,921 as of December 31, 2023.

as of September 30, 2024 was $4,892,914, an increase of $500,993, from $4,391,921 as of December 31, 2023.

The increase of cash and cash

equivalents for the six months ended June 30, 2024 was attributable to a number of factors including:

equivalents for the nine months ended September 30, 2024 was attributable to a number of factors including:

Net cash provided by operating activities

Net cash provided by operating activities was

$1,346,337 for the six months ended June 30, 2024.

The balance represented a decrease of cash of $4,400,382, or 76.57%, from $5,746,719

provided for the six months ended June 30, 2023.

Net loss for the six months ended June 30, 2024 was $3,824,283, representing a decrease

of loss of $162,375, or 4.07%, from $3,986,658 for the six months ended June 30, 2023.

Changes in various asset and liability account

balances throughout the six months ended June 30, 2024 also contributed to the net change in cash from operating activities in six months

ended June 30, 2024.

Chief among such changes is the increase of accounts receivable in the amount of $2,121,357 during the six months

There was also an increase of $1,751,011 in the ending inventory balance as of June 30, 2024 (a decrease to net cash for the

six months ended June 30, 2024 cash flow purposes).

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

in the amount of $6,862,883.

The Company also had a net decrease of $660,470 in prepayment and other current assets (an increase to net

cash) and a net increase of $692,857 in other payables and accrued liabilities and related parties (an increase to net cash), as well

as an increase in income tax payable of $416,770 (an increase to net cash) during the six months ended June 30, 2024.

$2,831,111 for the nine months ended September 30, 2024.

The balance represented a decrease of cash of $4,663,003, or 62.22%, from net

cash of $7,494,114 provided for the nine months ended September 30, 2023.

Net loss for the nine months ended September 30, 2024 was $5,798,229,

representing a decrease of loss from operations of $163,797, or 2.75%, from $5,962,026 for the nine months ended September 30, 2023.

in various asset and liability account balances throughout the nine months ended September 30, 2024 also contributed to the net change

in cash from operating activities in the nine months ended September 30, 2024.

Chief among such changes is the increase of accounts receivable

in the amount of $1,160,996 during the nine months of 2024.

There was also an increase of $2,108,280 in the ending inventory balance as

of September 30, 2024 (a decrease to net cash for the nine months ended September 30, 2024 cash flow purposes).

In addition, the Company

had non-cash expenses relating to depreciation and amortization in the amount of $10,346,181.

The Company also had a net increase of $122,747

in prepayment and other current assets (a decrease to net cash) and a net increase of $1,406,850 in other payables and accrued liabilities

and related parties (an increase to net cash), as well as an increase in income tax payable of $345,270 (an increase to net cash) during

the nine months ended September 30, 2024.

Net cash used in investing activities

We incurred $62,640 in net cash expenditures for

investing activities during the six months ended June 30, 2024, as compared to $5,565,713 for the same period of 2023.

We incurred $315,152 in net cash expenditures

for purchases of property, plant and equipment during the nine months ended September 30, 2024, as compared to $9,211,711 for the same

period of 2023.

Net cash provided by financing activities

Net cash provided by financing activities was

$422,096 for the six months ended June 30, 2024, as compared to net cash provided by financing activities in the amount of $2,823,597

for the six months ended June 30, 2023.

Net cash used in financing activities was $2,112,706

for the nine months ended September 30, 2024, as compared to net cash provided by financing activities in the amount of $1,997,269 for

the nine months ended September 30, 2023.

The net cash outflow for the nine months ended September 30, 2024 was mainly for repayment of

Short-term bank loans

September 30,

Bank of Cangzhou 1

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a working capital loan agreement with the Bank of Cangzhou, to borrow $142,706 at a fixed interest rate of 5.5% per annum.

secured by certain of the Company’s manufacturing equipment with net book value of $276,269 as of June 30, 2024.

The loan will be

due by December 30, 2024.

secured by certain of the Company’s manufacturing equipment with net book value of $251,593 as of September 30, 2024.

The loan will

be due by December 30, 2024.

On December 31, 2023, the Company entered into

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On September 15, 2023, the Company entered into

a working capital loan agreement with the ICBC, with a balance of $nil and $2,824 as of June 30, 2024 and December 31, 2023, respectively.

a working capital loan agreement with the ICBC, with a balance of $nil and $2,824 as of September 30, 2024 and December 31, 2023, respectively.

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

1 unchanged sentence

On September 22, 2023, the Company entered into

a working capital loan agreement with the ICBC, with a balance of $nil and $70,594 as of June 30, 2024 and December 31, 2023, respectively.

a working capital loan agreement with the ICBC, with a balance of $nil and $70,594 as of September 30, 2024 and December 31, 2023, respectively.

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

1 unchanged sentence

On September 22, 2023, the Company entered into

a working capital loan agreement with the ICBC, with a balance of $nil and $350,149 as of June 30, 2024 and December 31, 2023, respectively.

a working capital loan agreement with the ICBC, with a balance of $nil and $350,149 as of September 30, 2024 and December 31, 2023, respectively.

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

1 unchanged sentence

On June 11, 2024, the Company entered into a working

capital loan agreement with the ICBC, with a balance of $2,806 as of June 30, 2024.

The loan bears a fixed interest rate of 3.45% per

capital loan agreement with the ICBC, with a balance of $2,854 as of September 30, 2024.

The loan bears a fixed interest rate of 3.45%

The loan will be due by June 11, 2025.

On June 21, 2024, the Company entered into a working

capital loan agreement with the ICBC, with a balance of $140,316 as of June 30, 2024.

The loan bears a fixed interest rate of 3.45% per

capital loan agreement with the ICBC, with a balance of $142,706 as of September 30, 2024.

The loan bears a fixed interest rate of 3.45%

The loan will be due by June 21, 2025.

On June 22, 2024, the Company entered into a working

capital loan agreement with the ICBC, with a balance of $140,316 as of June 30, 2024.

The loan bears a fixed interest rate of 3.45% per

capital loan agreement with the ICBC, with a balance of $142,706 as of September 30, 2024.

The loan bears a fixed interest rate of 3.45%

The loan will be due by June 22, 2025.

On June 24, 2024, the Company entered into a working

capital loan agreement with the ICBC, with a balance of $137,509 as of June 30, 2024.

The loan bears a fixed interest rate of 3.45% per

capital loan agreement with the ICBC, with a balance of $139,852 as of September 30, 2024.

The loan bears a fixed interest rate of 3.45%

The loan will be due by June 24, 2025.

As of June 30, 2024, there were guaranteed short-term

borrowings of $nil and unsecured bank loans of $701,577.

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

and unsecured bank loans of $423,567.

As of September 30, 2024, there were guaranteed

short-term borrowings of $142,707 and unsecured bank loans of $713,531.

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 June 30, 2024 and 2023 were approximately 4.45% and 4.83%.

The average short-term borrowing rates for the six months

ended June 30, 2024 and 2023 were approximately 4.46% and 4.77%.

three months ended September 30, 2024 and 2023 were approximately 4.47% and 4.52%.

The average short-term borrowing rates for the nine

months ended September 30, 2024 and 2023 were approximately 4.47% and 4.66%.

Long-term loans

As of June 30, 2024 and December 31, 2023, long-term loans were $ 11,308,021

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 June

30, 2024 and December 31, 2023.

As of September 30, 2024 and December 31, 2023,

long-term loans were $8,931,986 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 September 30, 2024 and December 31, 2023.

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

1 unchanged sentence

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

As of June 30, 2024 and December 31, 2023, the total outstanding loan balance was $3,506,482

and $3,528,315.

Out of the total outstanding loan balance, current portion amounted was $1,963,012 and $1,269,290, which is presented

as current liabilities in the consolidated balance sheet and the remaining balance of $1,543,470 and $2,259,025 is presented as non-current

liabilities in the consolidated balance sheet as of June 30, 2024 and December 31, 2023, respectively.

As of September 30, 2024 and December 31, 2023, the total outstanding loan balance

was $3,566,229 and $3,528,315.

Out of the total outstanding loan balance, current portion amounted was $1,996,460 and $1,269,290, which

is presented as current liabilities in the consolidated balance sheet and the remaining balance of $1,569,769 and $2,259,025 is presented

as non-current liabilities in the consolidated balance sheet as of September 30, 2024 and December 31, 2023, respectively.

On April 17, 2019, the Company entered into a

7 unchanged sentences

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

As of June 30, 2024 and December 31, 2023, the total

As of September 30, 2024 and December 31, 2023, the total

outstanding loan balance was $2,283,301 and $2,259,026, respectively, which are presented as non-current liabilities and current liabilities,

respectively, in the consolidated balance sheet as of June 30, 2024 and December 31, 2023.

respectively, in the consolidated balance sheet as of September 30, 2024 and December 31, 2023.

On December 12, 2019, the Company entered into

7 unchanged sentences

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

As of June 30, 2024 and December 31, 2023, the total outstanding

As of September 30, 2024 and December 31, 2023, the total outstanding

loan balance was $1,855,182 and $1,835,458, respectively, which are presented as current liabilities in the consolidated balance sheet

as of June 30, 2024 and December 31, 2023.

as of September 30, 2024 and December 31, 2023.

On February 26, 2023, the Company entered into

4 unchanged sentences

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

As of June 30, 2024 and December 31, 2023, the total

outstanding loan balance was $2,525,678 and $2,541,404.

Out of the total outstanding loan balance, current portion amounted was $2,525,678

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 June 30, 2024 and December 31, 2023, respectively.

loan was fully repaid in July 2024.

The loan was repaid in July 2024.

As of September

30, 2024 and December 31, 2023, the total outstanding loan balance was $nil and $2,541,404.

Out of the total outstanding loan balance,

current portion amounted was $nil 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 September 30,

2024 and December 31, 2023, respectively.

On December 5, 2023, the Company entered into

4 unchanged sentences

of 7% per annum.

As of June 30, 2024 and December 31, 2023, total outstanding loan balance was $1,206,713 and $1,214,226, respectively.

As of September 30, 2024 and December 31, 2023, total outstanding loan balance was $1,227,274 and $1,214,226, respectively.

Out of the total outstanding loan balance, current portion amounted $513,743 and $225,903, which is presented as current liabilities and

the remaining balance of $701,577 and $988,323 is presented as non-current liabilities in the consolidated balance sheet as of June 30,

the remaining balance of $713,531 and $988,323 is presented as non-current liabilities in the consolidated balance sheet as of September

30, 2024 and December 31, 2023, respectively.

Total interest expenses for the short-term bank loans and long-term

loans for the three months ended June 30, 2024 and 2023 were $211,551 and $268,499, respectively.

Total interest expenses for the short-term

bank loans and long-term loans for the six months ended June 30, 2024 and 2023 were $421,841 and $513,179, respectively.

Total interest expenses for the short-term bank

loans and long-term loans for the three months ended September 30, 2024 and 2023 were $171,430 and $247,628, respectively.

Total interest

expenses for the short-term bank loans and long-term loans for the nine months ended September 30, 2024 and 2023 were $593,271 and $760,807,

respectively.

Shareholder Loans

6 unchanged sentences

Zhenyong Liu, which were recorded in other payables and accrued

liabilities as part of the current liabilities in the consolidated balance sheet as of June 30, 2024 and December 31, 2023, respectively.

On December 10, 2014, Mr.

Zhenyong Liu provided

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

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

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

would be originally due on December 10, 2017.

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

Zhenyong Liu, together with

interest of $288,596.

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

As of June 30,

2024 and December 31, 2023, approximately $42,095 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

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

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 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 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 June 30, 2024 and December 31, 2023, the outstanding interest

was $192,846 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 June 30, 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 six months ended June 30, 2024 and 2023.

The accrued interest owing to Mr.

Zhenyong Liu was approximately $594,617 and $598,319, as

of June 30, 2024 and December 31, 2023, respectively, which was recorded in other payables and accrued liabilities.

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.

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

to December 31, 2015.

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

from 2013 to 2015.

Approximately $359,676 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 June 30, 2024 and December

31, 2023, respectively.

On December 10, 2014, Mr.

Zhenyong Liu provided

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

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

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

would be originally due on December 10, 2017.

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

Zhenyong Liu, together with

interest of $288,596.

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

As of June 30,

2024 and December 31, 2023, approximately $42,095 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

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

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 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 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 June 30, 2024 and December 31, 2023, the outstanding interest

was $192,846 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 June 30, 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 six months ended June 30, 2024 and 2023.

The accrued interest owing to Mr.

Zhenyong Liu was approximately $594,617 and $598,319, as

of June 30, 2024 and December 31, 2023, respectively, which was recorded in other payables and accrued liabilities.

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.

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

to December 31, 2015.

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

from 2013 to 2015.

Approximately $359,676 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 June 30, 2024 and December

31, 2023, respectively.

liabilities as part of the current liabilities in the consolidated balance sheet as of September 30, 2024 and December 31, 2023, respectively.

On December 10, 2014, Mr.

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

As of June 30,

As of September

30, 2024 and December 31, 2023, approximately $42,812 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.

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

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

As of June 30, 2024 and December 31, 2023, the outstanding interest

As of September 30, 2024 and December 31, 2023, the outstanding interest

was $196,132 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 June 30, 2024 and December 31, 2023, total

amount of loans due to Mr.

As of September 30, 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 six months ended June 30, 2024 and 2023.

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

three and nine months ended September 30, 2024 and 2023.

The accrued interest owing to Mr.

Zhenyong Liu was approximately $594,617 and $598,319, as

of June 30, 2024 and December 31, 2023, respectively, which was recorded in other payables and accrued liabilities.

Zhenyong Liu was approximately $604,748 and

$598,319, as of September 30, 2024 and December 31, 2023, respectively, which was recorded in other payables and accrued liabilities.

In October 2022 and November 2022, the Company

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

Interest income of the loan for the six months ended

June 30, 2024 and 2023 were $nil and $176,847.

As of June 30, 2024 and December 31, 2023, amount

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

is due on demand with interest free.

Interest income of the loan for the nine months ended

September 30, 2024 and 2023 were $nil and $263,342.

As of September 30, 2024 and December 31, 2023,

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

amount is due on demand with interest free.

Critical Accounting Policies and Estimates

22 unchanged sentences

policy toward operating efficiency of the Chinese paper manufacturing industry.

For the six months ended June 30, 2024 and 2023, 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.

For the nine months ended September 30, 2024 and 2023,

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.

Foreign Currency Translation

4 unchanged sentences

The current exchange rates used by the Company

as of June 30, 2024 and December 31, 2023 to translate the Chinese RMB to the U.S.

as of September 30, 2024 and December 31, 2023 to translate the Chinese RMB to the U.S.

Dollars are 7.0074:1 and 7.0827:1, respectively.

and expenses are translated using the prevailing average exchange rates at 7.1074:1 and 6.9693:1 for the six months ended June 30, 2024

Revenues and expenses are translated using the prevailing average exchange rates at 7.0999:1 and 7.0341:1 for the nine months ended September

30, 2024 and 2023, respectively.

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Recent Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09,

Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

Under this ASU, public entities must annually (1) disclose specific

categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold

(if the effect of those reconciling items is equal to or greater than five percent of the amount computed by multiplying pretax income

or loss by the applicable statutory income tax rate).

This ASU’s amendments are effective for all entities that are subject to Topic

740, Income Taxes, for annual periods beginning after December 15, 2024, with early adoption permitted.

We are currently evaluating the

impact of this pronouncement on our disclosures.

In October 2021, the FASB issued ASU No.

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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