What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-09 compared with 2024-11-15 · 270 added, 417 removed, 272 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 September 30, 2024 and 2023 should be read in conjunction with the financial

and results of operations of the Company for the periods ended March 31, 2025 and 2024 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 September 30, 2024 and 2023

Revenue for the three months ended September 30,

Comparison of the Three months ended March 31, 2025 and 2024

Revenue for the three months ended March 31, 2025

was $10,897,266, an increase of $4,033,425, or 58.76%, from $6,863,841 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

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 CMP.

Revenue of Offset Printing Paper, Corrugating Medium Paper

1 unchanged sentence

Revenue from sales of offset

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:

printing paper, CMP and tissue paper products for the three months ended March 31, 2025 was $10,897,266, representing an increase of $4,070,466,

or 59.62%, from $6,826,800 for the first quarter of 2024.

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

months ended March 31, 2025 amounted to 31,607 tonnes, representing an increase of 12,937 tonnes, or 69.29%, compared to 18,670 tonnes

sold in the comparable period in the previous year.

Production of offset printing paper and tissue paper products were suspended from

2024 through first quarter of 2025 and is expected to resume in the second half of 2025.

The changes in revenue dollar amount and in quantity

sold for the three months ended March 31, 2025 and 2024 are summarized as follows:

Three Months Ended

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

Sales Revenue

Quantity (Tonne)

Light-Weight CMP

2 unchanged sentences

Total CMP, Offset Printing Paper and Tissue Paper Revenue

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

summarized below:

Monthly sales revenue for the 24 months ended March 31, 2025, are summarized

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

three months ended March 31, 2025 and 2024 are summarized as follows:

Offset Printing Paper ASP

Regular CMP ASP

Light-Weight CMP ASP

Tissue Paper Products ASP

Three Months ended March 31, 2025

Three Months ended March 31, 2024

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 September 30, 2024:

period ended March 31, 2025:

Corrugating Medium Paper

Revenue from CMP amounted

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

to $10,897,266 (100.00% of the total offset printing paper, CMP and tissue paper products revenues) for the three months ended March 31,

2025, representing an increase of $4,070,466, or 59.62%, from $6,826,800 for the comparable period in 2024.

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.

We sold 31,607 tonnes of

CMP in the three months ended March 31, 2025 as compared to 18,670 tonnes for the same period in 2024, representing a 69.29% increase

in quantity sold.

ASP for regular CMP decreased from $368/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.

ended March 31, 2024 to $347/tonne for the three months ended March 31, 2025, representing a 5.71% decrease.

ASP in RMB for regular CMP

for the first quarter of 2024 and 2025 was RMB2,611 and RMB2,487, respectively, representing a 4.74% 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.

CMP sold increased by 11,122 tonnes, from 15,640 tonnes in the first quarter of 2024 to 26,762 tonnes in the first quarter of 2025.

ASP for light-weight CMP decreased from $355/tonne

for the three months ended March 31, 2024 to $334/tonne for the three months ended March 31, 2025, representing a 5.92% decrease.

in RMB for light-weight CMP for the first quarter of 2024 and 2025 was RMB2,522 and RMB2,397, respectively, representing a 4.94% decrease.

The quantity of light-weight CMP sold increased by 1,815 tonnes, from 3,030 tonnes in the first quarter of 2024, to 4,845 tonnes in the

first quarter of 2025.

Our PM6 production line, which produces regular

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

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

The utilization rates for the first quarter of 2025 and 2024 were 30.44% and 15.11%,

respectively, representing an increase of 15.33%.

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

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

2023 to March 2025 are as follows:

Cost of Sales

Total cost of sales for CMP, offset printing paper

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

and tissue paper products for the quarter ended March 31, 2025 was $10,813,180, an increase of $4,348,716, or 67.27%, from $6,464,464

for the comparable period in 2024.

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.

of the unit material cost of Regular CMP.

Cost of sales for CMP was $10,813,180 for the

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

quarter ended March 31, 2025, as compared to $6,464,464 for the comparable period in 2024.

The increase in the cost of sales of $4,348,716

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

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 September 30, 2024 and 2023 are summarized below:

Average cost of sales per tonne for CMP decreased by 1.16%, from $346 in the first quarter of 2024 to $342 in the first quarter of 2025.

The decrease in average cost of sales was mainly attributable to the improvement on utilization rate of PM6 production line, which led

to the reduction in unit manufacturing costs, partially offset by the higher average unit purchase costs (net of applicable value added

tax) of recycled paper board.

Changes in cost of sales and cost per tonne by product for the quarters ended March 31, 2025 and 2024 are

summarized below:

Three Months Ended

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

Change in percentage

Cost of Sales

Cost per Tonne

Cost of Sales

Cost per Tonne

Cost of Sales

Cost per Tonne

Cost of Sales

Cost per Tone

Light-Weight CMP

3 unchanged sentences

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.

value added tax) of recycled paper board in the three months ended March 31, 2025 were RMB 1,321/tonne (approximately $184/tonne), as

compared to RMB 1,276/tonne (approximately $180/tonne) for the three months ended March 31, 2024.

These changes (in US dollars) represent

a year-over-year increase of 2.22% for the recycled paper board.

We use domestic recycled paper (sourced mainly from the Beijing-Tianjin

3 unchanged sentences

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:

The pricing trends of our major raw materials

for the 24-month period from April 2023 to March 2025 are shown below:

Electricity and gas are

our two main energy sources.

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

Electricity and gas accounted for approximately 5% and 16.8% of total sales in the first quarter of 2025,

respectively, compared to 4% and 12.4% of total sales in the third quarter of 2024.

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:

sales of our main paper products for the 24 months ended March 31, 2025 are summarized as follows:

Gross Profit (Loss)

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 the three months ended March

31, 2025 was $84,086 (representing 0.77% of the total revenue), representing a decrease of $315,027, or 78.93%, from the gross profit

of $399,113 (representing 5.81% of the total revenue) for the three months ended March 31, 2024, as a result of factors described above.

Offset Printing Paper, CMP and Tissue Paper

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.

tissue paper products for the three months ended March 31, 2025 was $84,086, representing a decrease of $278,250, or 76.79%, from the

gross profit of $362,336 for the three months ended March 31, 2024.

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

The overall gross profit margin for offset printing

paper, CMP and tissue paper products 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.

paper, CMP and tissue paper products decreased by 4.54 percentage points, from 5.31% for the three months ended March 31, 2024, to 0.77%

for the three months ended March 31, 2025.

Gross profit margin for regular CMP for the three

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.

months ended March 31, 2025 was 1.45%, or 4.23 percentage points lower, as compared to gross profit margin of 5.68% for the three months

ended March 31, 2024.

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

of sales in the first quarter of 2025.

Gross profit margin for light-weight CMP for the

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.

three months ended March 31, 2025 was -3.12%, or 6.44 percentage points lower, as compared to gross profit margin of 3.32% for the three

months ended March 31, 2024.

The decrease was mainly due to the decrease of ASP of light-weight CMP in the first quarter of 2025.

Monthly gross profit margins on the sales of our

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

CMP and offset printing paper for the 24-month period ended March 31, 2025 are as follows:

Selling, General and Administrative Expenses

Selling, general and administrative expenses for

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.

the three months ended March 31, 2025 were $3,461,321, a decrease of $439,462, or 11.27% from $3,900,783 for the three months ended March

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

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.

Operating loss for the quarter ended March 31,

2025 was $3,377,235, an increase of $124,435, or 3.55%, from $3,501,670 for the quarter ended March 31, 2024.

The increase was primarily

due to the decrease in 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 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.

Interest expense for the three months ended March

31, 2025 decreased by $77,443, from $210,290 in the three months ended March 31, 2024, to $132,847.

The Company had short-term and long-term

interest-bearing loans that aggregated $9,722,494 as of March 31, 2025, as compared to $12,204,370 as of March 31, 2024.

Gain on derivative liability

5 unchanged sentences

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.

the three months ended March 31, 2025 and 2024 was a gain of $4,553 and $34, respectively.

As a result and the factors discussed above, net

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.

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 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

$ (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

$ (7,399,292 )

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

30, 2024 and 2023 are summarized as follows:

Nine Months Ended September 30, 2024

Nine Months Ended September 30, 2023

Decrease from comparable period in the previous year

Decrease by percentage

Revenue of Face Masks

Revenue generated from selling face masks were

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

Cost of Sales

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 )

Light-Weight CMP

$ (2,329,106 )

$ (5,979,794 )

Offset Printing Paper

$ (3,143,496 )

Tissue Paper Products

$ (2,981,708 )

CMP, Offset Printing Paper and Tissue Paper Revenue

$ (12,104,998 )

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 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 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 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 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 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.

loss was $3,503,785 for the quarter ended March 31, 2025, representing an increase of $242,751, or 6.48%, from $3,746,536 for the quarter

ended March 31, 2024.

Liquidity and Capital Resources

As of March 31, 2025, we had current assets of

$29,499,038 (including a VAT（“Value Added Tax”） recoverable of Tengsheng Paper in amount of $13,173,067), and

current liabilities of $20,933,963, resulting in a working capital of $8,565,075.

However, production of Baoding Shende has been suspended

in 2024 and the first quarter of 2025, rendering related VAT unrecoverable in the short term.

Net working capital excluding VAT recoverable

as of March 31, 2025 was a working capital deficit of $4,607,992.

Baoding Shengde and Tengsheng Paper have incurred loss that there is

doubt about these subsidiaries ability to continue as going concerns.

The main reason of losses was due to high depreciation costs, decreased

market demand, and elevated material costs.

Our future sustainability is dependent on our capacity to generate cash from our operational

endeavors and secure additional capital to fund our ongoing activities.

Should we fail to secure necessary funding, we may be unable to

realize our assets and discharge our liabilities in the normal course of business.

To address these challenges, we plan to optimize

raw material structure and stabilize manufacturing capacity utilization, which will help to reduce procurement costs.

Additionally, we

are actively exploring new products and adjusting pricing strategies in a timely manner to secure a larger market share.

Furthermore, we will maintain rigorous control

over inventory, working capital, and cash flow to mitigate financial risks.

We will also strategically utilize financing quotas from the

capital market to ensure the smooth and healthy operation of the company.

Our continued existence as a going concern depends

on the successful implementation of our business plan.

This includes increasing market acceptance of our products to boost sales volume

and achieve economies of scale, while deploying more effective marketing strategies and cost control measures to better manage the operating

cash flow position.

Accounts Receivable

Net accounts receivable increased by $1,840,053,

or 200.14%, to $1,727,370 as of September 30, 2024, as compared with $575,526 as of December 31, 2023.

or 639.85%, to $2,127,629 as of March 31, 2025, as compared with $287,576 as of December 31, 2024.

We usually collect accounts receivable

within 30 days of delivery and completion of sales.

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

Inventories consist of raw materials (accounting

for 73.4% of total value of inventory as of March 31, 2025), semi-finished goods and finished goods.

As of March 31, 2025, the recorded

value of inventory increased by 97.4% to $4,642,056 from $2,351,876 as of December 31, 2024.

As of March 31, 2025, the inventory of recycled

paper board, which is the main raw material for the production of CMP, was $3,244,750, approximately $1,891,207, or 139.72%, higher than

the balance as of December 31, 2024.

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.

In March 2025, we increased our procurement volume of recycled paper board in anticipation of rising

purchase price and to prepare for the expanded production output as planned for the upcoming quarter.

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

September 30,

Raw Materials

20 unchanged sentences

rental payments as provided for in the original lease agreement.

Capital Expenditure Commitment as of September 30, 2024

Capital Expenditure Commitment

On May 5, 2020, the Company announced it planned

2 unchanged sentences

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

As of September 30, 2024, we had approximately

As of March 31, 2025, we had approximately $3.4

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.

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

as of March 31, 2025 was $5,070,360, a decrease of $1,880,216, from $6,950,576 as of December 31, 2024.

The decrease of cash and cash

equivalents for the three months ended March 31, 2025 was attributable to a number of factors including:

Net cash provided by operating activities

Net cash provided by operating activities was

$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 operating activities was $2,474,978

for the three months ended March 31, 2025.

The balance represented a decrease of cash of $3,099,398, or 496.36%, from $624,420 provided

for the three months ended March 31, 2024.

Net loss for the three months ended March 31, 2025 was $3,503,785, representing an increase

of $242,751, or 6.48%, from a net loss of $3,746,536 for the three months ended March 31, 2024.

Changes in various asset and liability

account balances throughout the three months ended March 31, 2025 also contributed to the net change in cash from operating activities

in three months ended March 31, 2025.

Chief among such changes is the increase of accounts receivable in the amount of $1,878,313 during

the three months of 2025.

There was also an increase of $2,256,756 in the ending inventory balance as of March 31, 2025 (a decrease to

net cash for the three months ended March 31, 2025 cash flow purposes).

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

and amortization in the amount of $3,547,398.

The Company also had a net decrease of $1,262,163 in prepayment and other current assets

(an increase to net cash) and a net increase of $433,825 in other payables and accrued liabilities and related parties (an increase to

net cash), as well as a decrease in income tax payable of $81,069 (a decrease to net cash) during the three months ended March 31, 2025.

Net cash used in investing activities

We incurred $8,364 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.

for purchases of property, plant and equipment during the three months ended March 31, 2025, as compared to $9,027 for the same period

Net cash provided by financing activities

Net cash used in financing activities was $585,456

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

for the three months ended March 31, 2025, as compared to net cash provided by financing activities in the amount of $422,488 for the

three months ended March 31, 2024.

The net cash outflow for the three months ended March 31, 2025 was from the proceeds of bank loans.

Short-term bank loans

September 30,

Bank of Cangzhou 1

Bank of Cangzhou 2

Rural Credit Union of Xushui District Loan 1

Rural Credit Union of Xushui District Loan 2

Bank of Cangzhou Loan 1

Bank of Cangzhou Loan 2

Bank of Cangzhou Loan 3

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

Total short-term bank loans

On December 24, 2024, the Company entered into a loan agreement with

the Rural Credit Union of Xushui District, with a balance of $1,811,039 and $1,808,469 as of March 31, 2025 and December 31, 2024, respectively.

The loan is secured by the equipment of Baoding Shengde as collateral for the benefit of the bank.

The loan bears a fixed rate of 6% and

will be due by December 23, 2025.

On December 24, 2024, the Company entered into a loan agreement with

the Rural Credit Union of Xushui District, with a balance of $2,228,971 and $2,225,808 as of March 31, 2025 and December 31, 2024, respectively.

The loan is secured by the equipment of Baoding Shengde as collateral for the benefit of the bank and guaranteed by a third party company.

The loan bears a fixed rate of 6% and will be due by December 23, 2025.

On December 28, 2024, the Company entered into

a working capital loan agreement with the Bank of Cangzhou, to borrow $306,484 at a fixed interest rate of 5.5% per annum.

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.

guaranteed by Mr.

Zhenyong Liu.

The loan will be due by December 27, 2025.

On December 28, 2024, the Company entered into

a working capital loan agreement with the Bank of Cangzhou, to borrow $69,655 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 $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.

The loan was repaid in June 2024.

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

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

The loan was repaid in June 2024.

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

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

The loan was repaid in June 2024.

secured by certain of the Company’s manufacturing equipment and guaranteed by Mr.

Zhenyong Liu.

The loan will be due by December

On March 10, 2025, the Company entered into a

working capital loan agreement with the Bank of Cangzhou, to borrow $208,966 at a fixed interest rate of 5.5% per annum.

The loan is secured

by certain of the Company’s manufacturing equipment and guaranteed by Mr.

Zhenyong Liu.

The loan will be due by March 9, 2026.

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

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.

capital loan agreement with the ICBC, with a balance of $2,786 and $2,782 as of March 31, 2025 and December 31, 2024, respectively.

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

The loan is due for repayment by June 11, 2025.

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

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.

capital loan agreement with the ICBC, with a balance of $139,311 and $139,113 as of March 31, 2025 and December 31, 2024, respectively.

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

The loan is due for repayment by June 21, 2025.

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

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.

capital loan agreement with the ICBC, with a balance of $139,311 and $139,113 as of March 31, 2025 and December 31, 2024, respectively.

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

The loan is due for repayment by June 22, 2025.

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

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 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.

capital loan agreement with the ICBC, with a balance of $136,524 and $136,331 as of as of March 31, 2025 and December 31, 2024, respectively.

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

The loan is due for repayment by June 24, 2025.

As of March 31, 2025, there were guaranteed short-term

borrowings of $2,814,076 and unsecured bank loans of $417,932.

As of December 31, 2024, there were guaranteed short-term borrowings of

$2,225,808 and unsecured bank loans of $417,339.

The average short-term borrowing rates for the

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%.

three months ended March 31, 2025 and 2024 were approximately 5.74% and 4.48%.

Long-term loans

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

long-term loans were $8,931,986 and $11,378,429, respectively.

As of March 31, 2025 and December 31, 2024, long-term

loans were $4,679,447 and $4,672,806, respectively.

On July 15, 2013, the Company entered into a loan

6 unchanged sentences

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.

as of March 31, 2025 and December 31, 2024.

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

As of March 31, 2025 and December 31, 2024, the total outstanding loan balance

was $3,481,375 and $3,476,434.

1 unchanged sentence

is presented as current liabilities in the consolidated balance sheet and the remaining balance of $835,865 and $834,678 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

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, December 24, 2021 and April 16, 2024 and extended for

additional 5 years in total, which is due on April 15, 2026 according to the new schedule.

The loan is secured by Tengsheng Paper with

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

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

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

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 September 30, 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 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 September 30, 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.

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.

as non-current liabilities in the consolidated balance sheet as of March 31, 2025 and December 31, 2024, respectively.

On December 5, 2023, the Company entered into

1 unchanged sentence

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

The loan is guaranteed by an independent third party.

Interest payment is due monthly and bears a rate of

7% per annum.

As of March 31, 2025 and December 31, 2024, total outstanding loan balance was $1,198,072 and $1,196,372, respectively.

Out of the total outstanding loan balance, current portion amounted $919,451 and $918,146, which is presented as current liabilities and

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

the remaining balance of $278,621 and $278,226 is presented as non-current liabilities in the consolidated balance sheet as of March 31,

2025 and December 31, 2024, 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.

loans and long-term loans for the three months ended March 31, 2025 and 2024 were $132,847 and $209,586, respectively.

Shareholder Loans

Zhenyong Liu, the Company’s CEO has

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

Zhenyong Liu 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 $365,804 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, 2024 and December 31, 2023, respectively.

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 $357,100 and

$356,594 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 March 31, 2025 and December 31, 2024, respectively.

On December 10, 2014, Mr.

8 unchanged sentences

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

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.

As of March 31,

2025 and December 31, 2024, approximately $41,793 and $41,734 of interest 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

15 unchanged sentences

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

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

As of March 31, 2025 and December 31, 2024, the outstanding interest

was $191,465 and $191,193, respectively, which was recorded in other payables and accrued liabilities as part of the current liabilities

in the consolidated balance sheet.

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

total amount of loans due to Mr.

As of March 31, 2025 and December 31, 2024, 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, 2024 and 2023.

The accrued interest owing to Mr.

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.

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

months ended March 31, 2025 and 2024.

The net interest owed to Mr.

Zhenyong Liu was approximately $305,033 and $304,600, as of March 31,

2025 and December 31, 2024, respectively, which was recorded in other payables and accrued liabilities.

In October 2022 and November 2022, the Company

5 unchanged sentences

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

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.

Interest income of the loan for the three months ended

March 31, 2025 and 2024 were $nil.

As of March 31, 2025 and December 31, 2024, amount

due to shareholder was $10,000 and $nil, respectively, which represents funds from shareholders to pay for various expenses incurred in

The 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 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.

For the three months ended March 31, 2025 and 2024, 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 September 30, 2024 and December 31, 2023 to translate the Chinese RMB to the U.S.

as of March 31, 2025 and December 31, 2024 to translate the Chinese RMB to the U.S.

Dollars are 7.1782:1 and 7.1884:1, respectively.

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

and expenses are translated using the prevailing average exchange rates at 7.1739:1 and 7.1008:1 for the three months ended March 31,

2025 and 2024, respectively.

22 unchanged sentences

impact of this pronouncement on our disclosures.

In October 2021, the FASB issued ASU No.

Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (ASU 2021-08),

which clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination

in accordance with Topic 606, Revenue from Contracts with Customers.

The new amendments are effective for fiscal years beginning after

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

The amendments should be applied prospectively to business combinations

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

The Company does not expect the adoption of

this standard to have a material impact on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03,

Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures, which emphasizes the importance of providing more

granular and detailed expense information in financial statements.

The update requires entities to disaggregate expenses by nature and

function on the income statement, offering a clearer picture of an entity’s cost structure and operational efficiency.

This enhanced

disclosure is intended to improve the transparency and comparability of financial reporting.

Entities must apply the new guidance retrospectively

to all periods presented in the financial statements.

The amendments are effective for annual reporting periods beginning after December

15, 2026, and interim reporting periods beginning after December 15, 2027.

Early adoption is permitted.

The Company is in the process

of assessing the impact of these changes on its financial reporting and will implement the necessary adjustments to comply with the updated

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