What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-14 compared with 2025-05-09 · 387 added, 261 removed, 281 unchanged (70% of the section changed)

2 unchanged sentences

The following discussion of the financial condition

and results of operations of the Company for the periods ended March 31, 2025 and 2024 should be read in conjunction with the financial

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

Comparison of the Three Months Ended June 30, 2025 and 2024

Revenue for the three months ended June 30, 2025

was $24,794,641, a decrease of $1,455,147, or 5.54%, from $26,249,788 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 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 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:

decreases in the sales volume of corrugating medium paper (“CMP”) and in the average selling prices (“ASP”) of

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 three months ended June 30, 2025 was $24,794,641, representing

a decrease of $1,418,174, or 5.41%, from $26,212,815 for the second quarter of 2024.

The total volume of offset printing paper, CMP and

tissue paper products sold during this period amounted to 74,188 tonnes, representing a decrease of 1,177 tonnes, or 1.56%, compared to

the 75,365 tonnes sold during the comparable period in the previous year.

Production of offset printing paper and tissue paper products

was suspended from 2024 through the first half 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 June 30, 2025 and 2024 are summarized as follows:

Three Months Ended

June 30, 2025

Three Months Ended

March 31, 2025

March 31, 2024

June 30, 2024

Percentage Change

Sales Revenue

Quantity (Tonne)

$ (1,331,192 )

Light-Weight CMP

$ (1,418,174 )

Offset Printing Paper

1 unchanged sentence

Total CMP, Offset Printing Paper and Tissue Paper Revenue

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 March 31, 2025 and 2024 are summarized as follows:

$ (1,418,174 )

Monthly sales revenue for the 24 months ended June 30, 2025, is summarized

The average selling prices (ASPs) for our main products in the three

months ended June 30, 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

Three Months ended June 30, 2025

Three Months ended June 30, 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 March 31, 2025:

period ended June 30, 2025:

Corrugating Medium Paper

Revenue from CMP amounted

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.

to $24,794,641 (100.00% of the total offset printing paper, CMP and tissue paper product revenues) for the three months ended June 30,

2025, representing a decrease of $1,418,174, or 5.41%, from $26,212,815 for the comparable period in 2024.

We sold 74,188 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 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 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.

CMP in the three months ended June 30, 2025, compared to 75,365 tonnes for the same period in 2024, representing a 1.56% decrease in quantity

The ASP for regular CMP decreased from $350/tonne

for the three months ended June 30, 2024 to $336/tonne for the three months ended June 30, 2025, representing a 4.00% decrease.

RMB for regular CMP for the second quarter of 2024 and 2025 was RMB2,488 and RMB2,409, respectively, representing a 3.18% decrease.

quantity of regular CMP sold decreased by 1,259 tonnes, from 62,813 tonnes in the second quarter of 2024 to 61,554 tonnes in the second

quarter of 2025.

The ASP for light-weight CMP decreased from $337/tonne

for the three months ended June 30, 2024 to $328/tonne for the three months ended June 30, 2025, representing a 2.67% decrease.

RMB for light-weight CMP for the second quarter of 2024 and 2025 was RMB2,395 and RMB2,354, respectively, representing a 1.73% decrease.

The quantity of light-weight CMP sold increased by 82 tonnes, from 12,552 tonnes in the second quarter of 2024, to 12,634 tonnes in the

second 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 first quarter of 2025 and 2024 were 30.44% and 15.11%,

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

The utilization rates for the second quarter of 2025 and 2024 were 68.82% and

68.02%, respectively, representing an increase of 0.80%.

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 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 Regular CMP.

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

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 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:

and tissue paper products for the quarter ended June 30, 2025 was $23,520,896, an increase of $536,408, or 2.33%, from $22,984,488 for

the comparable period in 2024.

This was mainly due to the increase in unit material cost of CMP, partially offset by the decrease in the

sales quantity of regular CMP.

The cost of sales for CMP was $23,520,896 for

the quarter ended June 30, 2025, as compared to $22,984,488 for the comparable period in 2024.

The increase of $536,408 was mainly due

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

cost of sales per tonne for CMP increased by 3.93%, from $305 in the second quarter of 2024 to $317 in the second quarter of 2025.

increase was mainly attributable to higher average unit purchase costs (net of applicable value-added tax) of recycled paper board in

the second quarter of 2025 compared to the second quarter of 2024.

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

ended June 30, 2025 and 2024 is summarized below:

Three Months Ended

March 31, 2025

March 31, 2024

June 30, 2025

June 30, 2024

Change in percentage

11 unchanged sentences

Total CMP, Offset Printing Paper and Tissue Paper

Our average unit purchase costs (net of applicable

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

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.

Our average unit purchase cost (net of

applicable value-added tax) of recycled paper board in the three months ended June 30, 2025 was RMB 1,250/tonne (approximately

$174/tonne), compared to RMB 1,167/tonne (approximately $164/tonne) for the three months ended June 30, 2024.

These changes (in US

dollars) represent a year-over-year increase of 6.10% for 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, whose pricing tends to be

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

correlation to that of imported recycled paper.

The pricing trends of our major raw materials

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

for the 24-month period from July 2023 to June 2025 are shown below:

Electricity and gas are

our two main energy sources.

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 March 31, 2025 are summarized as follows:

Gross Profit (Loss)

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.

Electricity and gas accounted for approximately 5% and 15.1% of total sales in the second quarter of 2025,

respectively, compared to 5% and 12.9% of total sales in the second quarter of 2024.

The monthly energy cost as a percentage of total

monthly sales of our main paper products for the 24 months ended June 30, 2025 is summarized as follows:

Gross profit for the three months ended June 30,

2025 was $1,273,745 (representing 5.14% of total revenue), representing a decrease of $1,991,555, or 60.99%, from the gross profit of

$3,265,300 (representing 12.44% of total revenue) for the three months ended June 30, 2024, as a result of the 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 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.

tissue paper products for the three months ended June 30, 2025 was $1,273,745, representing a decrease of $1,954,582, or 60.54%, from

the gross profit of $3,228,327 for the three months ended June 30, 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 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 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 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.

paper, CMP and tissue paper products decreased by 7.18 percentage points, from 12.32% for the three months ended June 30, 2024, to 5.14%

for the three months ended June 30, 2025.

The gross profit margin for regular CMP for the

three months ended June 30, 2025 was 5.11%, or 7.11 percentage points lower, compared to gross profit margin of 12.22% for the three months

ended June 30, 2024.

This decrease was mainly due to decreased ASP of regular CMP and increased unit cost of sales in the second quarter

The gross profit margin for light-weight CMP for

the three months ended June 30, 2025 was 5.29%, or 7.53 percentage points lower, compared to the gross profit margin of 12.82% for the

three months ended June 30, 2024.

Such decrease was mainly due to the decrease in ASP of light-weight CMP and the increase in unit cost

of sales in the second quarter of 2025.

Monthly gross profit margins on the sales of our

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

CMP and offset printing paper for the 24-month period ended June 30, 2025 are as follows:

Selling, General and Administrative Expenses

Selling, general and administrative expenses for

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.

the three months ended June 30, 2025 were $3,036,775, an increase of $319,227, or 11.75% from $2,717,548 for the three months ended June

The increase was mainly due to increased depreciation of idle fixed assets.

(Loss) Income from Operations

Operating loss for the quarter ended June 30,

2025 was $1,763,030, a decrease of $2,310,782, or 421.87%, from income from operations of $547,752 for the quarter ended June 30, 2024.

The decrease was primarily due to the decline in gross profit and the increase in selling, general and administrative expenses.

Other Income and Expenses

Interest expense for the three months ended June

30, 2025 decreased by $67,580, from $211,551 for the three months ended June 30, 2024, to $143,971.

The Company had short-term and long-term

interest-bearing loans that aggregated $9,749,113 as of June 30, 2025, as compared to $12,149,914 as of June 30, 2024.

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 that we assess the fair market value of the derivative liability at the end of each reporting

period and recognize any change in fair market value as other income or expense item.

The change in fair value of derivative liability

for the three months ended June 30, 2025 and 2024 was a gain of $795 and $15, respectively.

As a result of the above factors, net loss was

$1,951,826 for the quarter ended June 30, 2025, representing a decrease of $1,874,079, or 2410.48%, from $77,747 for the quarter ended

June 30, 2024.

Comparison of the Six Months Ended June 30,

2025 and 2024

Revenue for the six months ended June 30, 2025

was $35,691,907, representing an increase of $2,578,278, or 7.79%, from $33,113,629 for the same period in the previous year.

mainly due to the increase in sales volume of CMP, partially offset by decreased ASPs of CMP products.

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, 2025 was $35,691,907, an increase of $2,652,292, or 8.03%, from $33,039,615

for the six months ended June 30, 2024.

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

The total quantities of offset printing paper, CMP and tissue paper products sold during the six months ended June 30, 2025

amounted to 105,795 tonnes, an increase of 11,761 tonnes, or 12.51%, compared to 94,034 tonnes sold during the six months ended June 30,

Production of offset printing paper and tissue paper products was suspended from 2024 through the first half of 2025 and is expected

to resume in the second half of 2025.

The changes in revenue and quantity sold for the six months ended June 30, 2025 and 2024 is summarized

Six Months Ended

June 30, 2025

June 30, 2024

Sales Revenue

Quantity (Tonne)

Light-Weight CMP

Offset Printing Paper

Tissue Paper Products

Total CMP, Offset Printing Paper and Tissue Paper Revenue

ASPs for our main products in the six-month period

ended June 30, 2025 and 2024 is summarized as follows:

Six Months Ended June 30, 2025

Six Months Ended June 30, 2024

Decrease from comparable period in the previous year

Decrease by percentage

Cost of Sales

Total cost of sales for CMP, offset printing paper

and tissue paper products in the six months ended June 30, 2025 was $34,334,076, an increase of $4,885,123, or 16.59%, from $29,448,953

for the six months ended June 30, 2024.

This was mainly due to the increase in sales volume and the increase in unit material costs of

The cost of sales for CMP was $34,334,076 for

the six months ended June 30, 2025, compared to $29,448,953 in the same period of 2024.

The increase of $4,885,123 for CMP was mainly

due to the increase in quantities of CMP sold and in the average cost of sales in the first six months of 2025.

The average cost of sales

per tonne for CMP increased by 3.83%, from $313 for the six months ended June 30, 2024, to $325 in the same period of 2025.

cost of sales and cost per tonne by product for the six months ended June 30, 2025 and 2024 are summarized below:

Six Months Ended

June 30, 2025

June 30, 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

Offset Printing Paper

Tissue Paper Products

Total CMP, Offset Printing Paper and Tissue Paper Revenue

Gross profit for the six months ended June 30,

2025 was $1,357,831 (representing 3.80% of total revenue), representing a decrease of $2,306,582, or 62.95%, from $3,664,413 (representing

11.07% of total revenue) for the six months ended June 30, 2024.

The decrease was mainly due to the decline in ASPs of CMP and increased

unit cost of materials, partially offset by the increase in sales volume 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, 2025 was $1,357,831, a decrease of $2,232,831, or 62.18%, from the gross profit

of $3,590,662 for the six months ended June 30, 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 decreased by 7.07 percentage points, from 10.87% for the six months ended June 30, 2024, to 3.80%

for the six months ended June 30, 2025.

The gross profit margin for regular CMP for the

six months ended June 30, 2025 was 3.97%, or 6.89 percentage points lower, as compared to the gross profit margin of 10.86% for the six

months ended June 30, 2024.

This decrease was primarily due to the decrease in ASP and the increase in material costs of regular CMP.

The gross profit margin for light-weight CMP for

the six months ended June 30, 2025 was 2.93%, or 7.97 percentage points lower, compared to the gross profit margin of 10.90% for the six

months ended June 30, 2024.

This decrease was primarily due to the decrease in ASP and the increase in material costs of light-weight

Selling, General and Administrative Expenses

Selling, general and administrative expenses for

the six months ended June 30, 2025 were $6,498,096, a decrease of $120,235, or 1.82% from $6,618,331 for the six months ended June 30,

The decrease was mainly due to lower manpower costs and reduced depreciation of idle fixed assets during the production suspension.

Loss from Operations

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.

Operating loss for the six months ended June 30,

2025 was $5,140,265, a decrease of $2,186,347, or 74.02%, from $2,953,918 for the six months ended June 30, 2024.

The decrease was primarily

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

Other Income and Expenses

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.

Interest expense for the six months ended June

30, 2025 decreased by $145,023, from $421,841 for the six months ended June 30, 2024, to $276,818.

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.

interest-bearing loans that aggregated $9,749,113 as of June 30, 2025, as compared to $12,149,914 as of June 30, 2024.

Gain on Derivative Liability

2 unchanged sentences

be classified as a liability.

ASC 815 requires we assess the fair market value of derivative liability at the end of each reporting period

and recognize any change in the fair market value as other income or expense item.

The change in fair value of derivative liability for

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

As a result and the factors discussed above, net

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.

ASC 815 requires that 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, 2025 and 2024 was a gain of $5,348 and $49, respectively.

As a result of the above, net loss was $5,455,611

for the six months ended June 30, 2025, representing a decrease of $1,631,328, or 42.66%, from $3,824,283 for the six months ended June

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.

As of June 30, 2025, we had current assets of

$32,644,518 (including a VAT（“Value-Added Tax”） recoverable of Tengsheng Paper in the amount of $13,209,135),

and current liabilities of $21,341,552, resulting in a working capital of $11,302,966.

However, the production of Baoding Shende was suspended

in 2024 and the first half of 2025, rendering the 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.

as of June 30, 2025 was a working capital deficit of $1,906,169.

Baoding Shengde and Tengsheng Paper have incurred losses, raising doubt

about these subsidiaries’ ability to continue as going concerns.

The main reasons for these losses were high depreciation costs,

decreased market demand, and elevated material costs.

Our future sustainability depends on our ability to generate cash from our operational

endeavors and secure additional capital to fund 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.

our raw material structure and stabilize manufacturing capacity utilization, which will help to reduce procurement and production 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

1 unchanged sentence

We will also strategically utilize financing quotas from the

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

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

Our continued existence as a going concern depends

5 unchanged sentences

Net accounts receivable increased by $1,553,431,

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

or 540.18%, to $1,841,007 as of June 30, 2025, compared with $287,576 as of December 31, 2024.

We usually collect accounts receivable

1 unchanged sentence

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

for 74.7% of the total inventory value as of June 30, 2025), semi-finished goods and finished goods.

As of June 30, 2025, the recorded

value of inventory increased by 116.6% to $5,094,810 from $2,351,876 as of December 31, 2024.

As of March 31, 2025, the inventory of recycled

As of June 30, 2025, the inventory of recycled

paper board, which is the main raw material for the production of CMP, was $3,688,955, approximately $2,335,412, or 172.54%, higher than

the balance as of December 31, 2024.

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.

In May and June 2025, we increased our procurement volume of recycled paper board in anticipation

of rising purchase prices and to prepare for expanded production output as planned for the upcoming quarter.

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

13 unchanged sentences

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

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

dormitory buildings located within the Headquarters Compound (the “Dormitories”) to Hebei Fangsheng for cash prices of approximately

essentially all industrial-use buildings in the Headquarters Compound (the “Industrial Buildings”), and three employee dormitory

buildings located within the Headquarters Compound (the “Dormitories”) to Hebei Fangsheng for cash prices of approximately

$2.77 million, $1.15 million, and $4.31 million respectively.

In connection with the sale of the Industrial Buildings, Hebei Fangsheng

agreed to lease the Industrial Buildings back to the Company for its original use for a term of up to three years, with an annual rental

payment of approximately $139,394 (RMB1,000,000).

The lease agreement was renewed in August 2022 with a term of six years with the same

rental payments as provided for in the original lease agreement.

In connection with the sale, Hebei Fangsheng agreed to lease the Industrial

Buildings back to the Company for their original use for a term of up to three years, with an annual rental payment of approximately $139,318

(RMB1,000,000).

The lease agreement was renewed in August 2022 with a six-year term with the same rental payments as provided for in the

original lease agreement.

Capital Expenditure Commitment

On May 5, 2020, the Company announced it planned

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

machine supplier.

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

As of March 31, 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.

On May 5, 2020, the Company announced the planned

commercial launch of a new tissue paper production line PM10 and signed an agreement to purchase a paper machine from a supplier.

new tissue paper production line is expected to be launched after the completion of trial runs.

As of June 30, 2025, we had approximately $3.5

million in capital expenditure commitments mainly related to the purchase of the PM 10 paper machine.

The infrastructure work for PM10

is complete, while work on 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 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:

as of June 30, 2025 totaled $7,509,355, an increase of $558,779 from $6,950,576 as of December 31, 2024.

The increase in cash and cash

equivalents for the six months ended June 30, 2025 was attributable to several factors including:

Net cash provided by operating activities

Net cash used in operating activities was $1,111,313

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.

for the six months ended June 30, 2025.

The balance represented a decrease in cash of $2,457,650, or 182.54%, compared to net cash provided

by operating activities of $1,346,337 for the six months ended June 30, 2024.

Net loss for the six months ended June 30, 2025 was $5,455,611,

representing a decrease of $1,631,328, or 42.66%, from $3,824,283 for the six months ended June 30, 2024.

Changes in various asset and

liability account balances during the six months ended June 30, 2025 also contributed to the net change in cash from operating activities

in six months ended June 30, 2025.

Chief among such changes were an increase in accounts receivable of $1,579,675 during the six months

of 2025, an increase of $2,694,397 in the ending inventory balance as of June 30, 2025 (a decrease to net cash for the six months ended

June 30, 2025 cash flow purposes), non-cash expenses for depreciation and amortization of $7,090,582, a decrease of $860,449 in prepayment

and other current assets (an increase to net cash) and a net increase of $816,287 in other payables and accrued liabilities and related

parties (an increase to net cash), and a decrease in income tax payable of $81,025 (a decrease to net cash) during the six months ended

June 30, 2025.

Net cash used in investing activities

We incurred $8,364 in net cash expenditures

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

We incurred $29,896 in net cash expenditures for

purchases of property, plant and equipment during the six months ended June 30, 2025, as compared to $62,640 for the same period in 2024.

Net cash provided by financing activities

Net cash used in financing activities was $585,456

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.

Net cash provided by financing activities was

$1,648,262 for the six months ended June 30, 2025, compared to $422,096 for the same period in 2024.

The cash inflow was mainly attributable

to proceeds from the issuance of common stock in May 2025 and from short term bank loans.

Short-term Bank Loans

6 unchanged sentences

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.

On December 24, 2024, the Company entered into

a loan agreement with the Rural Credit Union of Xushui District, with a balance of $1,815,998 and $1,808,469 as of June 30, 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 24, 2024, the Company entered into

a loan agreement with the Rural Credit Union of Xushui District, with a balance of $2,235,074 and $2,225,808 as of June 30, 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.

2 unchanged sentences

guaranteed by Mr.

Zhenyong Liu.

Liu Zhenyong.

The loan will be due by December 27, 2025.

1 unchanged sentence

a working capital loan agreement with the Bank of Cangzhou, to borrow $69,846 at a fixed interest rate of 5.5% per annum.

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

Zhenyong Liu.

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

Liu Zhenyong.

The loan will be due by December 27, 2025.

2 unchanged sentences

The loan is secured

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

Zhenyong Liu.

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

Liu Zhenyong.

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 $2,786 and $2,782 as of March 31, 2025 and December 31, 2024, respectively.

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

capital loan agreement with the ICBC, with a balance of $nil and $2,782 as of June 30, 2025 and December 31, 2024, respectively.

bore a fixed interest rate of 3.45% per annum.

The loan was repaid on June 10, 2025.

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

capital loan agreement with the ICBC, with a balance of $ nil and $139,113 as of June 30, 2025 and December 31, 2024, respectively.

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

The loan was repaid on June 3, 2025.

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

capital loan agreement with the ICBC, with a balance of $ nil and $139,113 as of June 30, 2025 and December 31, 2024, respectively.

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

The loan was repaid on June 10, 2025.

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

capital loan agreement with the ICBC, with a balance of $ nil and $136,331 as of as of June 30, 2025 and December 31, 2024, respectively.

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

The loan was repaid on June 9, 2025.

On June 10, 2025, the Company entered into a working

capital loan agreement with the ICBC, with a balance of $2,794 as of June 30, 2025.

The loan bears a fixed interest rate of 3.00% per

The loan is due for repayment by June 10, 2026.

On June 3, 2025, the Company entered into a working

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.

capital loan agreement with the ICBC, with a balance of $139,692 as of June 30, 2025.

The loan bears a fixed interest rate of 3.00% per

The loan is due for repayment by June 3, 2026.

On June 10, 2025, the Company entered into a working

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.

capital loan agreement with the ICBC, with a balance of $139,692 as of June 30, 2025.

The loan bears a fixed interest rate of 3.00% per

The loan is due for repayment by June 10, 2026.

On June 9, 2025, the Company entered into a working

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.

capital loan agreement with the ICBC, with a balance of $136,898 as of June 30, 2025.

The loan bears a fixed interest rate of 3.00% per

The loan is due for repayment by June 9, 2026.

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.

As of June 30, 2025, guaranteed short-term borrowings

totaled $2,821,781, and unsecured bank loans were $419,076.

As of December 31, 2024, these figures were $2,225,808 and $417,339, respectively.

The average short-term borrowing rates for the

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

three months ended June 30, 2025 and 2024 were approximately 5.72% and 4.45%, respectively.

For the six months ended June 30, 2025 and

2024, the rates were approximately 5.73% and 4.46%, respectively.

Long-term Loans

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

As of June 30, 2025 and December 31, 2024, long-term

loans were $4,692,258 and $4,672,806, respectively.

2 unchanged sentences

from December 21, 2013 to July 26, 2018.

On June 21, 2018, the loan was extended for additional 5 years and was due and payable in various

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

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

payable on August 24, 2026.

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

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

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

On June 21, 2018, the loan was extended for an additional five years to mature in various installments

from December 21, 2018 to June 20, 2023.

On August 24, 2023, the loan was extended for another three years, now due and payable on August

The loan is secured by certain of the Company’s manufacturing equipment with a net book value of $nil as of June 30, 2025

and December 31, 2024.

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

Effective from November 15, 2022,

the interest rate was reduced to 7% per annum.

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

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

Out of the total outstanding loan balance, current portion amounted was $2,645,510 and $2,641,756, which

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 March 31, 2025 and December 31, 2024, respectively.

Effective from December 3, 2024, the interest rate was further reduced to 6% per annum.

As of June 30, 2025 and December 31, 2024, the total outstanding loan balance was $3,490,906 and $3,476,434.

Out of the total outstanding

loan balance, current portion amounted was $2,652,753 and $2,641,756, which is presented as current liabilities in the consolidated balance

sheet and the remaining balance of $838,153 and $834,678 is presented as non-current liabilities in the consolidated balance sheet as

of June 30, 2025 and December 31, 2024, respectively.

On December 5, 2023, the Company entered into

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

a loan agreement with the Rural Credit Union of Xushui District for a term of three years, due in various installments from June 21, 2024

to December 5, 2026.

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 $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 March 31, 2025 and 2024 were $132,847 and $209,586, respectively.

Interest payment is due monthly and bears a rate of 7% per

Effective from December 3, 2024, the interest rate was reduced to 6% per annum.

As of June 30, 2025 and December 31, 2024, total

outstanding loan balance was $1,201,352 and $1,196,372, respectively.

Out of the total outstanding loan balance, current portion amounted

$921,968 and $918,146, which is presented as current liabilities and the remaining balance of $279,384 and $278,226 is presented as non-current

liabilities in the consolidated balance sheet as of June 30, 2025 and December 31, 2024, respectively.

Total interest expense for short-term and long-term

loans for the three months ended June 30, 2025 and 2024 was $143,971 and $211,551, respectively.

For the six months ended June 30, 2025

and 2024, it was $276,818 and $421,841, respectively.

Shareholder Loans

Zhenyong Liu has loaned money to Dongfang

Liu Zhenyong had 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

Liu Zhenyong renewed the three-year

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

3 unchanged sentences

$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.

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

current liabilities in the consolidated balance sheet as of June 30, 2025 and December 31, 2024, respectively.

On December 10, 2014, Mr.

Zhenyong Liu provided

Liu Zhenyong 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,

3 unchanged sentences

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

Zhenyong Liu, together with

Liu Zhenyong, together with

interest of $288,596.

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

As of March 31,

As of June 30,

2025 and December 31, 2024, approximately $41,908 and $41,734 of interest were outstanding to Mr.

Zhenyong Liu, which was recorded in

Liu Zhenyong, 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

Liu Zhenyong 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.

5 unchanged sentences

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

Zhenyong Liu.

Liu Zhenyong.

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.

Liu Zhenyong 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.

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

In December 2019, the Company

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

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

As of June 30, 2025 and December 31, 2024, the outstanding interest

was $191,989 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 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

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,

As of June 30, 2025 and December 31, 2024, there

were no loans outstanding to Mr.

Liu Zhenyong .

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

six months ended June 30, 2025 and 2024.

Net interest owed to Mr.

Liu Zhenyong was approximately $305,868 and $304,600, as of June 30,

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

1 unchanged sentence

entered into two agreements with Mr.

Zhenyong Liu, which allowed Mr.

Zhenyong Liu to borrow from the Company an amount of $7,059,455 (RMB50,000,000)

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

Liu, allowing him to borrow a total of $7,059,455 (RMB50,000,000) from the Company.

The loans were

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

$4,235,673 (RMB30,000,000) was repaid by Mr.

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

Interest income of the loan for the 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.

Liu Zhengyong in August 2023

and the remaining balance was repaid in December 2023.

Interest income of the loan for the three and six months ended June 30, 2025 and

2024 were $nil.

As of June 30, 2025 and December 31, 2024, amount

Liu Zhenyong were $119,974 and $1,242, respectively, .

This mainly represents funds from Mr.

Liu Zhenyong to pay for various

expenses incurred in the U.S.

The amount is due on demand and is interest free.

Critical Accounting Policies and Estimates

22 unchanged sentences

policy toward operating efficiency of the Chinese paper manufacturing industry.

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.

For the six months ended June 30, 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 March 31, 2025 and December 31, 2024 to translate the Chinese RMB to the U.S.

as of June 30, 2025 and December 31, 2024 to translate the Chinese RMB to the U.S.

Dollars are 7.1586:1 and 7.1884:1, respectively.

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,

and expenses are translated using the prevailing average exchange rates at 7.1778:1 and 7.1074:1 for the six months ended June 30, 2025

and 2024, respectively.

37 unchanged sentences

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