Item 1. Legal Proceedings
Item 1. Legal Proceedings.
We may from time to time become a party to various
legal or administrative proceedings arising in the ordinary course of our business. We are currently not a party to any legal or administrative
proceedings and are not aware of any pending or threatened legal or administrative proceedings against us in all material aspects other
than the following:
In February 17, 2022, FT Global Capital, Inc.
(“FTG”), filed a lawsuit against the Company in the Commercial Division of New York Supreme Court (the “Court”).
FTG has brought a breach of contract action against the Company to recover fees in connection with an agreement that the parties entered
into in April 2019 (the “Agreement”). The Company has answered FTG’s complaint and has denied the allegations because
it is the Company’s position that FTG did not fulfill its obligations under the terms of the Agreement. Discovery is continuing.
The Court issued a Status Conference Order (the “Order”) dated April 15, 2024. According to the Order, the Court ordered that
the Company has failed to appear and is in default, and that pursuant to the warning given in the Court’s order dated March 22,
2024, the Company’s default renders its answer subject to being stricken, and accordingly the answer of the Company was stricken.
On April 18, 2024, FT Global filed a notice of motion for default judgment against the Company. By an order dated August 20, 2024, the
Court granted the plaintiff’s default motion on the issue of liability, with damages to be determined by a referee. The Company
then moved to vacate the order dated August 20, 2024, but the Court denied the Company’s motion on November 1, 2024, stating that
the excuse proffered by the Company as to the reason it did not retain counsel in a timely fashion was not sufficient.
In November 2023, an individual plaintiff involved
in a civil loan dispute filed a lawsuit against the defendants including Tengsheng Paper and Jie Ping, who served as the executive director
and the legal representative of Tengsheng Paper, at the Lianchi District People’s Court of Baoding City, China (the “PRC Court”).
From December 2023 through 2024, the plaintiff sought property preservation measures, requesting the PRC Court to freeze totaling RMB6.70
million worth of bank deposits held by Jie Ping and Tengsheng Paper. Following this request, on the same day, the PRC Court issued a ruling
to immediately freeze the RMB3.35 million worth of bank deposits of Jie Ping and Tengsheng Paper. On June 14, 2024, the PRC Court ordered
the defendants to repay the principal of the loan in the amount of RMB3,320,000 to the plaintiff, and Tengsheng Paper was jointly liable
for repayment.
The ultimate resolution of the proceedings may
have a material adverse impact on our business, financial condition, results of operations or cash flows. Failure to settle the proceedings
or other unfavorable outcomes in this proceedings could result in significant damages, additional penalties or other remedies imposed
against the Company. Litigation of this kind could result in substantial costs and a diversion of our management’s attention and
resources. It could also result in our reputation being harmed and our stock price could decline as a result of allegations made in the
course of the proceedings, regardless of the truthfulness of the allegations.
Item 1A. Risk Factors.
We are a smaller reporting company as defined
by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
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