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What changed in IT TECH PACKAGING, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of IT TECH PACKAGING, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+271 added−265 removedSource: 10-K (2024-03-27) vs 10-K (2023-03-24)

Top changes in IT TECH PACKAGING, INC.'s 2023 10-K

271 paragraphs added · 265 removed · 216 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

59 edited+19 added−11 removed143 unchanged
Biggest changeAny changes in such PRC laws and regulations may harm our business. ● A slowdown, inflation or other adverse developments in the PRC economy may harm our customers and the demand for our services and products. ● We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC Subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business. ● Our PRC Subsidiaries, consolidated VIE and its subsidiary in China are subject to restrictions on making dividends and other payments to us or any other affiliated company. ● Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of investors’ investment. 10 ● PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from making loans or additional capital contributions to our PRC Subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business. ● The fluctuation of the Renminbi may harm your investment. ● Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may materially adversely affect us. ● While the approval and/or other requirements of the CSRC or other PRC governmental authorities are currently not required, they may be required, in connection with our oversea listing under PRC rules, regulations or policies, and, if required, we cannot predict whether or how soon we will be able to obtain such approval. ● The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China. ● The PRC’s legal and judicial system may not adequately protect our business and operations and the rights of foreign investors. ● Because our principal assets are located outside of the United States and most of our directors and officers reside outside of the United States, it may be difficult for you to effect service of legal process, enforce your rights based on U.S. federal securities laws against us and our officers or to enforce U.S. court judgment against us or them in the PRC. ● It may be difficult for overseas regulators to conduct investigation or collect evidence within China.
Biggest changeAny changes in such PRC laws and regulations may harm our business. ● A slowdown, inflation or other adverse developments in the PRC economy may harm our customers and the demand for our services and products. ● Our PRC Subsidiaries, consolidated VIE and its subsidiary in China are subject to restrictions on making dividends and other payments to us or any other affiliated company. ● We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC Subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business. ● Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of investors’ investment. 11 ● PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from making loans or additional capital contributions to our PRC Subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business. ● The fluctuation of the Renminbi may harm your investment. ● Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may materially adversely affect us. ● While the approval and/or other requirements of the CSRC or other PRC governmental authorities are currently not required, they may be required, in connection with our oversea listing under PRC rules, regulations or policies, and, if required, we cannot predict whether or how soon we will be able to obtain such approval. ● The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China. ● The PRC’s legal and judicial system may not adequately protect our business and operations and the rights of foreign investors. ● Because our principal assets are located outside of the United States and most of our directors and officers reside outside of the United States, it may be difficult for you to effect service of legal process, enforce your rights based on U.S. federal securities laws against us and our officers or to enforce U.S. court judgment against us or them in the PRC. ● It may be difficult for overseas regulators to conduct investigation or collect evidence within China. ● We may be required to broaden the coverage of the mandatory social security insurance programs under the Labor Law of the PRC. ● The current tensions in international trade and rising political tensions, particularly between U.S. and China, may adversely impact our business, financial condition, and results of operations.
According to the Prevention and Control of Noise Pollution Law, entities subject to the pollutant discharge licensing management requirements shall not emit industrial noise without a pollutant discharge permit and shall prevent and control noise pollution according to the requirements of the pollutant discharge permit.
According to the Prevention and Control of Noise Pollution Law, entities subject to the pollutant discharge licensing management requirements shall not emit industrial noise without a pollutant discharge permit and shall prevent and control noise pollution according to the requirements of the pollutant discharge permit.
Risks Related to Our Corporate Structure ● Our current corporate structure and business operations may be affected by the newly enacted Foreign Investment Law. ● Any failure by our consolidated VIE or their shareholders to perform their obligations under our contractual arrangements with them would have a material adverse effect on our business. ● In order to comply with PRC regulatory requirements, we operate our businesses through companies with which we have contractual relationships but in which we do not have controlling ownership. ● Because we rely on the consulting services agreement with Dongfang Paper for essentially all of our revenue and cash flows, any difficulty for Dongfang Paper to pay consulting fees to Baoding Shengde under the consulting agreement may have a material adverse effect on our operations. ● If the PRC government determines that the contractual agreements constituting part of our VIE structure do not comply with applicable PRC regulations, or if these regulations change or are interpreted differently in the future, we may be unable to assert our contractual rights over the assets of the VIE, and our common stock may decline in value. ● The contractual arrangements under a VIE Structure may not be as effective as direct ownership in respect of our relationship with the VIE, and thus, we may incur substantial costs to enforce the terms of the arrangements, which we may not be able to enforce at all. ● The shareholders of Dongfang Paper may have actual or potential conflicts of interests with us, which may adversely affect our business. 11 ● We may lose the ability to use and enjoy assets held by the VIE that are material to the operation of our business if the entity goes bankrupt or becomes subject to a dissolution or liquidation proceeding. ● Our arrangements with Dongfang Paper and its shareholders may be subject to a transfer pricing adjustment by the PRC tax authorities which could have an adverse effect on our income and expenses. ● We may lose the ability to use, or otherwise benefit from, the licenses, approvals and assets held by the VIE, which could severely disrupt our business, render us unable to conduct some of our business operations and constrain our growth. ● The exercise of our option to purchase part or all of the equity interests in Dongfang Paper under the Call Option Agreement might be subject to approval by the PRC government.
Risks Related to Our Corporate Structure ● Our current corporate structure and business operations may be affected by the newly enacted Foreign Investment Law. ● Any failure by our consolidated VIE or their shareholders to perform their obligations under our contractual arrangements with them would have a material adverse effect on our business. ● In order to comply with PRC regulatory requirements, we operate our businesses through companies with which we have contractual relationships but in which we do not have controlling ownership. ● Because we rely on the consulting services agreement with Dongfang Paper for essentially all of our revenue and cash flows, any difficulty for Dongfang Paper to pay consulting fees to Baoding Shengde under the consulting agreement may have a material adverse effect on our operations. ● If the PRC government determines that the contractual agreements constituting part of our VIE structure do not comply with applicable PRC regulations, or if these regulations change or are interpreted differently in the future, we may be unable to assert our contractual rights over the assets of the VIE, and our common stock may decline in value. ● The contractual arrangements under a VIE Structure may not be as effective as direct ownership in respect of our relationship with the VIE, and thus, we may incur substantial costs to enforce the terms of the arrangements, which we may not be able to enforce at all. ● The shareholders of Dongfang Paper may have actual or potential conflicts of interests with us, which may adversely affect our business. 12 ● We may lose the ability to use and enjoy assets held by the VIE that are material to the operation of our business if the entity goes bankrupt or becomes subject to a dissolution or liquidation proceeding. ● Our arrangements with Dongfang Paper and its shareholders may be subject to a transfer pricing adjustment by the PRC tax authorities which could have an adverse effect on our income and expenses. ● We may lose the ability to use, or otherwise benefit from, the licenses, approvals and assets held by the VIE, which could severely disrupt our business, render us unable to conduct some of our business operations and constrain our growth. ● The exercise of our option to purchase part or all of the equity interests in Dongfang Paper under the Call Option Agreement might be subject to approval by the PRC government.
See “Risk Factors — Risk Factors Relating to Doing Business in China — While the approval and/or other requirements of the CSRC or other PRC governmental authorities are currently not required, they may be required, in connection with our oversea listing under PRC rules, regulations or policies, and, if required, we cannot predict whether or how soon we will be able to obtain such approval .” As of the date of this annual report, we have not received any inquiry, notice, warning, or sanctions regarding listing abroad or offshore offering from the CSRC or any other PRC governmental authorities.
See “ Risk Factors — Risk Factors Relating to Doing Business in China — While the approval and/or other requirements of the CSRC or other PRC governmental authorities are currently not required, they may be required, in connection with our oversea listing under PRC rules, regulations or policies, and, if required, we cannot predict whether or how soon we will be able to obtain such approval .” As of the date of this annual report, we have not received any inquiry, notice, warning, or sanctions regarding listing abroad or offshore offering from the CSRC or any other PRC governmental authorities.
For a description of relevant risks related to our corporate structure, see “Risk Factors – Risks Relating to Doing Business in China” and “Risk Factors – Risks Relating to Our Corporate Structure.” Corporate History IT Tech Packaging was incorporated in the State of Nevada on December 9, 2005, under the name “Carlateral, Inc.” Through the steps described below, we became the holding company with operations primarily conducted by our subsidiaries and our VIE, Dongfang Paper, a producer and distributor of paper products in China, on October 29, 2007.
For a description of relevant risks related to our corporate structure, see “ Risk Factors – Risks Relating to Doing Business in China” and “Risk Factors – Risks Relating to Our Corporate Structure .” Corporate History IT Tech Packaging was incorporated in the State of Nevada on December 9, 2005, under the name “Carlateral, Inc.” Through the steps described below, we became the holding company with operations primarily conducted by our subsidiaries and our VIE, Dongfang Paper, a producer and distributor of paper products in China, on October 29, 2007.
Dongfang Zhiye Holding Limited has been inactive since 2010. 4 Recent Regulatory Developments On January 4, 2022, the Cyberspace Administration of China, or CAC, issued the revised Measures on Cyberspace Security Review (the “Revised Measures”), which came into effect on February 15, 2022.
Dongfang Zhiye Holding Limited has been inactive since 2010. 5 Recent Regulatory Developments On January 4, 2022, the Cyberspace Administration of China, or CAC, issued the revised Measures on Cyberspace Security Review (the “Revised Measures”), which came into effect on February 15, 2022.
IT Tech Packaging is a Nevada holding company with no operations of its own. Operations in China are primarily conducted through Dongfeng Paper, the consolidated VIE. Dongfang Paper is consolidated for accounting purposes but is not an entity in which you own equity.
IT Tech Packaging is a Nevada holding company with no operations of its own. Operations in China are primarily conducted through Dongfang Paper, the consolidated VIE. Dongfang Paper is consolidated for accounting purposes but is not an entity in which you own equity.
If our auditor is not permitted to provide requested audit work papers located in China to the PCAOB, investors would be deprived of the benefits of PCAOB’s oversight of our auditor through such inspections which could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities may be prohibited under the HFCAA, which would result in the delisting of our securities from the NYSE American. 8 See “ Risk Factors—Risks Associated with Our Company— Our common stock may be delisted from the NYSE American under the Holding Foreign Companies Accountable Act if the PCAOB is unable to adequately inspect audit documentation located in China.
If our auditor is not permitted to provide requested audit work papers located in China to the PCAOB, investors would be deprived of the benefits of PCAOB’s oversight of our auditor through such inspections which could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities may be prohibited under the HFCAA, which would result in the delisting of our securities from the NYSE American. 9 See “ Risk Factors—Risks Associated with Our Company— Our common stock may be delisted from the NYSE American under the Holding Foreign Companies Accountable Act if the PCAOB is unable to adequately inspect audit documentation located in China.
For details, see “ Risk Factors — Risk Factors Relating to Doing Business in China — PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from making loans or additional capital contributions to our PRC Subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business .” 7 In addition, the PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China.
For details, see “ Risk Factors — Risk Factors Relating to Doing Business in China — PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from making loans or additional capital contributions to our PRC Subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business .” 8 In addition, the PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China.
PM10 Tissue paper 20,000 Dongfang Paper Dongfang Paper In construction *: Paper machines under renovation, under construction, or in the planning stage. ***: PM6 is funded and owned by Baoding Shengde; ancillary facilities that support the PM6 operation are built and owned by Dongfang Paper. 16 On December 31, 2009, we acquired a digital photo paper production line, including two coating lines that are designated as PM4 and PM5 and ancillary equipment, for a total purchase price of approximately $13.6 million.
PM10 Tissue paper 20,000 Dongfang Paper Dongfang Paper In construction *: Paper machines under renovation, under construction, or in the planning stage. ***: PM6 is funded and owned by Baoding Shengde; ancillary facilities that support the PM6 operation are built and owned by Dongfang Paper. 17 On December 31, 2009, we acquired a digital photo paper production line, including two coating lines that are designated as PM4 and PM5 and ancillary equipment, for a total purchase price of approximately $13.6 million.
Additionally, because we buy all recycled paper raw materials from Beijing and Tianjin, rather than from the United States or Japan, our purchase lead time is shorter as compared to manufacturers who rely on imported recycled paper. 18 Research and Development Our R&D activities are carried out by a task force led by a group of senior managers (in charge of product development and quality control) and by a group of selected engineers and technicians.
Additionally, because we buy all recycled paper raw materials from Beijing and Tianjin, rather than from the United States or Japan, our purchase lead time is shorter as compared to manufacturers who rely on imported recycled paper. 19 Research and Development Our R&D activities are carried out by a task force led by a group of senior managers (in charge of product development and quality control) and by a group of selected engineers and technicians.
Because Baoding Shengde is a wholly-owned subsidiary of Shengde Holdings Inc., it is regarded as a wholly foreign-owned entity under PRC law. 1 Effective June 24, 2009, Baoding Shengde, Dongfang Paper and the original shareholders of Dongfang Paper entered into a number of contractual arrangements, as subsequently amended on February 10, 2010, pursuant to which Baoding Shengde acts as the management company for Dongfang Paper, and Dongfang Paper conducts the principal operations of the business.
Because Baoding Shengde is a wholly-owned subsidiary of Shengde Holdings Inc., it is regarded as a wholly foreign-owned entity under PRC law. 2 Effective June 24, 2009, Baoding Shengde, Dongfang Paper and the original shareholders of Dongfang Paper entered into a number of contractual arrangements, as subsequently amended on February 10, 2010, pursuant to which Baoding Shengde acts as the management company for Dongfang Paper, and Dongfang Paper conducts the principal operations of the business.
The diagram below illustrates our corporate structure and contractual arrangements with respect to each of our subsidiaries and consolidated VIE and the place of incorporation of each named entity as of the date of this annual report: 3 The following diagram sets forth the current ownership of Dongfang Paper: Our subsidiaries and the VIE in which our operations are conducted include: ● Baoding Shengde Paper Co., Ltd.
The diagram below illustrates our corporate structure and contractual arrangements with respect to each of our subsidiaries and consolidated VIE and the place of incorporation of each named entity as of the date of this annual report: 4 The following diagram sets forth the current ownership of Dongfang Paper: Our subsidiaries and the VIE in which our operations are conducted include: ● Baoding Shengde Paper Co., Ltd.
Effective on August 1, 2018, we changed our corporate name to IT Tech Packaging, Inc. The name change was effected through a parent/subsidiary short-form merger of IT Tech Packaging, Inc., our wholly-owned Nevada subsidiary formed solely for the purpose of the name change, with and into us. We were the surviving entity.
Effective on August 1, 2018, we changed our corporate name to “IT Tech Packaging, Inc.” The name change was effected through a parent/subsidiary short-form merger of IT Tech Packaging, Inc., our wholly-owned Nevada subsidiary formed solely for the purpose of the name change, with and into us. We were the surviving entity.
The noise pollution has been included in the Pollution Discharge Permit, and we conduct quarterly test on the noise through qualified testing institutions to comply with the laws, which is required by laws. 20 Waste Water Treatment Dongfang Paper uses a multi-level water recycling process.
The noise pollution has been included in the Pollution Discharge Permit, and we conduct quarterly test on the noise through qualified testing institutions to comply with the laws, which is required by laws. 21 Waste Water Treatment Dongfang Paper uses a multi-level water recycling process.
While such rules have not yet gone into effect, the Chinese government may exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers, which could significantly limit or completely hinder our ability to continue to offer our securities to investors and could cause the value of our securities to significantly decline or become worthless ” 5 On December 24, 2021, the Standing Committee of the National People’s Congress issued Law of the People’s Republic of China on the Prevention and Control of Noise Pollution (the “Prevention and Control of Noise Pollution Law”), which became effective on June 5, 2022.
While such rules have become into effect, the Chinese government may exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers, which could significantly limit or completely hinder our ability to continue to offer our securities to investors and could cause the value of our securities to significantly decline or become worthless ” 6 On December 24, 2021, the Standing Committee of the National People’s Congress issued Law of the People’s Republic of China on the Prevention and Control of Noise Pollution (the “Prevention and Control of Noise Pollution Law”), which became effective on June 5, 2022.
Upon completion, the rolls are fitted with sleeves and labeled, and then sent to quality control before shipment or storage. 13 Base Tissue Paper While we make tissue paper products, we currently purchase paper pulp from suppliers and use it to manufacture base tissue paper directly.
Upon completion, the rolls are fitted with sleeves and labeled, and then sent to quality control before shipment or storage. 14 Base Tissue Paper While we make tissue paper products, we currently purchase paper pulp from suppliers and use it to manufacture base tissue paper directly.
Category Registrant Valid Term Shuangxing 3298963 Fax paper, thermal paper, blueprint paper, sensitized paper, spectrum sensitized paper, blueprint cloth, photographic paper, cyanotype solution, diazo paper Dongfang Paper April 7, 2014 through April 6, 2024 Fangmenglai 12955328 Toilet paper, handkerchief tissues, tissues, paper napkins, paper mats, beer mats, paper place mats, printing paper (including offset paper, newsprint, books paper, bond paper, plate paper and halftone paper), coated paper Dongfang Paper December 28, 2014 through December 27, 2024 Fangqingxin 12955235 Toilet paper, handkerchief tissues, tissues for makeup remover, paper napkin, tissues, paper duster cloth, paper face towels, paper table cloth, paper tablecloths, drawer liner (with or without flavor) Dongfang Paper December 28, 2014 through December 27, 2024 Kaimeilai 20212149 Xuan Paper (for traditional Chinese painting and calligraphy), Paper, tissue paper, watercolor paper, writing paper, printing publications, ink, painting brush, packaging plastic film, color box, Baoding Shengde July 28, 2017 through July 27, 2027 Shadow 8349821 Drying blueprint solution, diazo paper, photographic paper, sensitive paper, blueprint paper, blueprint canvas, spectral photographic plate, heliographic paper Baoding Shengde June 14, 2011 through June 13, 2021 Lanmeier 15635879 Paper table cover, paper pinafore, drawer lining (with flavor or not) Tengsheng Paper November 21, 2016 through November 20, 2026 Qingmu 15635916 Tissue paper, paper handkerchief, paper napkin, facial paper, grained paper, cardboard, white board, container board, kraft liner, corrugated medium paper (board) Tengsheng Paper January 7, 2016 through January 6, 2026 Rongou 20063034 Paper, tissue paper, paper handkerchief, paper napkin, facial paper, paper billboard, cleansing tissue, packaging paper or plastic bag (envelop, sachet), carton, paper box Tengsheng Paper July 14, 2017 through July 13, 2027 Weizun 15636093 Coasters, paper table cover, paper costers, cleansing paper Tengsheng Paper February 28, 2016 through February 27, 2026 19 The Company has also been granted twelve new utility patent certificates on paper manufacturing related equipment issued by the State Intellectual Property Office, including equipment testing, screening and filtering, and mixing.
Category Registrant Valid Term Shuangxing 3298963 Fax paper, thermal paper, blueprint paper, sensitized paper, spectrum sensitized paper, blueprint cloth, photographic paper, cyanotype solution, diazo paper Dongfang Paper April 7, 2014 through April 6, 2024 Fangmenglai 12955328 Toilet paper, handkerchief tissues, tissues, paper napkins, paper mats, beer mats, paper place mats, printing paper (including offset paper, newsprint, books paper, bond paper, plate paper and halftone paper), coated paper Dongfang Paper December 28, 2014 through December 27, 2024 Fangqingxin 12955235 Toilet paper, handkerchief tissues, tissues for makeup remover, paper napkin, tissues, paper duster cloth, paper face towels, paper table cloth, paper tablecloths, drawer liner (with or without flavor) Dongfang Paper December 28, 2014 through December 27, 2024 Kaimeilai 20212149 Xuan Paper (for traditional Chinese painting and calligraphy), Paper, tissue paper, watercolor paper, writing paper, printing publications, ink, painting brush, packaging plastic film, color box, photographic plate, heliographic paper Baoding Shengde July 28, 2017 through July 27, 2027 Lanmeier 15635879 Paper table cover, paper pinafore, drawer lining (with flavor or not) Tengsheng Paper November 21, 2016 through November 20, 2026 Qingmu 15635916 Tissue paper, paper handkerchief, paper napkin, facial paper, grained paper, cardboard, white board, container board, kraft liner, corrugated medium paper (board) Tengsheng Paper January 7, 2016 through January 6, 2026 Rongou 20063034 Paper, tissue paper, paper handkerchief, paper napkin, facial paper, paper billboard, cleansing tissue, packaging paper or plastic bag (envelop, sachet), carton, paper box Tengsheng Paper July 14, 2017 through July 13, 2027 Weizun 15636093 Coasters, paper table cover, paper costers, cleansing paper Tengsheng Paper February 28, 2016 through February 27, 2026 20 The Company has also been granted twelve new utility patent certificates on paper manufacturing related equipment issued by the State Intellectual Property Office, including equipment testing, screening and filtering, and mixing.
See “ Risk factors — Risk Factors Relating to Doing Business in China — Our business may be subject to a variety of PRC laws and other obligations regarding cyber security and data protection .” On July 6, 2021, the relevant PRC governmental authorities made public the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law.
See “ Risk factors — Risk Factors Relating to Doing Business in China — Our business may be subject to a variety of PRC laws and other obligations regarding cybersecurity and data protection .” On July 6, 2021, the relevant PRC governmental authorities made public the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law.
IT Tech Packaging operated its business in China through its wholly-owned PRC subsidiaries, namely Baoding Shengde Paper Co., Ltd., a People’s Republic of China company (“Baoding Shengde”) and QianrongQianhui Hebei Technology Co., Ltd., a People’s Republic of China company (“Qianrong”) (together with Baoding Shengde, the “PRC Subsidiaries”), and Hebei Baoding Dongfang Paper Milling Company Limited (“Dongfang Paper”), which we refer to as our VIE in this annual report, and rely on contractual arrangements that establish the VIE structure among Baoding Shengde, the VIE and VIE’s shareholders to operate our business in China.
IT Tech Packaging operated its business in China through its wholly-owned PRC subsidiaries, namely Baoding Shengde Paper Co., Ltd., a People’s Republic of China company (“Baoding Shengde”) and QianrongQianhui Hebei Technology Co., Ltd., a People’s Republic of China company (“Qianrong”) (together with Baoding Shengde, the “PRC Subsidiaries”), and Dongfang Paper, which we refer to as our VIE in this annual report, and rely on contractual arrangements that establish the VIE structure among Baoding Shengde, the VIE and VIE’s shareholders to operate our business in China.
While such rules have not yet gone into effect, the Chinese government may exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers, which could significantly limit or completely hinder our ability to continue to offer our securities to investors and could cause the value of our securities to significantly decline or become worthless. ● Recent greater oversight by the Cyberspace Administration of China, or the “CAC,” over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact the business of us, the consolidated VIE and its subsidiary and investing in our securities. ● Our business may be subject to a variety of PRC laws and other obligations regarding cybersecurity and data protection. ● Changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in the PRC and the profitability of such business. ● The PRC laws and regulations governing our current business operations are sometimes vague and uncertain.
While such rules have become into effect, the Chinese government may exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers, which could significantly limit or completely hinder our ability to continue to offer our securities to investors and could cause the value of our securities to significantly decline or become worthless. ● Recent greater oversight by the Cyberspace Administration of China, or the “CAC,” over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact the business of us, the consolidated VIE and its subsidiary and investing in our securities. ● The occurrence of security breaches and cyber-attacks could negatively impact our business. ● Our business may be subject to a variety of PRC laws and other obligations regarding cybersecurity and data protection. ● Changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in the PRC and the profitability of such business. ● The PRC laws and regulations governing our current business operations are sometimes vague and uncertain.
Our largest customer is a packaging company in Hebei Province. Our total corrugating medium and offset printing paper revenue in 2022 was primarily derived from customers in Hebei Province and Shandong Province.
Our largest customer is a packaging company in Hebei Province. Our total corrugating medium and offset printing paper revenue in 2023 was primarily derived from customers in Hebei Province and Shandong Province.
The largest paper production capacities by province for 2021 and 2020 (the most recent year for which relevant information is available) are summarized in the table below.
The largest paper production capacities by province for 2022 and 2021 (the most recent year for which relevant information is available) are summarized in the table below.
Under the Revised Measures, any “network platform operator” controlling personal information of no less than one million users which seeks to list in a foreign stock exchange should also be subject to cyber security review.
Under the Revised Measures, any “network platform operator” controlling personal information of no less than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review.
On February 17, 2023, the CSRC released the Trial Administrative Measures for Administration of Overseas Securities Offerings and Listings by Domestic Companies (the “Trial Measures”) and five supporting guidelines, which will come into effect on March 31, 2023.
On February 17, 2023, the CSRC released the Trial Administrative Measures for Administration of Overseas Securities Offerings and Listings by Domestic Companies (the “Trial Measures”) and five supporting guidelines, which came into effect on March 31, 2023.
We do not believe we are “network platform operator” who control over one million personal information as mentioned above; as such, we believe we are currently not be subject to the cyber security review by the CAC.
We do not believe we are “network platform operator” who control over one million personal information as mentioned above; as such, we believe we are currently not be subject to the cybersecurity review by the CAC.
Our R&D efforts in 2022has focused on evaluating and developing new products that are in the pipeline for 2022 and included developing and improving the manufacturing process of Light-Weight CMP and the production and packaging technology of tissue paper. One of our production lines, PM7, is under renovation.
Our R&D efforts in 2023 were focused on evaluating and developing new products that are in the pipeline for 2023 and included developing and improving the manufacturing process of Light-Weight CMP and the production and packaging technology of tissue paper. One of our production lines, PM7, is under renovation.
Our Production Lines During the year ended December 31, 2022, we had six PM production lines in operation and are in the process of launching one more that are designated as PM7.
Our Production Lines During the year ended December 31, 2023, we had six PM production lines in operation and are in the process of launching one more that is designated as PM7.
These production lines include the followings: PM# Paper Product Produced Designed Capacity (tonnes/year) Owned by Operated by Status as of December 31, 2022 PM1 Corrugating Medium Paper 60,000 Dongfang Paper Dongfang Paper In production PM2 Offset Printing Paper 50,000 Dongfang Paper Dongfang Paper In production PM3 Offset Printing Paper 40,000 Dongfang Paper Dongfang Paper In production PM4 Digital Photo Paper ** Baoding Shengde Baoding Shengde Suspended in June 2016 due to low market demand PM5 Digital Photo Paper ** Baoding Shengde Baoding Shengde Suspended in June 2016 due to low market demand PM6 Corrugating Medium Paper 360,000 Baoding Shengde Dongfang Paper*** In production PM7* Specialty paper 10,000 Dongfang Paper Dongfang Paper Under renovation and preparing for launch by the end of 2023 PM8 Tissue paper 15,000 Dongfang Paper Dongfang Paper In production PM9 Tissue paper 15,000 Dongfang Paper Dongfang Paper In production.
These production lines include the followings: Paper Product Designed Capacity PM# Produced (tonnes/year) Owned by Operated by Status as of December 31, 2023 PM1 Corrugating Medium Paper 60,000 Dongfang Paper Dongfang Paper In production PM2 Offset Printing Paper 50,000 Dongfang Paper Dongfang Paper In production PM3 Offset Printing Paper 40,000 Dongfang Paper Dongfang Paper In production PM4 Digital Photo Paper ** Baoding Shengde Baoding Shengde Suspended in June 2016 due to low market demand PM5 Digital Photo Paper ** Baoding Shengde Baoding Shengde Suspended in June 2016 due to low market demand PM6 Corrugating Medium Paper 360,000 Baoding Shengde Dongfang Paper*** In production PM7* Specialty paper 10,000 Dongfang Paper Dongfang Paper In renovation PM8 Tissue paper 15,000 Dongfang Paper Dongfang Paper In production PM9 Tissue paper 15,000 Dongfang Paper Dongfang Paper In production.
Human Capital Resources Employee Profiles As of December 31, 2022, we have approximately 380 full time employees, all of whom were based in PRC. As of December 31, 2022, approximately 24.7% of our current workforce is female and 75.3% male.
Human Capital Resources Employee Profiles As of December 31, 2023, we have approximately 383 full time employees, all of whom were based in PRC. As of December 31, 2023, approximately 24.3% of our current workforce is female and 75.7% male.
These risks are discussed more fully in the section titled “Risk Factors.” Risks Relating to our Business ● Our business, financial condition and results of operations may be materially adversely affected by global health epidemics, including the COVID-19 outbreak. ● Our operating history may not serve as an adequate basis to judge our future prospects and results of operations. ● Dongfang Paper and Baoding Shengde’s failure to compete effectively may adversely affect our ability to generate revenue. ● We may not be able to effectively control and manage our growth. ● We, through our subsidiaries, may engage in future acquisitions that could dilute the ownership interests of our stockholders and cause us to incur debt and assume contingent liabilities. ● We are responsible for the indemnification of our officers and directors. ● We are dependent on certain key personnel and loss of these key personnel could have a material adverse effect on our business, financial condition and results of operations. ● We may not be able to hire and retain qualified personnel to support our growth and if we are unable to retain or hire these personnel in the future, our ability to improve our products and implement our business objectives could be adversely affected. ● Our operating results may fluctuate as a result of factors beyond our control. ● We face risks related to product liability claims. ● Our operating results also depend on the availability and pricing of energy and raw materials. ● A material disruption at one of our manufacturing facilities could prevent us from meeting customer demand, reduce our sales, and/or negatively affect our net income. ● Our certificates, permits, and licenses related to our papermaking operations are subject to governmental control and renewal and failure to obtain renewal will cause all or part of our operations to be terminated. ● Compliance with environmental regulations is expensive, and noncompliance may result in adverse publicity and potentially significant monetary damages and fines or suspension of our business operations. 9 ● If we are unable to respond to pricing pressures, our business may be harmed. ● Our failure to protect our intellectual property rights may undermine our competitive position, and external infringements of our intellectual property rights may adversely affect our business. ● We may be subject to intellectual property infringement claims or other allegations, which may materially and adversely affect our business, financial condition and prospects.
These risks are discussed more fully in the section titled “ Risk Factors .” Risks Relating to our Business ● Our operating history may not serve as an adequate basis to judge our future prospects and results of operations. ● Dongfang Paper and Baoding Shengde’s failure to compete effectively may adversely affect our ability to generate revenue. ● We may not be able to effectively control and manage our growth. ● We, through our subsidiaries, may engage in future acquisitions that could dilute the ownership interests of our stockholders and cause us to incur debt and assume contingent liabilities. ● We are responsible for the indemnification of our officers and directors. ● We are dependent on certain key personnel and loss of these key personnel could have a material adverse effect on our business, financial condition and results of operations. ● We may not be able to hire and retain qualified personnel to support our growth and if we are unable to retain or hire these personnel in the future, our ability to improve our products and implement our business objectives could be adversely affected. ● Our operating results may fluctuate as a result of factors beyond our control. ● We face risks related to product liability claims. ● Our operating results also depend on the availability and pricing of energy and raw materials. ● A material disruption at one of our manufacturing facilities could prevent us from meeting customer demand, reduce our sales, and/or negatively affect our net income. ● Our certificates, permits, and licenses related to our papermaking operations are subject to governmental control and renewal and failure to obtain renewal will cause all or part of our operations to be terminated. ● Compliance with environmental regulations is expensive, and noncompliance may result in adverse publicity and potentially significant monetary damages and fines or suspension of our business operations. 10 ● If we are unable to respond to pricing pressures, our business may be harmed. ● If we fail to introduce enhancements to our existing products or to develop new products, our business and results of operations could be adversely affected. ● We have limited insurance coverage and may incur losses resulting from product liability claims or business interruptions. ● Our failure to protect our intellectual property rights may undermine our competitive position, and external infringements of our intellectual property rights may adversely affect our business. ● We may be subject to intellectual property infringement claims or other allegations, which may materially and adversely affect our business, financial condition and prospects.
Although we have contracts with our suppliers, these contracts do not lock-in the purchase price of our raw materials or provide hedge against the fluctuation in the market price of these raw materials. For the year ended December 31, 2022, we had two large suppliers which accounted for approximately 76% and 15% of our total purchases, respectively.
Although we have contracts with our suppliers, these contracts do not lock-in the purchase price of our raw materials or provide hedge against the fluctuation in the market price of these raw materials. For the year ended December 31, 2023, we had two large suppliers which accounted for approximately 72% and 17% of our total purchases, respectively.
The information on our website is not, and shall not be deemed to be, a part hereof or incorporated into this or any of our other filings with the SEC. Executive Officers For information regarding our executive officers as of March 23, 2023, see Part III, Item 10, “Directors, Executive Officers and Corporate Governance.” 21
The information on our website is not, and shall not be deemed to be, a part hereof or incorporated into this or any of our other filings with the SEC. Executive Officers For information regarding our executive officers as of March 27, 2024, see Part III, Item 10, “Directors, Executive Officers and Corporate Governance.” 22
The machine supplier was delayed because of pandemic. We are closely following up the provider for further actions. Tissue paper products comprised approximately 0.58% of our total paper production quantities and approximately 1.36% of our total sales revenue for the year ended December 31, 2022.
The machine supplier was delayed because of pandemic. We are closely following up the provider for further actions. Tissue paper products comprised approximately 0.52% of our total paper production quantities and approximately 1.51% of our total sales revenue for the year ended December 31, 2023.
In May 2021, the Company obtained the license for its new single-use surgical masks from local food and drug administration in Hebei province, and began commercial production in November 2021. 14 Market for our Products The PRC Paper Making Industry According to the 2021 China Paper Industry Annual Report, issued by the China Paper Association, there were approximately 2,500 paper and paper board manufacturers in China, with a total output of 121.05 million tonnes, up by 7.50% from 112.60 million tonnes in 2020.
In May 2021, the Company obtained the license for its new single-use surgical masks from local food and drug administration in Hebei province, and began commercial production in November 2021. 15 Market for our Products The PRC Paper Making Industry According to the 2022 China Paper Industry Annual Report, issued by the China Paper Association, there were approximately 2,500 paper and paper board manufacturers in China, with a total output of 124.25 million tonnes, up by 2.64% from 121.05 million tonnes in 2021.
As of December 31, 2022 and 2021, $7,612,294 and $2,058,841 of cash and cash equivalents were denominated in RMB, respectively. IT Tech Packaging and its directly owned subsidiary, Shengde Holding, do not have any substantial assets or liabilities or result of operations.
As of December 31, 2023 and 2022, $3,705,111 and $7,612,294 of cash and cash equivalents were denominated in RMB, respectively. IT Tech Packaging and its directly owned subsidiary, Shengde Holding, do not have any substantial assets or liabilities or result of operations.
For the year ended December 31, 2022, corrugating medium paper comprised approximately 99.42% of our total paper production quantities and roughly 98.38% of our total revenue. Raw materials used in the production of corrugating medium paper include recycled paper board (or Old Corrugating Cardboard or “OCC,” as it is commonly referred to in the United States) and certain supplementary agents.
For the year ended December 31, 2023, corrugating medium paper comprised approximately 97.06% of our total paper production quantities and roughly 94.47% of our total revenue. Raw materials used in the production of corrugating medium paper include recycled paper board (or Old Corrugating Cardboard or “OCC,” as it is commonly referred to in the United States) and certain supplementary agents.
While we are optimistic about the prospect of the specialty papers, we cannot guarantee the launch of the specialty paper production (which is tentatively scheduled by the end of 2023) or the success of such renovation. Intellectual Property The Company has registered nine trademarks with the Trademark Bureau under the State of Administration for Industry & Commerce. Trademark Certificate No.
While we are optimistic about the prospect of the specialty papers, we cannot guarantee the launch of the specialty paper production or the success of such renovation. Intellectual Property The Company has registered eight trademarks with the Trademark Bureau under the State of Administration for Industry & Commerce. Trademark Certificate No.
Revenue from offset printing paper was $nil for the year ended December 31, 2022. Raw materials used in making offset printing paper include recycled white scrap paper, fluorescent whitening agent and sizing agent. We currently have two production lines, PM2 and PM3, for the production of offset printing paper.
Revenue from offset printing paper was $3,215,190 with 5,573 tonnes sold for the year ended December 31, 2023. Raw materials used in making offset printing paper include recycled white scrap paper, fluorescent whitening agent and sizing agent. We currently have two production lines, PM2 and PM3, for the production of offset printing paper.
The following table sets forth the assets, liabilities, results of operations and changes in cash, cash equivalents of the VIE, which were included in the Company’s consolidated balance sheets and statements of comprehensive income and statements of cash flows with intercompany transactions eliminated: As of December 31, 2022 December 31, 2021 Current assets $ 33,832,930 $ 33,444,699 Total non-current assets $ 147,178,884 $ 169,766,341 Total Assets $ 181,011,814 $ 203,211,040 Total liabilities $ 16,784,877 $ 17,924,476 For the Fiscal Year Ended December 31, 2022 2021 Net cash provided by operating activities $ 13,064,529 $ 25,058,780 Net cash used in investing activities $ (7,494,805 ) $ (25,071,372 ) Net cash used in financing activities $ (7,074,857 ) $ (917,041 ) 6 Distributions and Other Transfers of Cash through our Organization We are a holding company, although other means are available for us to obtain financing at the holding company level, we may receive dividends and other distributions on equity paid by our subsidiary established in China for our cash needs, including the funds necessary to pay dividends and other cash distributions to our shareholders to the extent we choose to do so, to service any debt we may incur and to pay our operating expenses.
The following table sets forth the assets, liabilities, results of operations and changes in cash, cash equivalents of the VIE, which were included in the Company’s consolidated balance sheets and statements of comprehensive income and statements of cash flows with intercompany transactions eliminated: As of December 31, December 31, 2023 2022 Current assets $ 26,317,876 $ 33,832,930 Total non-current assets $ 158,555,747 $ 147,178,884 Total Assets $ 184,873,623 $ 181,011,814 Total liabilities $ 20,084,995 $ 16,784,877 For the Fiscal Year Ended December 31, 2023 2022 Net cash provided by operating activities $ 17,444,376 $ 13,064,529 Net cash used in investing activities $ (22,239,297 ) $ (7,494,805 ) Net cash provided by (used in) financing activities $ 3,965,631 $ (7,074,857 ) 7 Distributions and Other Transfers of Cash through our Organization We are a holding company, although other means are available for us to obtain financing at the holding company level, we may receive dividends and other distributions on equity paid by our subsidiary established in China for our cash needs, including the funds necessary to pay dividends and other cash distributions to our shareholders to the extent we choose to do so, to service any debt we may incur and to pay our operating expenses.
Total domestic consumption was 126.48 million tonnes in 2021, up by 6.94% from 118.27 million tonnes in 2020. The output of paper and paper board maintained an average growth rate of approximately 1.87% during the ten-year period from 2012 to 2021, while consumption increased at an average annual rate of 2.59%. The growth is expected to continue.
Total domestic consumption was 124.03 million tonnes in 2022, down by 1.94% from 126.48 million tonnes in 2021. The output of paper and paper board maintained an average growth rate of approximately 2.32% during the ten-year period from 2013 to 2022, while consumption increased at an average annual rate of 2.67%. The growth is expected to continue.
The delisting of our common stock, or the threat of their being delisted, may materially and adversely affect the value of your investment.. ● If we fail to comply with Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner, our business could be harmed and our stock price could decline. ● If we become directly subject to the scrutiny involving U.S. listed Chinese companies, we may have to expend significant resources to investigate and/or defend the matter, which could harm our business operations, stock price and reputation. ● Our officers and directors control us through their positions and stock ownership and their interests may differ from other stockholders. ● We may not continue to pay cash dividends and any return on investment may be limited to the value of our common stock.
The delisting of our common stock, or the threat of their being delisted, may materially and adversely affect the value of your investment.. ● If we fail to comply with Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner, our business could be harmed and our stock price could decline. ● If we become directly subject to the scrutiny involving U.S. listed Chinese companies, we may have to expend significant resources to investigate and/or defend the matter, which could harm our business operations, stock price and reputation. ● Our officers and directors control us through their positions and stock ownership and their interests may differ from other stockholders. ● We may not continue to pay cash dividends and any return on investment may be limited to the value of our common stock. ● Our common stock may be affected by limited trading volume and may fluctuate significantly. ● Future financings may dilute stockholders or impair our financial condition. 13 Our Business We, through our PRC Subsidiaries and VIE, engage in production and distribution of three categories of paper products: corrugating medium paper, offset printing paper, tissue paper products and medical face masks in China.
On November 27, 2012, we signed a 15-year lease relating to approximately 49.4 acres of land in the Economic Development Zone in Wei County, Hebei Province, China for the purpose of developing a new tissue paper production plant.
When the renovation is completed, we intend to use the renovated production line to produce high-profit margin specialty papers. On November 27, 2012, we signed a 15-year lease relating to approximately 49.4 acres of land in the Economic Development Zone in Wei County, Hebei Province, China for the purpose of developing a new tissue paper production plant.
Our auditor, WWC, P.C., Certified Public Accountants, is a U.S.-based accounting firm registered with the PCAOB, and is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards.
Our auditor, GGF CPA Limited, is a China-based accounting firm registered with the PCAOB, and is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards.
(Data source: 2021Annual Report of China Paper Manufacturing, May 2022,China Paper Association) Unit: Million tons Data source: 2021 Annual Report of China’s Paper Industry, May 2022, China Paper Association Corrugating medium paper production in China totaled 26.85 million tonnes in 2021, a 12.34% increase from 2020.
(Data source: 2022 Annual Report of China Paper Manufacturing, May 2023,China Paper Association) Unit: Million tons Data source: 2022Annual Report of China’s Paper Industry, May 2023, China Paper Association Corrugating medium paper production in China totaled 27.70 million tonnes in 2022, a 3.17% increase from 2021.
As of December 31, 2022, our variable interest entity accounted for an aggregate of 88.54% and 72.59% of our total assets and total liabilities. As of December 31, 2021, our variable interest entity accounted for an aggregate of 84.13% and 69.51% of our total assets and total liabilities.
As of December 31, 2023, our variable interest entity accounted for an aggregate of 94.81% and 75.92% of our total assets and total liabilities. As of December 31, 2022, our variable interest entity accounted for an aggregate of 88.54% and 72.59% of our total assets and total liabilities.
Item 1. Business IT Tech Packaging, Inc. (the “Company,” “IT Tech Packaging,” or “ITP”) is not an operating company but a Nevada holding company with operations primarily conducted by its subsidiary and variable interest entity, or VIE, in China.
Item 1. Business IT Tech Packaging, Inc. (the “Company,” “IT Tech Packaging,” or “ITP”) is not an operating company but a Nevada holding company with operations primarily conducted by its subsidiaries and through contractual arrangements with Hebei Baoding Dongfang Paper Milling Company Limited, a People’s Republic of China company (“Dongfang Paper”), the variable interest entity, or VIE, based in China.
As a result of this assignment and the restructuring transactions described above, Shengde Holdings Inc., Baoding Shengde, and Dongfang Paper became directly and indirectly controlled by the Company, and Dongfang Paper continued to function as the Company’s operating entity. 2 In addition to controlling the operations and beneficial ownership of Dongfang Paper, Baoding Shengde also acquired a digital photo paper production line (including two photo paper coating lines and ancillary equipment) in an asset acquisition transaction on November 25, 2009 and began directly conducting business in the PRC.
In addition to controlling the operations and beneficial ownership of Dongfang Paper, Baoding Shengde also acquired a digital photo paper production line (including two photo paper coating lines and ancillary equipment) in an asset acquisition transaction on November 25, 2009 and began directly conducting business in the PRC.
Substantially most of IT Tech Packaging’s revenues, costs and net income in China are directly or indirectly generated through the VIE. IT Tech Packaging, through Baoding Shengde, has signed various agreements with the VIE and shareholders of the VIE to allow the transfer of economic benefits from the VIE to Baoding Shengde and to direct the activities of the VIE.
IT Tech Packaging, through Baoding Shengde, has signed various agreements with the VIE and shareholders of the VIE to allow the transfer of economic benefits from the VIE to Baoding Shengde and to direct the activities of the VIE.
Because of our corporate structure, we as well as the investors are subject to unique risks due to uncertainty of the interpretation and the application of the PRC laws and regulations, including but not limited to regulatory review of oversea listing of PRC companies through a special purpose vehicle.
We are subject to risks due to the uncertainty of the interpretation and application of the laws and regulations of the PRC regarding the consolidated VIE and the VIE structure, including, but not limited to, regulatory review of overseas listing of PRC companies through a special purpose vehicle and the validity and enforcement of the contractual arrangements with the consolidated VIE.
Consumption of uncoated offset printing paper in China amounted to 17.93 million tonnes in 2021, an increase of 0.56% as compared to 2020. The paper making industry in China is concentrated in the east coast provinces.
Consumption of uncoated offset printing paper in China amounted to 16.78 million tonnes in 2022, a decrease of 6.41% as compared to 2021. The paper making industry in China is concentrated in the east coast provinces.
For the year ended December 31, 2022, the cash flows occurred between IT Tech Packaging, its subsidiaries and the VIE included (i) funding through Shengde Holdings Inc. to Baoding Shengde, with an amount of $6,500,000 as capital contributions; (ii) Baoding Shengde loans to Dongfang Paper with total amount of $1,727,644; (iii) Baoding Shengde loans to Tengsheng Paper with total amount of $1,923,845; and (iv) funding through Shengde Holdings Inc. to Qianrong, with an amount of $3,500,000 as capital contributions.
For the year ended December 31, 2023, the major cash flows occurred between IT Tech Packaging, its subsidiaries and the VIE included (i) loans in the total amount of $4,251,821 provided by Baoding Shengde to Tengsheng Paper; (ii) loans in the total amount of $2,834,547 from Baoding Shengde loans to Dongfang Paper; (iii) the payment in the amount of $5,491,139 made from Dongfang Paper to Baoding Shengde for purchase of raw materials; and (iv) funding through Shengde Holdings Inc. to Qianrong, with an amount of $500,000 as capital contributions.
Consumption of corrugating medium paper in China amounted to 29.77 million tonnes in 2021, an increase of 7.24% as compared to 2020. Uncoated offset printing paper production in China totaled 17.20 million tonnes in 2021, a 0.58% decrease from 2019.
Consumption of corrugating medium paper in China amounted to 30.10 million tonnes in 2022, an increase of 1.11% as compared to 2021. Uncoated offset printing paper production in China totaled 17.35 million tonnes in 2022, a 0.87% increase from 2021.
The noise pollution has been included in the Pollution Discharge Permit, and we conduct quarterly test on the noise through qualified testing institutions to comply with the laws, which is required by laws. Consolidation We conduct substantially all of our business in China through Dongfang Paper, the VIE, due to PRC legal restrictions of foreign ownership in certain sectors.
The noise pollution has been included in the Pollution Discharge Permit, and we conduct quarterly test on the noise through qualified testing institutions to comply with the laws, which is required by laws.
For the year ended December 31, 2022, three major suppliers who individually accounted for more than 5% of our total purchase are as follows: 2022 Purchase % of Amount Total (USD$) Purchase Company A (Hebei) 66,560,547 76 % Company B (Hebei) 12,955,766 15 % Company C (Hebei) 4,864,447 6 % Total Major Suppliers 84,103,790 97 % 17 Competition Dongfang Paper’s main competitors are: Chenming Paper Group Limited, Huatai Group Limited, Nine Dragons Paper (Holdings) Limited and Sun Paper Group Limited.
For the year ended December 31, 2023, three major suppliers who individually accounted for more than 5% of our total purchase are as follows: 2023 Purchase % of Amount Total (USD$) Purchase Company A (Hebei) 56,159,754 72 % Company B (Hebei) 13,631,622 17 % Company C (Hebei) 5,034,368 6 % Total Major Suppliers 64,825,744 95 % 18 Competition Dongfang Paper’s main competitors are: Chenming Paper Group Limited, Huatai Group Limited, Nine Dragons Paper (Holdings) Limited and Sun Paper Group Limited.
On June 24, 2009, Zhao Tianqing, the sole shareholder of Shengde Holdings Inc., assigned to the Company, for good and valuable consideration, 100 shares representing 100% of the issued and outstanding shares of Shengde Holdings Inc.
Dongfang Paper shareholder will cease to be a party to the agreement once it transfers its equity interests with the prior approval of Baoding Shengde. 3 On June 24, 2009, Zhao Tianqing, the sole shareholder of Shengde Holdings Inc., assigned to the Company, for good and valuable consideration, 100 shares representing 100% of the issued and outstanding shares of Shengde Holdings Inc.
The terms of the agreement are binding on the parties for as long as the Dongfang Paper shareholders continue to hold any equity interest in Dongfang Paper. Dongfang Paper shareholder will cease to be a party to the agreement once it transfers its equity interests with the prior approval of Baoding Shengde.
The terms of the agreement are binding on the parties for as long as the Dongfang Paper shareholders continue to hold any equity interest in Dongfang Paper.
The three provinces with largest capacities showed moderate increases in paper production capacities; provinces with smaller capacities, such as, Chongqing, Hebei and Sichuan, showed noticeable increases as well. 2020 Capacity 2021 Capacity % Province (10k tonnes) (10k tonnes) Change Shandong 1,920 2,035 5.99 Guangdong 2,012 1,970 2.09 Jiangsu 1,402 1,415 0.93 Zhejiang 1,149 1,050 (8.62 ) Fujian 777 845 8.75 Henan 532 672 26.32 Hubei 427 570 33.49 Chongqing 352 423 20.17 Hebei 317 408 28.71 Sichuan 313 389 24.28 Data Sources: 2021 Annual Report of China’s Paper Industry, May 2022, China Paper Association 15 Customers We generally sell our corrugating medium paper to companies making corrugating cardboards and offset printing paper to printing companies.
The three provinces with largest capacities showed moderate decreases in paper production capacities. 2022 Capacity 2021 Capacity % Province (10k tonnes) (10k tonnes) Change Shandong 2,015 2,035 (0.98 ) Guangdong 1,969 1,970 (0.05 ) Jiangsu 1,373 1,415 (2.97 ) Zhejiang 1,193 1,050 13.62 Fujian 821 845 (2.84 ) Henan 715 672 6.40 Hubei 592 570 3.86 Guangxi 559 423 65.88 Chongqing 408 423 (3.55 ) Hebei 378 408 (7.35 ) Data Sources: 2022 Annual Report of China’s Paper Industry, May 2023, China Paper Association 16 Customers We generally sell our corrugating medium paper to companies making corrugating cardboards and offset printing paper to printing companies.
For the year ended December 31, 2022, three major customers who individually accounted for more than 5% of our total sales revenue are as follows: 2022 Sales Amount (USD$, net of % of applicable Total VAT) Revenue Company A (Hebei) 6,712,210 6.69 % Company B (Shandong) 6,126,070 6.10 % Company C (Hebei) 5,670,453 5.65 % Total Major Customers 1,8,508,733 18.44 % Seven of our top-ten customers of 2022 are also in the top-ten customer list in 2021, representing 78.48% of the 2021 top-ten customer sales.
For the year ended December 31, 2023, five major customers who individually accounted for more than 5% of our total sales revenue are as follows: 2023 Sales Amount (USD$, net of % of applicable Total VAT) Revenue Company A (Hebei) 6,387,786 7.38 % Company B (Shandong) 6,167,272 7.13 % Company C (Hebei) 6,097,717 7.05 % Company D (Shandong) 6,085,824 7.03 % Company E (Tianjin) 6,006,103 6.94 % Total Major Customers 30,744,703 35.53 % Eight of our top-ten customers of 2023 are also in the top-ten customer list in 2022, representing 85.66% of the 2022 top-ten customer sales.
Removed
We are also subject to the risks of uncertainty about any future actions of the PRC government in this regard. We may also be subject to sanctions imposed by PRC regulatory agencies including Chinese Securities Regulatory Commission (“CSRC”) if we fail to comply with their rules and regulations.
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As a holding company with no material operations of our own, we conduct our operations through the VIE established in the PRC.
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Although the Company is currently not required to obtain permission from any of the PRC central or local government to obtain such permission and has not received any denial to list on the U.S. exchange, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to its business or industry, if we inadvertently conclude that such approvals are not required when they are, or applicable laws, regulations, or interpretations change and we are required to obtain approval in the future.
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We do not have any equity ownership of the VIE; instead, we control and receive the economic benefits of the VIE’s business operations through the VIE Agreements, and we consolidate the VIE for accounting purposes only because we met the conditions under the U.S. GAAP to consolidate the VIE.
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Our auditor is headquartered in the United States and is subject to inspection by the PCAOB on a regular basis with the last inspection in November 2021.
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The VIE Agreements are used to provide contractual exposure to foreign investment in China-based companies where Chinese law prohibits direct foreign investment in the Chinese operating companies.
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Impact of COVID-19 on Our Operations and Financial Performance Outbreaks of epidemic, pandemic, or contagious diseases such as COVID-19, could have an adverse effect on our business, financial condition, and results of operations. The spread of COVID-19 has resulted in the World Health Organization declaring the outbreak of COVID-19 as a global pandemic.
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Pursuant to the VIE Agreements, the VIE pays service fees equal to 80% of its total annual net profits to Baoding Shengde, while Baoding Shengde has the power to direct the activities of the VIE that can significantly impact the VIE’s economic performance and has the right to receive substantially all of the economic benefits of the VIE.
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Substantially all of our revenues and workforce are concentrated in China.
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Such contractual arrangements are designed so that the operations of the VIE are solely for the benefit of Baoding Shengde and ultimately, ITP. As such, under the U.S. GAAP, ITP is deemed to have a controlling financial interest in, and be the primary beneficiary of, the VIE for accounting purposes and must consolidate the VIE.
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In response to the intensifying efforts to contain the spread of COVID-19, the Chinese government took a number of actions, which included extending the Chinese New Year holiday, quarantining individuals suspected of having COVID-19, asking residents in China to stay at home and to avoid public gathering, among other things.
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As a result of the prohibitions on direct investments by foreign enterprises, we conduct our production and distribution of paper products and medical face masks in China primarily through a series of VIE Agreements among Baoding Shende, the VIE and the VIE’s shareholders.
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On the basis of scientific assessment of the characteristics of the virus and the pandemic situation, as well as reference to the prevention practices of other countries, at the end of 2022, the Chinese government refined its COVID-19 prevention and control measures and stopped conducting nucleic acid testing for all residents.
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Substantially all of the VIE’s operations are conducted in China in the paper making industry, over which the Chinese government exercises significant oversight and discretion. Due to PRC legal restrictions on foreign ownership in the paper making industry, ITP is unable to own any equity interest in the consolidated VIE.
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By the end of 2022, vaccination rate has exceeded 90%. And normal life is returning. Under such circumstances, the government has taken positive service measures, including tax incentives, bank loan and financial support, etc, to support domestic enterprises to overcome difficulties. The market consolidation will be expedited eventually.
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The VIE structure is used to provide investors with exposure to foreign investment in China-based companies where PRC laws restrict direct foreign investment in certain aspects of the paper making industry in which the VIE operates. As a result, you are not directly investing in and may never hold equity interests in the VIE in China.
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Since we resumed business operations after the outbreak of COVID-19, the Company kept continuous attention on the development of the COVID-19 pandemic and reacted actively to its impact on the financial position and operating results of the Company.
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The VIE structure involves unique risks to investors. The VIE Agreements have not been tested in a court of law and may not be effective in providing control over the VIE as would direct equity ownership.
Removed
As of the date of the annual report, COVID-19’s adverse impacts on the company’s financial position and operating result as of December 31, 2022 were limited. 12 Our Business We, through our PRC Subsidiaries and VIE, engage in production and distribution of three categories of paper products: corrugating medium paper, offset printing paper, tissue paper products and medical face masks in China.
Added
We are also subject to the risk that the Chinese regulatory authorities could disallow the VIE structure, which could result in a material change in the operations of us, the consolidated VIE and the value of ITP’s securities could decline or become worthless.
Removed
When the renovation is completed, we intend to use the renovated production line to produce high-profit margin specialty papers. Our current plan is to complete the renovation project, put in place a new production and marketing team and launch the renovated production line as PM7 by the end of 2023.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

55 edited+12 added−21 removed303 unchanged
Biggest changeHowever, it is uncertain when the Administration Provision and the Measures will take effect or if they will take effect as currently drafted. 35 We believe that, as of the date of this annual report, we are not required to obtain any permission from PRC authorities to operate and issue securities to foreign investors, including permissions from the CSRC or CAC.
Biggest changeWhile such rules have become into effect, the Chinese government may exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers, which could significantly limit or completely hinder our ability to continue to offer our securities to investors and could cause the value of our securities to significantly decline or become worthless ” 37 We believe that, as of the date of this annual report, we are not required to obtain any permission from PRC authorities to operate and issue securities to foreign investors, including permissions from the CSRC or CAC.
If we fail to complete such registrations or obtain such approvals, our ability to to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business. The fluctuation of the Renminbi may harm your investment.
If we fail to complete such registrations or obtain such approvals, our ability to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business. The fluctuation of the Renminbi may harm your investment.
From time to time, we may be subject to legal proceedings and claims alleging infringement of patents, trademarks, copyrights or other intellectual property rights, or misappropriation of creative ideas or formats, or other infringement of proprietary, which may materially and adversely affect our business, financial condition and prospects. 27 Risks Related To Doing Business in the PRC The PRC government has significant oversight and discretion over the conduct of a PRC company’s business operations or to exert control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, and may intervene with or influence our operations, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless, as the government deems appropriate to further regulatory, political and societal goals.
From time to time, we may be subject to legal proceedings and claims alleging infringement of patents, trademarks, copyrights or other intellectual property rights, or misappropriation of creative ideas or formats, or other infringement of proprietary, which may materially and adversely affect our business, financial condition and prospects. 28 Risks Related To Doing Business in the PRC The PRC government has significant oversight and discretion over the conduct of a PRC company’s business operations or to exert control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, and may intervene with or influence our operations, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless, as the government deems appropriate to further regulatory, political and societal goals.
On January 24, 2021, the State Council issued Regulations on the Administration of Pollutant Discharge Permits, which has effected on March 1, 2022. Additionally, such companies were required to obtain and annually renew a Pollution Discharge Permit in order to conduct their operations.
On January 24, 2021, the State Council issued Regulations on the Administration of Pollutant Discharge Permits, which has effected since March 1, 2022. Additionally, such companies were required to obtain and annually renew a Pollution Discharge Permit in order to conduct their operations.
Therefore, as a practical matter, although no assurances can be given, the Chinese legal infrastructure, while different in operation from its United States counterpart, should not present any significant impediment to the operation of foreign invested enterprises. 36 Because our principal assets are located outside of the United States and most of our directors and officers reside outside of the United States, it may be difficult for you to effect service of legal process, enforce your rights based on U.S. federal securities laws against us and our officers or to enforce U.S. court judgment against us or them in the PRC.
Therefore, as a practical matter, although no assurances can be given, the Chinese legal infrastructure, while different in operation from its United States counterpart, should not present any significant impediment to the operation of foreign invested enterprises. 38 Because our principal assets are located outside of the United States and most of our directors and officers reside outside of the United States, it may be difficult for you to effect service of legal process, enforce your rights based on U.S. federal securities laws against us and our officers or to enforce U.S. court judgment against us or them in the PRC.
We believe none of us, our PRC Subsidiaries, the consolidated VIE or its subsidiaries is a CIIO, and we believe that we, all of our PRC Subsidiaries, the consolidated VIE and its subsidiary are not required to go through cybersecurity review from the CAC to continue to offer our securities or operate the business of the consolidated VIE and its subsidiary.
We believe none of us, our PRC Subsidiaries, the consolidated VIE or its subsidiaries is a CIIO, and we believe that, to date, we, all of our PRC Subsidiaries, the consolidated VIE and its subsidiary are not required to go through cybersecurity review from the CAC to continue to offer our securities or operate the business of the consolidated VIE and its subsidiary.
If our auditor is not permitted to provide requested audit work papers located in China to the PCAOB, investors would be deprived of the benefits of PCAOB’s oversight of our auditor through such inspections which could result in limitation or restriction to our access to the U.S. capital markets, and trading of our securities may be prohibited under the HFCAA, which would result in the delisting of our securities from the NYSE American. 41 If we fail to comply with Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner, our business could be harmed and our stock price could decline.
If our auditor is not permitted to provide requested audit work papers located in China to the PCAOB, investors would be deprived of the benefits of PCAOB’s oversight of our auditor through such inspections which could result in limitation or restriction to our access to the U.S. capital markets, and trading of our securities may be prohibited under the HFCAA, which would result in the delisting of our securities from the NYSE American. 43 If we fail to comply with Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner, our business could be harmed and our stock price could decline.
If we are not successful in addressing any or all of these risks, our business may be materially and adversely affected. 22 Dongfang Paper and Baoding Shengde’s failure to compete effectively may adversely affect our ability to generate revenue.
If we are not successful in addressing any or all of these risks, our business may be materially and adversely affected. Dongfang Paper and Baoding Shengde’s failure to compete effectively may adversely affect our ability to generate revenue.
Pursuant to the PRC Cyber security Law, which was promulgated by the Standing Committee of the National People’s Congress on November 7, 2016 and took effect on June 1, 2017, personal information and important data collected and generated by a critical information infrastructure operator in the course of its operations in China must be stored in China, and if a critical information infrastructure operator purchases internet products and services that affects or may affect national security, it should be subject to cyber security review by the Cyberspace Administration of China (“CAC”).
Pursuant to the PRC Cybersecurity Law, which was promulgated by the Standing Committee of the National People’s Congress on November 7, 2016 and took effect on June 1, 2017, personal information and important data collected and generated by a critical information infrastructure operator in the course of its operations in China must be stored in China, and if a critical information infrastructure operator purchases internet products and services that affects or may affect national security, it should be subject to cybersecurity review by the Cyberspace Administration of China (“CAC”).
If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders of our common stock. 33 PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from making loans or additional capital contributions to our PRC Subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders of our common stock. 35 PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from making loans or additional capital contributions to our PRC Subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
We cannot assure you that we will be able to compete effectively with current or future competitors or that the competitive pressures we face will not harm our business. We may not be able to effectively control and manage our growth.
We cannot assure you that we will be able to compete effectively with current or future competitors or that the competitive pressures we face will not harm our business. 23 We may not be able to effectively control and manage our growth.
The failure by us to obtain any certificate, permit, and license necessary for our operations or the failure by us to obtain the renewal of any such certificate, permit or license may materially and adversely affect our business, prospects, financial condition and results of operation.
The failure by us to maintain or obtain any certificate, permit, and license necessary for our operations or the failure by us to obtain the renewal of any such certificate, permit or license may materially and adversely affect our business, prospects, financial condition and results of operation.
Based on our understanding of the current PRC laws, we believe that the CSRC’s approval is not required to be obtained for ITP’s listing on NYSE American; however, there are substantial uncertainties regarding the interpretation and application of the M&A Rules, other PRC Laws and future PRC laws and regulations, and there can be no assurance that any PRC governmental agency will not take a view that is contrary to or otherwise different from our belief stated herein. 28 Recent greater oversight by the Cyberspace Administration of China, or the “CAC,” over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact the business of us, the consolidated VIE and its subsidiary and investing in our securities.
Based on our understanding of the current PRC laws, we believe that the CSRC’s approval is not required to be obtained for ITP’s continued listing on NYSE American; however, there are substantial uncertainties regarding the interpretation and application of the M&A Rules, other PRC Laws and future PRC laws and regulations, and there can be no assurance that any PRC governmental agency will not take a view that is contrary to or otherwise different from our belief stated herein. 29 Recent greater oversight by the Cyberspace Administration of China, or the “CAC,” over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact the business of us, the consolidated VIE and its subsidiary and investing in our securities.
The Data Security Law also sets forth the data security protection obligations for entities and individuals handling personal data, including that no entity or individual may acquire such data by stealing or other illegal means, and the collection and use of such data should not exceed the necessary limits The costs of compliance with, and other burdens imposed by, PRC Cyber security Law and any other cyber security and related laws may limit the use and adoption of our products and services and could have an adverse impact on our business.
The Data Security Law also sets forth the data security protection obligations for entities and individuals handling personal data, including that no entity or individual may acquire such data by stealing or other illegal means, and the collection and use of such data should not exceed the necessary limits The costs of compliance with, and other burdens imposed by, PRC Cybersecurity Law and any other cybersecurity and related laws may limit the use and adoption of our products and services and could have an adverse impact on our business.
If these disputes or proceedings were to impair our control over our VIE, we may not be able to maintain effective control over our business operations in the PRC and thus would not be able to continue to consolidate our VIE’s financial results, which would in turn result in a material adverse effect on our business, operations and financial condition. 38 In order to comply with PRC regulatory requirements, we operate our businesses through companies with which we have contractual relationships but in which we do not have controlling ownership.
If these disputes or proceedings were to impair our control over our VIE, we may not be able to maintain effective control over our business operations in the PRC and thus would not be able to continue to consolidate our VIE’s financial results, which would in turn result in a material adverse effect on our business, operations and financial condition. 40 In order to comply with PRC regulatory requirements, we operate our businesses through companies with which we have contractual relationships but in which we do not have controlling ownership.
While the international reaction to the Renminbi revaluation has generally been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant depreciation of the Renminbi against the U.S. dollar. 34 Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may materially adversely affect us.
While the international reaction to the Renminbi revaluation has generally been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant depreciation of the Renminbi against the U.S. dollar. 36 Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may materially adversely affect us.
Zhenyong Liu, our Chairman of the Board and Chief Executive Officer, Jing Hao, our Chief Financial Officer, Dahong Zhou, our Secretary, and Marco Ku Hon Wai, Wenbing Christopher Wang, Lusha Niu, and Fuzeng Liu, our directors, are key personnel with rights to indemnification under our Articles of Incorporation. 23 We are dependent on certain key personnel and loss of these key personnel could have a material adverse effect on our business, financial condition and results of operations.
Zhenyong Liu, our Chairman of the Board and Chief Executive Officer, Jing Hao, our Chief Financial Officer, Dahong Zhou, our Secretary, and Marco Ku Hon Wai, Wenbing Christopher Wang, Lusha Niu, and Fuzeng Liu, our directors, are key personnel with rights to indemnification under our Articles of Incorporation. 24 We are dependent on certain key personnel and loss of these key personnel could have a material adverse effect on our business, financial condition and results of operations.
If we are not able to purchase the equity of Dongfang Paper, then we will lose a substantial portion of our ability to control Dongfang Paper and our ability to ensure that Dongfang Paper will act in our interests. 40 Risks Related to Our Common Stock Our common stock may be delisted from the NYSE American under the Holding Foreign Companies Accountable Act if the PCAOB is unable to adequately inspect audit documentation located in China.
If we are not able to purchase the equity of Dongfang Paper, then we will lose a substantial portion of our ability to control Dongfang Paper and our ability to ensure that Dongfang Paper will act in our interests. 42 Risks Related to Our Common Stock Our common stock may be delisted from the NYSE American under the Holding Foreign Companies Accountable Act if the PCAOB is unable to adequately inspect audit documentation located in China.
If these or other disputes between the shareholders of the VIE and third parties were to impair our relationship with the VIE, our ability to consolidate the financial results of the VIE would be affected, which would in turn result in a material adverse effect on the business, operations and financial condition. 39 The shareholders of Dongfang Paper may have actual or potential conflicts of interests with us, which may adversely affect our business.
If these or other disputes between the shareholders of the VIE and third parties were to impair our relationship with the VIE, our ability to consolidate the financial results of the VIE would be affected, which would in turn result in a material adverse effect on the business, operations and financial condition. 41 The shareholders of Dongfang Paper may have actual or potential conflicts of interests with us, which may adversely affect our business.
Any of these factors could have a material adverse effect on our business, prospects, financial condition and results of operations. 37 Although the direct impact of the current international trade tensions and political tensions between the United States and China, and any escalation of such tensions, on the paper making industry in China is uncertain, the negative impact on general, economic, political and social conditions may adversely impact our business, financial condition and results of operations.
Any of these factors could have a material adverse effect on our business, prospects, financial condition and results of operations. 39 Although the direct impact of the current international trade tensions and political tensions between the United States and China, and any escalation of such tensions, on the paper making industry in China is uncertain, the negative impact on general, economic, political and social conditions may adversely impact our business, financial condition and results of operations.
We do not, at this time, intend to distribute earnings or settle amounts owed under the VIE Agreements. 32 In the future, cash proceeds raised from overseas financing activities may be transferred by ITP to our PRC Subsidiaries and other subsidiaries or the consolidated VIE and its subsidiary via capital contributions or loans, as the case may be.
We do not, at this time, intend to distribute earnings or settle amounts owed under the VIE Agreements. 34 In the future, cash proceeds raised from overseas financing activities may be transferred by ITP to our PRC Subsidiaries and other subsidiaries or the consolidated VIE and its subsidiary via capital contributions or loans, as the case may be.
If any of the abovementioned events were to occur, we may be unable to meet customer demand, which may adversely affect our sales and net income. 25 Our certificates, permits, and licenses related to our papermaking operations are subject to governmental control and renewal and failure to obtain renewal will cause all or part of our operations to be terminated.
If any of the abovementioned events were to occur, we may be unable to meet customer demand, which may adversely affect our sales and net income. 26 Our certificates, permits, and licenses related to our papermaking operations are subject to governmental control and renewal and failure to obtain renewal will cause all or part of our operations to be terminated.
Any business disruption, natural disaster, or product liability claim could result in our incurring substantial costs and diversion of resources, which would have an adverse effect on our business and results of operations. 26 Our failure to protect our intellectual property rights may undermine our competitive position, and external infringements of our intellectual property rights may adversely affect our business.
Any business disruption, natural disaster, or product liability claim could result in our incurring substantial costs and diversion of resources, which would have an adverse effect on our business and results of operations. 27 Our failure to protect our intellectual property rights may undermine our competitive position, and external infringements of our intellectual property rights may adversely affect our business.
Given such uncertainty, we may be further required to suspend our relevant business, or face other penalties, which could materially and adversely affect our business, financial condition, and results of operations. 30 Changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in the PRC and the profitability of such business.
Given such uncertainty, we may be further required to suspend our relevant business, or face other penalties, which could materially and adversely affect our business, financial condition, and results of operations. 32 Changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in the PRC and the profitability of such business.
Among the material laws that we are subject to are the Price Law of The People’s Republic of China, Measurement Law of The People’s Republic of China, Tax Law, Environmental Protection Law, Contract Law, Patent Law, Accounting Laws and Labor Law. 31 A slowdown, inflation or other adverse developments in the PRC economy may harm our customers and the demand for our services and products.
Among the material laws that we are subject to are the Price Law of The People’s Republic of China, Measurement Law of The People’s Republic of China, Tax Law, Environmental Protection Law, Contract Law, Patent Law, Accounting Laws and Labor Law. 33 A slowdown, inflation or other adverse developments in the PRC economy may harm our customers and the demand for our services and products.
While we have not detected any significant deficiency or material weakness in our internal control and with respect to the assessment of the internal control for the year ended December 31, 2022, we cannot guarantee the implementation of controls and procedures in future years to be without any significant deficiency or material weakness.
While we have not detected any significant deficiency or material weakness in our internal control and with respect to the assessment of the internal control for the year ended December 31, 2023, we cannot guarantee the implementation of controls and procedures in future years to be without any significant deficiency or material weakness.
Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cyber security reviews, and expanding the efforts in anti-monopoly enforcement.
Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement.
In addition, an interruption in the supply of natural gas could cause a material disruption at our facilities. At present, our raw materials including natural gas are purchased from a number of suppliers, of which the three largest suppliers account for over 97% of all purchases.
In addition, an interruption in the supply of natural gas could cause a material disruption at our facilities. At present, our raw materials including natural gas are purchased from a number of suppliers, of which the three largest suppliers account for over 95% of all purchases.
This liability could be substantial and the occurrence of such loss or liability may have a material adverse effect on our business, financial condition and prospects. 24 Our operating results also depend on the availability and pricing of energy and raw materials.
This liability could be substantial and the occurrence of such loss or liability may have a material adverse effect on our business, financial condition and prospects. 25 Our operating results also depend on the availability and pricing of energy and raw materials.
Due to the lack of further interpretations, the exact scope of “critical information infrastructure operator” remains unclear. 29 On April 13, 2020, twelve Chinese government agencies jointly promulgated the Measures for Cyber security Review (2020 version) (“Old Measures”), which became effective on June 1, 2020, set forth the cyber security review mechanism for critical information infrastructure operators, and provided that critical information infrastructure operators (“CIIOs”) who intend to procure network products and services that affect or may affect national security shall be subject to a cyber security review.
Due to the lack of further interpretations, the exact scope of “critical information infrastructure operator” remains unclear. 31 On April 13, 2020, twelve Chinese government agencies jointly promulgated the Measures for Cybersecurity Review (2020 version) (“Old Measures”), which became effective on June 1, 2020, set forth the cybersecurity review mechanism for critical information infrastructure operators, and provided that critical information infrastructure operators (“CIIOs”) who intend to procure network products and services that affect or may affect national security shall be subject to a cybersecurity review.
These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies. These opinions proposed to take effective measures, such as promoting the construction of relevant regulatory systems, to deal with the risks and incidents facing China-based overseas-listed companies and the demand for cyber security and data privacy protection.
These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies. These opinions proposed to take effective measures, such as promoting the construction of relevant regulatory systems, to deal with the risks and incidents facing China-based overseas-listed companies and the demand for cybersecurity and data privacy protection.
On January 4, 2022, the CAC issued the revised Measures on Cyberspace Security Review (the “Revised Measures”)that has came into effect on February 15, 2022, which required that, among others, in addition to “operator of critical information infrastructure,” any “network platform operator data processor” controlling personal information of no less than one million users which seeks to list in a foreign stock exchange should also be subject to cyber security review.
On January 4, 2022, the CAC issued the revised Measures on Cyberspace Security Review (the “Revised Measures”) that has come into effect on February 15, 2022, which required that, among others, in addition to “operator of critical information infrastructure,” any “network platform operator data processor” controlling personal information of no less than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review.
The issuance of debt could result in effective subordination of stockholders’ interests to the debt, create the possibility of default, and limit our financial and business alternatives. 42 Item 1B. Unresolved Staff Comments Not applicable.
The issuance of debt could result in effective subordination of stockholders’ interests to the debt, create the possibility of default, and limit our financial and business alternatives. 44 Item 1B. Unresolved Staff Comments Not applicable.
The Measures for Cyber security Review issued by the CAC on January 4, 2022 also required that, among others, “critical information infrastructure” or internet platform operator holding over one million users’ personal information to apply for a cyber security review before any listing at a foreign country.
The Measures for Cybersecurity Review issued by the CAC on January 4, 2022 also required that, among others, “critical information infrastructure” or internet platform operator holding over one million users’ personal information to apply for a cybersecurity review before any listing at a foreign country.
Further, if the enacted version of the Measures for Cyber security Review mandates clearance of cyber security review and other specific actions to be completed by companies like us, we face uncertainties as to whether such clearance can be timely obtained, or at all.
Further, if the enacted version of the Measures for Cybersecurity Review mandates clearance of cybersecurity review and other specific actions to be completed by companies like us, we face uncertainties as to whether such clearance can be timely obtained, or at all.
The Revised Measures also establish a Cyber security Review Office (the “CRO”), an administrative body within the CAC, to formulate the regulations for cyber security review and to lead the cyber security review process. Applicable CIIOs and NP operators are required to submit an application to the CRO, and the CRO will assess whether a cyber security review is required.
The Revised Measures also establish a Cybersecurity Review Office (the “CRO”), an administrative body within the CAC, to formulate the regulations for cybersecurity review and to lead the cybersecurity review process. Applicable CIIOs and NP operators are required to submit an application to the CRO, and the CRO will assess whether a cybersecurity review is required.
Moreover, the CAC issued the Measures of Cyber security Review (Revised Draft for Comments) on July 10, 2021, which requires operators with personal information of more than one million users who want to list abroad to file a cyber security review with the CAC.
Moreover, the CAC issued the Measures of Cybersecurity Review (Revised Draft for Comments) on July 10, 2021, which requires operators with personal information of more than one million users who want to list abroad to file a cybersecurity review with the CAC.
Therefore, it is uncertain whether the future regulatory changes would impose additional restrictions on our business. We believe that we are currently not be subject to the cyber security review by the CAC, given the factors discussed above.
Therefore, it is uncertain whether the future regulatory changes would impose additional restrictions on our business. We believe that we are currently not be subject to the cybersecurity review by the CAC, given the factors discussed above.
Effective measures, such as promoting the construction of relevant regulatory systems, are to be taken to deal with the risks and incidents of China-based overseas-listed companies, cyber security and data privacy protection requirements and similar matters.
Effective measures, such as promoting the construction of relevant regulatory systems, are to be taken to deal with the risks and incidents of China-based overseas-listed companies, cybersecurity and data privacy protection requirements and similar matters.
As a result, he is able to influence the outcome of stockholder votes on various matters, including the election of directors and extraordinary corporate transactions including business combinations. Yet Mr. Liu’s interests may differ from those of other stockholders. Furthermore, ownership of 4.7% of our common stock by Mr.
As a result, he is able to influence the outcome of stockholder votes on various matters, including the election of directors and extraordinary corporate transactions including business combinations. Yet Mr. Liu’s interests may differ from those of other stockholders. Furthermore, ownership of 5.3% of our common stock by Mr.
In the event that we are subject to any mandatory cyber security review and other specific actions required by the CAC, we face uncertainty as to whether any clearance or other required actions can be timely completed, or at all.
In the event that we are subject to any mandatory cybersecurity review and other specific actions required by the CAC, we face uncertainty as to whether any clearance or other required actions can be timely completed, or at all.
The revised draft of the Measures for Cyber security Review is in the process of being formulated and it is also unclear on how it will be interpreted, amended and implemented by the relevant PRC governmental authorities.
The revised draft of the Measures for Cybersecurity Review is in the process of being formulated and it is also unclear on how it will be interpreted, amended and implemented by the relevant PRC governmental authorities.
All of our operations are conducted in the PRC and all of our revenue is generated from sales in the PRC. Although the PRC economy has grown significantly in recent years, we cannot assure you that this growth will continue. In 2022, China’s Gross Domestic Product (“GDP”) growth rate was 3.0% as compared to 8.1% in 2021.
All of our operations are conducted in the PRC and all of our revenue is generated from sales in the PRC. Although the PRC economy has grown significantly in recent years, we cannot assure you that this growth will continue. In 2023, China’s Gross Domestic Product (“GDP”) growth rate was 5.2% as compared to 3.0% in 2022.
Our Chairman, Chief Executive Officer and 4.7% shareholder, Zhenyong Liu, owns 100% of the equity interest in Dongfang Paper. Conflicts of interests between his duties to IT Tech and to Dongfang Paper may arise.
Our Chairman, Chief Executive Officer and 5.3% shareholder, Zhenyong Liu, owns 100% of the equity interest in Dongfang Paper. Conflicts of interests between his duties to IT Tech and to Dongfang Paper may arise.
The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. According to the Bureau of the Fiscal Service, as of December 31, 2022, $1 is converted into 6.9646 Yuan (RMB).
The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. According to the Bureau of the Fiscal Service, as of December 31, 2023, $1 is converted into 7.0827 Yuan (RMB).
Under the new policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. This change in policy resulted in an approximately 8.20% appreciation of the Renminbi against the U.S. dollar as of December 31, 2022.
Under the new policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. This change in policy resulted in an approximately 4.55% appreciation of the Renminbi against the U.S. dollar as of December 31, 2023.
Thus, if Dongfang Paper has RMB1,000,000 in assets and Renminbi is depreciated against the U.S. dollar by 15%, then the assets will be valued at $124,855 as opposed to $143,583 prior to the depreciation. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar.
Thus, if Dongfang Paper has RMB1,000,000 in assets and Renminbi is depreciated against the U.S. dollar by 15%, then the assets will be valued at $122,773 as opposed to $141,189 prior to the depreciation. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar.
Cybersecurity review and network data security review could also result in negative publicity with respect to our Company and diversion of our managerial and financial resources, which could materially and adversely affect the business, financial conditions, and results of operations of us, the consolidated VIE and its subsidiary.
Cybersecurity review and network data security review could also result in negative publicity with respect to our Company and diversion of our managerial and financial resources, which could materially and adversely affect the business, financial conditions, and results of operations of us, the consolidated VIE and its subsidiary. 30 The occurrence of security breaches and cyber-attacks could negatively impact our business.
Our officers and directors control us through their positions and stock ownership and their interests may differ from other stockholders. As of March 23, 2023, there were 10,065,920 shares of our common stock issued and outstanding. Mr. Zhenyong Liu, our Chief Executive Officer, beneficially owns approximately 4.7% of our common stock.
Our officers and directors control us through their positions and stock ownership and their interests may differ from other stockholders. As of March 27, 2024, there were 10,065,920 shares of our common stock issued and outstanding. Mr. Zhenyong Liu, our Chief Executive Officer, beneficially owns approximately 5.3% of our common stock.
Our auditor, WWC, P.C., Certified Public Accountants, the independent registered public accounting firm that issued the audit report included in our annual report, an auditor of companies that are traded publicly in the United States and an U.S.-based accounting firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards.
Our auditor, GGF CPA Limited , the independent registered public accounting firm that issued the audit report included in our annual report, an auditor of companies that are traded publicly in the United States and a China-based accounting firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards.
Thus, if we raise 1,000,000 U.S. dollars and the Renminbi appreciates against the U.S. dollar by 15%, then the proceeds will be worth only RMB5,919,910 as opposed to RMB 6,964,600 prior to the appreciation.
Thus, if we raise 1,000,000 U.S. dollars and the Renminbi appreciates against the U.S. dollar by 15%, then the proceeds will be worth only RMB6,020,295 as opposed to RMB 7,082,700 prior to the appreciation.
For the year ended December 31, 2022, the cash flows occurred between IT Tech Packaging, its subsidiaries and the VIE included (i) funding through Shengde Holdings Inc. to Baoding Shengde, with an amount of $6,500,000 as capital contributions; (ii) Baoding Shengde loans to Dongfang Paper with total amount of $1,727,644;(iii) Baoding Shengde loans to Tengsheng Paper with total amount of $1,923,845; and (iv) funding through Shengde Holdings Inc. to Qianrong, with an amount of $3,500,000 as capital contributions.
For the year ended December 31, 2023, the cash flows occurred between IT Tech Packaging, its subsidiaries and the VIE included (i) loans in the amount of $4,233,999 provided by Baoding Shengde to Tengsheng Paper; (ii) loans in the amount of $2,822,666 provided by Baoding Shengde to Dongfang Paper; (iii) the payment in the amount of 5,468,122 made by Dongfang Paper to Baoding Shengde for purchase of raw materials; and (iv) funding through Shengde Holdings Inc. to Qianrong, with an amount of $500,000 as capital contributions.
These laws continue to develop, and the PRC government may adopt other rules and restrictions in the future. Non-compliance could result in penalties or other significant legal liabilities.
In addition, our business may be subject to PRC laws relating to the collection, use, sharing, retention, security, and transfer of confidential and private information, such as personal information and other data. These laws continue to develop, and the PRC government may adopt other rules and restrictions in the future. Non-compliance could result in penalties or other significant legal liabilities.
Our auditor is based in the United States and is subject to inspection by the PCAOB on a regular basis with the last inspection in November 2021. However, our auditor’s working papers related to us and the consolidated VIE and its subsidiary are located in China.
However, our auditor’s working papers related to us and the consolidated VIE and its subsidiary are located in China.
We have been actively cooperating with the government in implementing corresponding epidemic control measures to fulfill our social responsibility, by early prevention and control, to ensure the minimize adverse impact of the epidemic. Our operating history may not serve as an adequate basis to judge our future prospects and results of operations.
Item 1A. Risk Factors Risks Relating to our Business Our operating history may not serve as an adequate basis to judge our future prospects and results of operations.
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Item 1A. Risk Factors Risks Relating to our Business Our business, financial condition and results of operations may be materially adversely affected by global health epidemics, including the COVID-19 pandemic. Outbreaks of epidemic, pandemic, or contagious diseases such as COVID-19, could have an adverse effect on our business, financial condition, and results of operations.
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Information technology systems are important to our business and operations. We are subject to attempts to compromise our security and information systems, including denial of service attacks, viruses, malicious software or ransomware, and exploitations of system flaws or weaknesses.
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The COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected the economies and financial markets worldwide..
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Error or malfeasance or other irregularities may also result in the failure of our or our third-party service providers’ cybersecurity measures and may give rise to a cybersecurity incident.
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Government efforts to contain the spread of the coronavirus including lockdowns of cities, business closures, restrictions on travel and emergency quarantines, and responses by businesses and individuals to reduce the risk of exposure to infection, including reduced travel, cancellation of meetings and events, and implementation of work-at-home policies, have caused significant disruptions to the global economy and normal business operations.
Added
The techniques used to conduct security breaches and cyber-attacks, as well as the sources and targets of these attacks, change frequently and may not be recognized until launched against us or our third-party service providers. We or our third-party service providers may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks.
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Substantially all of our revenues and workforce are concentrated in China.
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The primary risks that could directly result from the occurrence of security breaches and cyber-attacks include operational interruption, financial losses, personal information leakage and non-compliance. The occurrence of such incidents could negatively impact our business operations and our relationships with customers and employees, and damage our reputation.
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In response to the intensifying efforts to contain the spread of COVID-19, the Chinese government took a number of actions, which included extending the Chinese New Year holiday, quarantining individuals suspected of having COVID-19, asking residents in China to stay at home and to avoid public gathering, among other things.
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If we or our third-party service providers are unable to avert security breaches and cyber-attacks, we could incur significantly higher costs, including remediation costs to repair damage caused by the breach, costs to deploy additional personnel and network protection technologies, train employees and engage third-party experts and consultants, as well as litigation costs resulting from the incident.
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For the year 2022, COVID-19 caused temporary closure of our CMP production and offset printing paper was suspended for the whole year, and as a result, our revenue of CMP decreased by 26.60% for 2022.
Added
These costs, which could be material, could adversely impact our results of operations in the period in which they are incurred and may not meaningfully limit the success of future attempts to breach our information technology systems. Our business may be subject to a variety of PRC laws and other obligations regarding cybersecurity and data protection.
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It is, however, still unclear how the pandemic will evolve going forward, and we cannot assure you whether the COVID-19 pandemic will again bring about significant negative impact on our business operations, financial condition and operating results, including but not limited to negative impact to our total revenues.
Added
We receive and maintain certain personal, financial and other information about our customers in various information systems that we maintain and in those maintained by third-party service providers. Our information technology systems, such as those we use for administrative functions, including human resources, payroll, accounting and internal and external communications, can contain personal, financial or other information of our employees.
Removed
While we have resumed business operations, there remain significant uncertainties surrounding the COVID-19 outbreak and its further development as a global pandemic. Hence, the extent of the business disruption and the related impact on our financial results and outlook for 2023 cannot be reasonably estimated at this time.
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We also maintain important proprietary and other confidential information related to our operations. As a result, we face risks inherent in handling and protecting information.
Removed
The extent to which the COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions taken globally to contain the corona virus or treat its impact, among others.
Added
If our security and information systems or the security and information systems of third-party service providers are compromised for any reason, including as a result of data corruption or loss, security breach, cyber-attack or other external or internal methods, or if our employees, or service providers fail to comply with laws, regulations and practice standards, and this information is obtained by unauthorized persons, used or disclosed inappropriately or destroyed, it could subject us to litigation and government enforcement actions, cause us to incur substantial costs, liabilities and penalties and/or result in a loss of customer confidence, any and all of which could adversely affect our business, reputation, ability to attract new customers, results of operations and financial condition.
Removed
Existing insurance coverage may not provide protection for all costs that may arise from all such possible events. We continue to assess the related risks and impacts that the COVID-19 pandemic might have on our business and financial performance.
Added
These statements and regulations are recently issued and there remain substantial uncertainties about their interpretation and implementation. On February 17, 2023, the CSRC released the Trial Administrative Measures for Administration of Overseas Securities Offerings and Listings by Domestic Companies, or the Trial Measures. and five supporting guidelines, which came into effect on March 31, 2023.
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Until such time as the COVID-19 pandemic is contained or eradicated and global business return to more customary levels, our business and financial results might be materially adversely affected.
Added
Pursuant to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill the filing procedures and report relevant information to the CSRC.
Removed
On the basis of scientific assessment of the characteristics of the virus and the pandemic situation, as well as reference to the prevention practices of other countries, at the end of 2022, the Chinese government refined its COVID-19 prevention and control measures and stopped conducting nucleic acid testing for all residents.
Added
For more information about the Trial Measures, see “ Risk Factors — Risk Factors Relating to Doing Business in China — The CSRC has released the Trial Measures for Administration of Overseas Securities Offerings and Listings by Domestic Companies (the “Trial Measures”).
Removed
By the end of 2022, vaccination rate has exceeded 90%. And normal life is returning. Under such circumstances, the government has taken positive service measures, including tax incentives, bank loan and financial support, etc, to support domestic enterprises to overcome difficulties. The market consolidation will be expedited eventually.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOn August 9, 2016 and August 6, 2018, the Company entered into a supplementary agreement with Hebei Fangsheng, who agreed to extend the lease term to August 9, 2022, with the same rental payment as original lease agreement.” In the spring of 2010, we initiated the process of acquiring approximately 667,000 square meters of land adjacent to our first production base, Xushui Paper Mill and subsequently received governmental approval for our capacity expansion plan.
Biggest changeThe 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., with the same rental payment as original lease agreement.” In the spring of 2010, we initiated the process of acquiring approximately 667,000 square meters of land adjacent to our first production base, Xushui Paper Mill and subsequently received governmental approval for our capacity expansion plan.
As of December 31, 2022, our facilities include a total of nine production lines, among which PM7 is currently idle and under renovation, and each PM4 and PM5 (both for digital photo paper) has been suspended, nine warehouses, two office buildings, two cafeterias, and five dormitories.
As of December 31, 2023, our facilities include a total of nine production lines, among which PM7 is currently idle and under renovation, and each PM4 and PM5 (both for digital photo paper) has been suspended, nine warehouses, two office buildings, two cafeterias, and five dormitories.
The land of our first production base (the “Xushui Paper Mill”), comprising 200 mu, or approximately 33 acres, of land, is leased from the local government pursuant to a 30 year lease that expires December 31, 2031. The lease requires an annual payment of approximately $ 17,406 (RMB 120,000) due by June 30 every year.
The land of our first production base (the “Xushui Paper Mill”), comprising 200 mu, or approximately 33 acres, of land, is leased from the local government pursuant to a 30 year lease that expires December 31, 2031.
The land of the second production base (the “Xingtai Paper Mill”), comprising 300 mu, or approximately 50 acres, of land, is owned by Hebei Tengsheng Paper Co., Ltd., a limited liability company organized under the laws of the PRC. (“Tengsheng Paper”).
The lease requires an annual payment of approximately $ 17,406 (RMB 120,000) due by June 30 every year. 45 The land of the second production base (the “Xingtai Paper Mill”), comprising 300 mu, or approximately 50 acres, of land, is owned by Hebei Tengsheng Paper Co., Ltd., a limited liability company organized under the laws of the PRC. (“Tengsheng Paper”).

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings 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. We may from time to time become a party to various legal or administrative proceedings arising in the ordinary course of our business. Item 4.
Biggest changeItem 3. 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.
Mine Safety Disclosures Not Applicable. 43 PART II
Mine Safety Disclosures Not Applicable. 46 PART II
Added
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.
Added
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.
Added
Discovery is continuing. 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.
Added
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 4.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeEquity Compensation Plan The following table provides information as of December 31, 2022 about our equity compensation plan and arrangements: Plan category Number of securities to be issued upon exercise of outstanding options and restricted stock units Weighted-average exercise price of outstanding options, and restricted stock units Number of securities remaining available for future issuance under equity compensation plans Equity compensation plans approved by security holders - $ - - Equity compensation plans not approved by security holders - - - Total $ Recent Sales of Unregistered Securities None.
Biggest changeEquity Compensation Plan The following table provides information as of December 31, 2023 about our equity compensation plan and arrangements: Plan category Number of securities to be issued upon exercise of outstanding options and restricted stock units Weighted- average exercise price of outstanding options, and restricted stock units Number of securities remaining available for future issuance under equity compensation plans Equity compensation plans approved by security holders - $ - - Equity compensation plans not approved by security holders - - - Total $ Recent Sales of Unregistered Securities None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved] 44
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved] 47
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information IT Tech Packaging’s common stock is traded on the NYSE American under the symbol “ITP”. Holders As of March 23, 2023, we had approximately 9,000 shareholders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information IT Tech Packaging’s common stock is traded on the NYSE American under the symbol “ITP”. Holders As of March 27, 2024, we had approximately 11,000 shareholders of record of our common stock.
All shares of common stock under the 2021 ISP, including shares originally authorized by equity holders and shares remaining for future issuance as of December 31, 2022, have been issued.
All shares of common stock under the 2023 ISP, including shares originally authorized by equity holders and shares remaining for future issuance as of December 31, 2023, have been reserved.
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All shares of common stock under the 2021 ISP, including shares originally authorized by equity holders and shares remaining for future issuance as of December 31, 2022, have been issued. 2023 Incentive Stock Plan On October 31, 2023, the Company’s Annual General Meeting adopted and approved the 2023 Omnibus Equity Incentive Plan of IT Tech Packaging, Inc.(the”2023 Plan”).
Added
Under the 2023 ISP, the Company has reserved a total of 1,500,000 shares of common stock for issuance as or under awards to be made to the directors, officers, employees and/or consultants of the Company and its subsidiaries.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe changes in revenue and quantity sold for the year ended December 31, 2022 and 2021 are summarized as follows: Year Ended Year Ended Percentage December 31, 2022 December 31, 2021 Change in Change Sales Revenue Quantity (Tonne) Amount Quantity (Tonne) Amount Quantity (Tonne) Amount Quantity Amount Regular CMP 180,977 $ 82,297,055 213,490 $ 111,079,432 (32,513 ) $ (28,782,377 ) -15.23 % -25.91 % Light-Weight CMP 37,354 $ 16,428,354 46,201 $ 23,432,323 (8,847 ) $ (7,003,969 ) -19.15 % -29.89 % Total CMP 218,331 $ 98,725,409 259,691 $ 134,511,755 (41,360 ) $ (35,786,346 ) -15.93 % -26.60 % Offset Printing Paper - $ - 24,513 $ 17,062,564 (24,513 ) $ (17,062,564 ) -100.00 % -100.00 % Tissue Paper Products 1,273 $ 1,356,255 8,255 $ 8,769,601 (6,982 ) $ (7,413,346 ) -84.58 % -84.53 % Total CMP, Offset Printing Paper and Tissue Paper Revenue 219,604 $ 100,081,664 292,459 $ 160,343,920 (72,855 ) $ (60,262,256 ) -24.91 % -37.58 % 45 Monthly revenue (excluding revenue of digital photo paper and tissue paper products) for the 24 months ended December 31, 2022, are summarized below: The average selling price, or ASP, for our major products for the years ended December 31, 2022 and 2021 are summarized as follows: Offset Printing Paper ASP Regular CMP ASP Light-Weight CMP ASP Tissue Paper Products ASP Year Ended December 31, 2021 $ 696 $ 520 $ 507 $ 1062 Year Ended December 31, 2022 $ - $ 455 $ 440 $ 1065 Increase (Decrease) from comparable period in the previous year $ -696 $ -65 $ -67 $ 3 Increase (Decrease) by percentage - % -12.50 % -13.21 % 0.28 % The following is a chart showing the month-by-month ASPs for the 24 month period ended December 31, 2022: 46 Corrugating Medium Paper Revenue from CMP amounted to $98,725,409 (98.64% of the total offset printing paper, CMP and tissue paper products revenues) for the year ended December 31, 2022, representing a decrease of $35,786,346, or 26.60%, from $134,511,755 during 2021.
Biggest changeThe changes in revenue and quantity sold for the year ended December 31, 2023 and 2022 are summarized as follows: Year Ended December 31, 2023 Year Ended December 31, 2022 Change in Percentage Change Quantity (Tonne) Amount Quantity (Tonne) Amount Quantity (Tonne) Amount Quantity Amount Sales Revenue Regular CMP 182,870 $ 67,371,471 180,977 $ 82,297,055 1,893 $ (14,925,584 ) 1.05 % -18.14 % Light-Weight CMP 40,953 $ 14,520,205 37,354 $ 16,428,354 3,599 $ (1,908,149 ) 9.63 % -11.61 % Total CMP 223,823 $ 81,891,676 218,331 $ 98,725,409 5,492 $ (16,833,733 ) 2.52 % -17.05 % Offset Printing Paper 5,573 $ 3,215,190 - $ - 5,573 $ 3,215,190 - % - % Tissue Paper Products 1,205 $ 1,305,192 1,273 $ 1,356,255 (68 ) $ (51,063 ) -5.34 % -3.76 % Total CMP, Offset Printing Paper and Tissue Paper Revenue 230,601 $ 86,412,058 219,604 $ 100,081,664 10,997 $ (13,669,606 ) 5.01 % -13.66 % 48 Monthly revenue (excluding revenue of digital photo paper and tissue paper products) for the 24 months ended December 31, 2023, are summarized below: The average selling price, or ASP, for our major products for the years ended December 31, 2023 and 2022 are summarized as follows: Offset Printing Paper ASP Regular CMP ASP Light- Weight CMP ASP Tissue Paper Products ASP Year Ended December 31, 2023 $ 577 $ 368 $ 355 $ 1083 Year Ended December 31, 2022 $ - $ 455 $ 440 $ 1065 Increase (Decrease) from comparable period in the previous year $ 577 $ (87 ) $ (85 ) $ 18 Increase (Decrease) by percentage - % -19.12 % -19.32 % 1.69 % The following is a chart showing the month-by-month ASPs for the 24 month period ended December 31, 2023: 49 Corrugating Medium Paper Revenue from CMP amounted to $81,891,676 (94.77% of the total offset printing paper, CMP and tissue paper products revenues) for the year ended December 31, 2023, representing a decrease of $16,833,733, or 17.05%, from $98,725,409 during 2022.
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 into an agreement with Mr. Zhenyong Liu which allows Dongfang Paper to borrow from the CEO an amount up to $17,201,342 (RMB120,000,000) for working capital purposes.
Zhenyong Liu, which was recorded in other payables and accrued liabilities as part of the current liabilities in the consolidated balance sheet. On March 1, 2015, the Company entered an agreement with Mr. Zhenyong Liu which allows Dongfang Paper to borrow from the CEO an amount up to $17,201,342 (RMB120,000,000) for working capital purposes.
These commitments are expected to be financed by bank loans and cash flows generated from our business operations. Financing with Sale-Leaseback The Company entered into a sale-leaseback arrangement (the “Lease Financing Agreement”) with TAC Leasing Co., Ltd.(“TLCL”) on August 6, 2020, for a total financing proceeds in the amount of RMB 16 million (approximately US$2.5 million).
These commitments are expected to be financed by bank loans and cash flows generated from our business operations. Financing with Sale-Leaseback The Company entered into a sale-leaseback arrangement (the “Lease Financing Agreement”) with TAC Leasing Co., Ltd.(“TLCL”) on August 6, 2020, for a total financing proceeds in the amount of RMB 16 million (approximately US$2.3 million).
Capital Expenditure Commitment as of December 31, 2022 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.
Capital Expenditure Commitment as of December 31, 2023 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.
The Leased Equipment in amount of $2,349,452 was recorded as right of use assets and the net present value of the minimum lease payments was recorded as lease liability and calculated with TLCL’s implicit interest rate of15.6% per annum and stated at $567,099 at the inception of the lease on August 17, 2020.
The Leased Equipment in amount of $2,349,452 was recorded as right of use assets and the net present value of the minimum lease payments was recorded as lease liability and calculated with TLCL’s implicit interest rate of 15.6% per annum and stated at $567,099 at the inception of the lease on August 17, 2020.
We are currently not aware of any events or circumstances that may indicate any need to record such impairment in the future. 55 Foreign Currency Translation The functional currency of Dongfang Paper and Baoding Shengde is the Chinese Yuan Renminbi (“RMB”).
We are currently not aware of any events or circumstances that may indicate any need to record such impairment in the future. 59 Foreign Currency Translation The functional currency of Dongfang Paper and Baoding Shengde is the Chinese Yuan Renminbi (“RMB”).
Under the sale-leaseback arrangement, Tengsheng Paper sold the Leased Equipment to TLCL for 16 million (approximately US$2.5 million). Concurrent with the sale of equipment, Tengsheng Paper leases back the equipment sold to TLCL for a lease term of three years.
Under the sale-leaseback arrangement, Tengsheng Paper sold the Leased Equipment to TLCL for 16 million (approximately US$2.3 million). Concurrent with the sale of equipment, Tengsheng Paper leases back the equipment sold to TLCL for a lease term of three years.
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. 48 The pricing trends of our major raw materials for the 24-month period from January 2021 to December 2022 are shown below: Electricity and gas are our two main energy sources.
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. 51 The pricing trends of our major raw materials for the 24-month period from January 2022 to December 2023 are shown below: Electricity and gas are our two main energy sources.
At the end of the lease term, Tengsheng Paper may pay a nominal purchase price of RMB 100 (approximately $15) to TLCL and buy back the Leased Equipment.
At the end of the lease term, Tengsheng Paper may pay a nominal purchase price of RMB 100 (approximately $14) to TLCL and buy back the Leased Equipment.
For the years ended December 31, 2022 and 2021, no events or circumstances occurred for which an evaluation of the recoverability of long-lived assets was required.
For the years ended December 31, 2023 and 2022, no events or circumstances occurred for which an evaluation of the recoverability of long-lived assets was required.
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 $368,052 and $402,047 of interest were outstanding to Mr.
Zhenyong Liu renewed the three-year term loan previously entered on January 1, 2010, and extended the maturity date further to December 31, 2015. On December 31, 2015, the Company paid off the loan of $2,249,279, together with interest of $391,374 for the period from 2013 to 2015. Approximately $361,915 and $368,052 of interest were outstanding to Mr.
Off-Balance Sheet Arrangements We were the guarantor for Baoding Huanrun Trading Co., for its long-term bank loans in an amount of $4,862,211 (RMB31,000,000), which matures at various times in 2023. Baoding Huanrun Trading Co. is one of our major suppliers of raw materials.
Off-Balance Sheet Arrangements We were the guarantor for Baoding Huanrun Trading Co., for its long-term bank loans in an amount of $4,376,862 (RMB31,000,000), which matures at various times in 2028. Baoding Huanrun Trading Co. is one of our major suppliers of raw materials.
Under ASC Topic 830-30, all assets and liabilities are translated into United States dollars using the current exchange rate at the end of each fiscal period. The current exchange rates used by the Company as of December 31, 2022 and 2021 to translate the Chinese RMB to the U.S. Dollars are 6.9646:1 and 6.3757:1, respectively.
Under ASC Topic 830-30, all assets and liabilities are translated into United States dollars using the current exchange rate at the end of each fiscal period. The current exchange rates used by the Company as of December 31, 2023 and 2022 to translate the Chinese RMB to the U.S. Dollars are 7.0827:1 and 6.9646:1, respectively.
As of December 31, 2022, we had approximately $4.3 million in capital expenditure commitments that were mainly related to the purchase of paper machine of PM10. The infrastructure work of PM10 has been completed and the associated ancillary facilities are working in progress.
As of December 31, 2023, we had approximately $3.5 million in capital expenditure commitments that were mainly related to the purchase of paper machine of PM10. The infrastructure work of PM10 has been completed and the associated ancillary facilities are working in progress.
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 $147,988 (RMB1,000,000).
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 $141,727 (RMB1,000,000).
These changes (in US dollars) represent a year-over-year decrease of 19.35% for the unit purchase cost of recycled paper board. We use domestic recycled paper (sourced mainly from the Beijing-Tianjin metropolitan area) exclusively.
These changes (in US dollars) represent a year-over-year decrease of 23.60% for the unit purchase cost of recycled paper board. We use domestic recycled paper (sourced mainly from the Beijing-Tianjin metropolitan area) exclusively.
Total interest expenses for the short-term bank loans and long-term loans for the years ended December 31, 2022, and 2021 were $988,997 and $1,052,904 respectively. Related party transactions Mr. 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.
Total interest expenses for the short-term bank loans and long-term loans for the years ended December 31, 2023, and 2022 were $977,678 and $988,997 respectively. Related party transactions Mr. 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.
Zhenyong Liu, which were recorded in other payables and accrued liabilities as part of the current liabilities in the consolidated balance sheet as of December 31, 2022, and 2021, respectively. 54 On December 10, 2014, 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 December 31, 2023, and 2022, respectively. 58 On December 10, 2014, Mr.
During the year of 2016, the Company repaid $6,012,416 to Mr. Zhenyong Liu, together with interest of $288,596. In February 2018, the company paid off the remaining balance, together with interest of $20,400. As of December 31, 2022, and 2021, approximately $43,075 and $47,054 of interest were outstanding to Mr.
During the year of 2016, the Company repaid $6,012,416 to Mr. Zhenyong Liu, together with interest of $288,596. In February 2018, the company paid off the remaining balance, together with interest of $20,400. As of December 31, 2023, and 2022, approximately $42,357 and $43,075 of interest were outstanding to Mr.
Revenues and expenses are translated using the prevailing average exchange rates at 6.7573:1, and 6.4474:1 for the years ended December 31, 2022 and 2021, respectively. Translation adjustments are included in other comprehensive income (loss).
Revenues and expenses are translated using the prevailing average exchange rates at 7.0558:1, and 6.7573:1 for the years ended December 31, 2023 and 2022, respectively. Translation adjustments are included in other comprehensive income (loss).
As of December 2022, and 2021, the outstanding interest was $197,338 and $215,565, respectively, which was recorded in other payables and accrued liabilities as part of the current liabilities in the consolidated balance sheet. As of December 31, 2022, and 2021, total amount of loans due to Mr. Zhenyong Liu were $nil.
As of December 2023, and 2022, the outstanding interest was $194,047 and $197,338, respectively, which was recorded in other payables and accrued liabilities as part of the current liabilities in the consolidated balance sheet. As of December 31, 2023, and 2022, total amount of loans due to Mr. Zhenyong Liu were $nil.
On July 1, 2022, the Company entered into a loan agreement with Jiangna Yu, a customer of the Company, pursuant to which the Company borrowed RMB400,000 from Jiangna Yu for a term of five years. The loan is payable in monthly installment of RMB10,667 from July 2022 to July 2027.
On July 1, 2022, the Company entered into a loan agreement with Jiangna Yu, a customer of the Company, pursuant to which the Company borrowed RMB 400,000 from Jiangna Yu for a term of five years. The loan is payable in monthly installment of RMB10,667 from July 2022 to July 2027. The company repaid the loan in November 2023.
The Company had short-term and long-term interest-bearing loans and lease obligation that aggregated $15,442,807 as of December 31, 2022, as compared to $16,139,485 as of December 31, 2021. Provision for Income Taxes Full allowance for deferred tax asset loss was provided in the year of 2022.
The Company had short-term and long-term interest-bearing loans and lease obligation that aggregated $12,386,346 as of December 31, 2023, as compared to $15,442,807 as of December 31, 2022. Provision for Income Taxes Full allowance for deferred tax asset loss was provided in the year of 2023 and 2022.
Monthly gross profit margins for our corrugating medium paper and offset printing paper for the 24-month period ended December 31, 2022 are as follows: Face Masks Gross profit for face mask for the year ended December 31, 2022 was $67,328, representing a gross margin of 26.11% compared with a gross profit of $103,350, representing a gross margin of 19.22%, for the year ended December 31, 2021.
Monthly gross profit margins for our corrugating medium paper and offset printing paper for the 24-month period ended December 31, 2023 are as follows: Face Masks Gross loss for face mask for the year ended December 31, 2023 was $11,127, representing a gross margin of -10.49% compared with a gross profit of $67,328, representing a gross margin of 26.11%, for the year ended December 31, 2022.
Changes in various asset and liability account balances throughout the year ended December 31, 2022 also contributed to the net change in cash from operating activities in year ended December 31, 2022. Chief among such changes is the decrease of accounts receivable in the amount of $3,750,196 (an increase to net cash) during the year of 2022.
Changes in various asset and liability account balances throughout the year ended December 31, 2023 also contributed to the net change in cash from operating activities in year ended December 31, 2023. Chief among such changes is the decrease of accounts receivable in the amount of $280,970 during the year of 2023.
Average cost of sales per tonne for CMP decreased by 13.66%, from $483 for the year ended December 31, 2021, to $417 in 2022.This is mainly attributable to the lower average unit purchase costs (net of applicable value added tax) of recycled paper board.
Average cost of sales per tonne for CMP decreased by 16.55%, from $417 for the year ended December 31, 2022, to $348 in 2023. This was mainly attributable to the lower average unit purchase costs (net of applicable value added tax) of recycled paper board.
Electricity and gas accounted for approximately 4% and 12.4% of total sales in 2022, respectively, compared to 4% and 10.5% of total sales 2021.
Electricity and gas accounted for approximately 5% and 15.3% of total sales in 2023, respectively, compared to 4% and 12.4% of total sales 2022.
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 2.12 percentage points, from 6.81% for the year ended December 31, 2021, to 4.69% for the year ended December 31, 2022.
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 3.54 percentage points, from 4.69% for the year ended December 31, 2022, to 1.15 for the year ended December 31, 2023.
As of December 31, 2022, the total outstanding loan balance was $51,690. Out of the total outstanding loan balance, the current portion amounted $11,486, which is presented as current liabilities and the remaining balance of $40,204 is presented as non-current liabilities in the consolidated balance sheet as of December 31, 2022.
Out of the total outstanding loan balance, current portion amounted $nil and $11,486, respectively, which are presented as current liabilities and the remaining balance of $nil and $40,204 are presented as non-current liabilities in the consolidated balance sheet as of December 31, 2023 and 2022, respectively.
The decrease of cash and cash equivalents for the year ended December 31, 2022 was attributable to a number of factors including: i. Net cash provided by operating activities Net cash provided by operating activities was $10,719,388 for the year ended December 31, 2022.
The decrease of cash and cash equivalents for the year ended December 31, 2023 was attributable to a number of factors including: i. Net cash provided by operating activities Net cash provided by operating activities was $12,871,086 for the year ended December 31, 2023.
Net cash provided by financing activities Net cash used in financing activities was $879,596 for the year ended December 31, 2022, as compared to net cash provided by financing activities in the amount of $34,193,824 for the year ended December 31, 2021.
Net cash provided by financing activities Net cash provided by financing activities was $4,410,099 for the year ended December 31, 2023, as compared to net cash used in financing activities in the amount of $879,596 for the year ended December 31, 2022.
This was mainly due to the decrease in sales volume of regular CMP, light-weight CMP, offset printing paper and tissue paper products, and the decrease in ASPs of CMP products.
This was mainly due to the decrease in ASP of CMP, partially offset by increase in sales volume of regular CMP, light-weight CMP and offset printing paper.
On April 16, 2014, the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 5 years, which was originally due in various installments from June 21, 2014 to November 18, 2018. The loan is guaranteed by an independent third party.
On December 5, 2023, the Company entered into a loan agreement with the Rural Credit Union of Xushui District for a term of 3 years, which was due in various installments from June 21, 2024 to December 5, 2026. The loan was guaranteed by an independent third party.
Gross profit margin for light-weight CMP for the year ended December 31, 2022 was 9.42%, or 0.69 percentage points higher, as compared to gross profit margin of 8.73% for the year ended December 31, 2021. Such increase was primarily due to the decrease in material costs, partially offset by the decrease in ASP of light-weight CMP.
Gross profit margin for light-weight CMP for the year ended December 31, 2023 was 2.59%, or 6.83 percentage points lower, as compared to gross profit margin of 9.42% for the year ended December 31, 2022. Such decrease was primarily due to the decrease in ASP of light-weight CMP, partially offset by the decrease in material costs.
Gross profit margin for regular CMP for the year ended December 31, 2022 was 7.39%, or 1.07 percentage points higher, as compared to gross profit margin of 6.32% for the year ended December 31, 2021. Such increase was primarily due to decrease in material costs, partially offset by the decrease in ASP of regular CMP.
Gross profit margin for regular CMP for the year ended December 31, 2023 was 5.27%, or 2.12 percentage points lower, as compared to gross profit margin of 7.39% for the year ended December 31, 2022. Such decrease was primarily due to the decrease in ASP of regular CMP, partially offset by the decrease in material costs.
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.
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.
ASP in RMB for tissue paper products for the year ended 2021 and 2022 was RMB6,849 and RMB7,198, respectively, representing a 5.10% increase. Revenue of Face Mask Revenue generated from selling face masks were $257,820 and $537,800 for the year ended December 31, 2022 and 2021.
ASP in RMB for tissue paper products for the year ended 2022 and 2023 was RMB7,198 and RMB7,640, respectively, representing a 6.14% increase. Revenue of Face Mask Revenue generated from selling face masks were $106,064 and $257,820 for the year ended December 31, 2023 and 2022.
On July 29, 2022, the Company entered into a working capital loan agreement with the China Construction Bank, with a balance of $143,583 as of December 31, 2022. The loan bears a fixed interest rate of 3.95% per annum. The loan will be due by July 29, 2023.
On July 29, 2022, the Company entered into a working capital loan agreement with the China Construction Bank, with a balance of $nil and $143,583 as of December 31, 2023 and 2022, respectively. The loan bore a fixed interest rate of 3.95% per annum. The loan was fully repaid in July 2023.
December 31, December 31, 2022 2021 Industrial and Commercial Bank of China (“ICBC”) Loan 1 $ - $ 5,958,561 ICBC Loan 2 5,023,978 ICBC Loan 3 287,167 - ICBC Loan 4 143,583 - China Construction Bank Loan 143,583 - Total short-term bank loans $ 5,598,311 $ 5,958,561 On November 25, 2021, the Company entered into a working capital loan agreement with the ICBC, with a balance of $5,958,561 as of December 31, 2021.
December 31, December 31, 2023 2022 Industrial and Commercial Bank of China (“ICBC”) Loan 1 $ - $ 5,023,978 ICBC Loan 2 - 287,167 ICBC Loan 3 - 143,583 ICBC Loan 4 - - China Construction Bank Loan - 143,583 ICBC Loan 5 - ICBC Loan 6 2,824 - ICBC Loan 7 70,594 - ICBC Loan 8 350,149 - Total short-term bank loans $ 423,567 $ 5,598,311 On November 10, 2022, the Company entered into a working capital loan agreement with the ICBC.
The loan is unsecured and carries a fixed interest rate of 3% per annum. The loan was repaid by Mr. Zhenyong Liu in February 2022. In October 2022 and November 2022, the Company entered into two agreements with Mr. Zhenyong Liu, which allowed Mr. Zhenyong Liu to borrow from the Company an amount of $7,179,163 (RMB50,000,000) in total.
In October 2022 and November 2022, the Company entered into two agreements with Mr. Zhenyong Liu, which allowed Mr. Zhenyong Liu to borrow from the Company an amount of $7,059,455 (RMB50,000,000) in total. 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.
ASP in RMB for light-weight CMP in 2021 and 2022 was RMB3,270 and RMB2,972, respectively, representing a 9.11% decrease. The quantity of light-weight CMP sold decreased by 8,847 tonnes, from 46,201 tonnes in 2021, to 37,354 tonnes in 2022. Our PM6 production line, which produces regular CMP, has a designated capacity of 360,000 tonnes /year.
ASP in RMB for light-weight CMP in 2022 and 2023 was RMB2,972 and RMB2,502, respectively, representing a 15.82% decrease. The quantity of light-weight CMP sold increased by 3,599 tonnes, from 37,354 tonnes in 2022, to 40,953 tonnes in 2023. Our PM6 production line, which produces regular CMP, has a designated capacity of 360,000 tonnes /year.
The monthly energy cost (electricity and gas) as a percentage of total monthly sales of our main paper products for the 24 months ended December 31, 2022 are summarized as follows: Gross Profit Gross profit for December 31, 2022 was $4,754,196 (4.74% of the total revenue), representing a decrease of $6,263,363, or 56.85%, from the gross profit of $11,017,559 (6.85% of the total revenue) for the year ended December 31, 2021.
The monthly energy cost (electricity and gas) as a percentage of total monthly sales of our main paper products for the 24 months ended December 31, 2023are summarized as follows: Gross Profit Gross profit for December 31, 2023 was $999,885 (representing 1.16% of the total revenue), representing a decrease of $3,754,311, or 78.97%, from the gross profit of $4,754,196 (representing 4.74% of the total revenue) for the year ended December 31, 2022.
We sold 218,331 tonnes of CMP in the year ended December 31, 2022 as compared to 259,691 tonnes in the year ended December 31, 2021, representing a 15.93% decrease in quantity sold. ASP for regular CMP dropped from $520/tonne in 2021 to $455/tonne in 2022, representing a 12.50% decrease.
We sold 223,823 tonnes of CMP in the year ended December 31, 2023 as compared to 218,331 tonnes in the year ended December 31, 2022, representing a 2.52% increase in quantity sold. ASP for regular CMP dropped from $455/tonne in 2022 to $368/tonne in 2023, representing a 19.12% decrease.
The loan bears a fixed interest rate of 4.785% per annum. The loan will be due by November 13, 2023. On November 30, 2022, the Company entered into a working capital loan agreement with the ICBC, with a balance of $287,167 as of December 31, 2022. The loan bears a fixed interest rate of 4.3% per annum.
On September 15, 2023, the Company entered into a working capital loan agreement with the ICBC, with a balance of $2,824 as of December 31, 2023. The loan bears a fixed interest rate of 3.45% per annum. The loan will be due by September 14, 2024.
The loan will be due by May 29, 2023. On November 30, 2022, the Company entered into a working capital loan agreement with the ICBC, with a balance of $143,583 as of December 31, 2022. The loan bears a fixed interest rate of 4.3% per annum. The loan will be due by May 29, 2023.
On September 22, 2023, the Company entered into a working capital loan agreement with the ICBC, with a balance of $ 70,594 as of December 31, 2023. The loan bears a fixed interest rate of 3.45% per annum. The loan will be due by September 21, 2024.
Net cash used in investing activities We incurred $10,898,531 in net cash expenditures for investing activities during the year ended December 31, 2022, as compared to $25,071,372 for the year ended December 31, 2021. Payments in 2022 were mainly for the last installments for the Tengsheng land acquisition. iii.
Net cash used in investing activities We incurred $22,239,297 in net cash expenditures for investing activities during the year ended December 31, 2023, as compared to $10,898,531 for the year ended December 31, 2022. Payments in 2023 were mainly for the payment for Land Use Right. iii.
Out of the total outstanding loan balance, current portion amounted were $nil and $2,509,528 as of December 31, 2022 and 2021 respectively, which are presented as current liabilities in the consolidated balance sheet and the remaining balance of $2,297,332 and $nil are presented as non-current liabilities in the consolidated balance sheet as of December, 2022 and 2021, respectively.
As of December 31, 2023 and 2022, the total outstanding loan balance was $2,259,026 and $2,297,332, respectively, which are presented as current liabilities and non-current liabilities in the consolidated balance sheet as of December 31, 2023 and 2022, respectively.
The Company also had a net increase of $3,976,010 in prepayment and other current assets (a decrease to net cash) and a net increase of $1,018,448 in other payables and accrued liabilities and related parties (a decrease to net cash), as well as a decrease in income tax payable of $614,738 (a decrease to net cash) during the year ended December 31, 2022. ii.
The Company also had a net decrease of $9,322,532 in prepayment and other current assets (an increase to net cash) and a net decrease of $999,812 in other payables and accrued liabilities and related parties (a decrease to net cash), as well as a decrease in income tax payable of $412,504 (a decrease to net cash) during the year ended December 31, 2023. ii.
We sold 1,273 tonnes of tissue paper products in the year ended December 31, 2022, as compared to 8,255 tonnes in 2021, a decrease of 6,982 tonnes, or 84.58%. ASP for tissue paper products was $1,062/tonne and $1,065/tonne in the year ended December 31, 2021 and 2022, respectively, representing a 0.28% increase.
We sold 1,205 tonnes of tissue paper products in the year ended December 31, 2023, as compared to 1,273 tonnes in 2022, a decrease of 68 tonnes, or 5.34%. ASP for tissue paper products was $1,065/tonne and $1,083/tonne in the year ended December 31, 2022 and 2023, respectively, representing a 1.69% increase.
As of December 31, 2022, and 2021, total outstanding loan balance was $1,234,816 and $1,348,871, respectively, Out of the total outstanding loan balance, current portion amounted were $1,234,816 and $329,376 as of December 31, 2022, and 2021, respectively, which are presented as current liabilities in the consolidated balance sheet and the remaining balance of $nil and $1,019,495 are presented as non-current liabilities in the consolidated balance sheet as of December 31, 2022, and 2021, respectively.
As of December 31, 2023 and 2022, total outstanding loan balance was $nil and $1,234,816, respectively, which are presented as current liabilities in the consolidated balance sheet.
The working capital loan was secured by the land use right of Dongfang Paper as collateral for the benefit of the bank and guaranteed by Mr. Liu. The loan bears a fixed interest rate of 4.785% per annum. The loan was fully repaid in November 2022.
The loan was secured by the land use right of Dongfang Paper as collateral for the benefit of the bank and guaranteed by Mr. Liu. The loan bore a fixed interest rate of 4.785% per annum. The Company repaid $71,743 in May 2023 and paid off the remaining balance of the loan in August 2023.
Out of the total outstanding loan balance, current portion amounted were $nil and $2,038,992 as of December 31, 2022, and 2021 respectively, which are presented as current liabilities in the consolidated balance sheet and the remaining balance of $1,866,582 and $nil are presented as non-current liabilities in the consolidated balance sheet as of December 31, 2022, and 2021, respectively.
As of December 31, 2023 and 2022, the total outstanding loan balance was $1,835,458 and $1,866,582, respectively, which are presented as current liabilities and non-current liabilities in the consolidated balance sheet as of December 31, 2023 and 2022, respectively.
Cost of sales for offset printing paper was $nil for the year ended December 31, 2022, as compared to $13,963,983 in 2021. Cost of sales for tissue paper products was $4,290,443 for the year ended December 31, 2022, as compared to $10,020,571 in 2021.
Cost of sales for offset printing paper was $3,134,832 for the year ended December 31, 2023. Cost of sales for tissue paper products was $4,318,339 for the year ended December 31, 2023, as compared to $4,290,443 in 2022.
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 year ended December 31, 2022 was $100,081,664, a decrease of $60,262,256, or 37.58%, from $160,343,920 for the year ended December 31, 2021.
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 year ended December 31, 2023 was $86,412,058, a decrease of $13,669,606, or 13.66%, from $100,081,664 for the year ended December 31, 2022.
Interest payment is due quarterly and bore a rate of 7.68% per annum. With effective from November 15, 2022, the interest rate is reduced to 7% per annum. As of December 31, 2022, and 2021, the total outstanding loan balance was $3,589,582 and $3,921,139, respectively.
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.
Total quantities of CMP and offset printing paper sold decreased by 65,873 tonnes in the year of 2022 as compared to 2021. We sold 1,273 tonnes of tissue paper products in the year of 2022 as opposed to 8,255 tonnes in 2021. Production of CMP was suspended during January and February 2022 and offset printing paper suspended during the year.
Total quantities of CMP and offset printing paper sold increased by 11,065 tonnes in the year of 2023 as compared to 2022. We sold 1,205 tonnes of tissue paper products in the year of 2023 as opposed to 1,273 tonnes in 2022. Production of offset printing paper was resumed in May 2023.
ASP in RMB for regular CMP in 2021 and 2022 was RMB3,355 and RMB3,073, respectively, representing a 8.41% decrease. The quantity of regular CMP sold decreased by 32,513 tonnes, from 213,490 tonnes in 2021 to 180,977 tonnes in 2022. ASP for light-weight CMP dropped from $507/tonne in 2021 to $440/tonne in 2022, representing a $13.21% decrease.
ASP in RMB for regular CMP in 2022 and 2023 was RMB3,073 and RMB2,599, respectively, representing a 15.42% decrease. The quantity of regular CMP sold increased by 1,893 tonnes, from 180,977 tonnes in 2022 to 182,870 tonnes in 2023. ASP for light-weight CMP dropped from $440/tonne in 2022 to $355/tonne in 2023, representing a $19.32% decrease.
The decrease was mainly due to (i) the decrease in quantities sold of CMP, offset printing paper and tissue paper products, and (ii) the increase in material costs of tissue paper products. 49 Corrugating Medium Paper, Offset Printing Paper and Tissue Paper Products Gross profit for offset printing paper, CMP and tissue paper products for the year ended December 31, 2022 was $4,697,330, a decrease of $6,216,879, or 56.96%, from the gross profit of $10,914,209 for the year ended December 31, 2021.
The decrease was mainly due to the decrease in ASP of CMP, partially offset by the decrease of material costs of CMP, and (ii) the increase in material costs of tissue paper products. 52 Corrugating Medium Paper, Offset Printing Paper and Tissue Paper Products Gross profit for offset printing paper, CMP and tissue paper products for the year ended December 31, 2023 was $993,236, a decrease of $3,704,094, or 78.86%, from the gross profit of $4,697,330 for the year ended December 31, 2022.
Total quantities of offset printing paper, CMP and tissue paper products sold during the year ended December 31, 2022 amounted to 219,604 tonnes, a decrease of 72,855 tonnes, or 24.91%, compared to 292,459 tonnes sold during the year ended December 31, 2021.
Total quantities of offset printing paper, CMP and tissue paper products sold during the year ended December 31, 2023 amounted to 230,601 tonnes, an increase of 10,997 tonnes, or 5.01%, compared to 219,604 tonnes sold during the year ended December 31, 2022.
Gross profit margin for tissue paper products was -216.34% for the year ended December 31, 2022, a decrease of 202.08 percentage points, as compared to -14.26% for the year ended December 31, 2021.The decrease was mainly due to the increase in cost of tissue base paper.
Gross profit margin for offset printing paper was 2.41% for the year ended December 31, 2023. Gross profit margin for tissue paper products was -230.86% for the year ended December 31, 2023, a decrease of 14.52 percentage points, as compared to -216.34% for the year ended December 31, 2022.
Quantities sold for regular CMP that was produced by the PM6 production line from January 2021 to December 2022 are as follows: Offset Printing Paper Revenue from offset printing paper was $nil for the year ended December 31, 2022 compared to the revenue of $17,062,564 for the year ended December 31, 2021.
Quantities sold for regular CMP that was produced by the PM6 production line from January 2022 to December 2023 are as follows: Offset Printing Paper Revenue from offset printing paper was $3,215,190 (3.72% of the total offset printing paper, CMP and tissue paper products revenues) for the year ended December 31, 2023, representing an increase of $3,215,190, or 100%, from year of 2022.
The decrease was primarily due to the decrease in gross profit and increase in selling, general and administrative expenses. 50 Other Income and Expenses Interest expense for the year ended December 31, 2022 decreased by $96,751, from $1,124,702 for the year ended December 31, 2021, to $1,027,951.
The decrease was primarily due to the decrease in gross profit and recognition of impairment and disposal loss on assets, partially offset by the decrease in selling, general and administrative expenses. 53 Other Income and Expenses Interest expense for the year ended December 31, 2023 decreased by $43,433, from $1,027,951 for the year ended December 31, 2022, to $984,518.
The amendments in this Update should be applied prospectively to business combinations occurring on or after the effective date of the amendments. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.
The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.
Interest payment is due quarterly and bore a rate of 7.68% per annum. With effective from November 15, 2022, the interest rate is reduced to 7% per annum. On November 6, 2018, the loan was renewed for additional 5 years and will be due and payable in various installments from December 21, 2018 to November 5, 2023.
On November 6, 2018, the loan was renewed for additional 5 years and will be due and payable in various installments from December 21, 2018 to November 5, 2023. The loan was fully repaid in December 2023.
Interest payment is due monthly and bore a rate of 7.68% per annum. With effective from November 15, 2022, the interest rate is reduced to 7% per annum. As of December 31, 2022, and 2021, the total outstanding loan balance was $1,866,582 and $2,038,992, respectively.
The loan is secured by certain of the Company’s manufacturing equipment with net book value of $nil and $280,466 as of December 31, 2023 and 2022, respectively. Interest payment is due monthly and bore a rate of 7.68% per annum. Effective from November 15, 2022, the interest rate was reduced to 7% per annum.
Out of the total outstanding loan balance, current portion amounted were $3,589,582 and $1,960,569 as of December 31, 2022, and 2021 respectively, which are presented as current liabilities in the consolidated balance sheet and the remaining balance of $nil and $1,960,570 are presented as non-current liabilities in the consolidated balance sheet as of December 31, 2022, and 2021, respectively.
Out of the total outstanding loan balance, current portion amounted was $1,284,820, which is presented as current liabilities in the consolidated balance sheet and the remaining balance of $1,256,584 is presented as non-current liabilities in the consolidated balance sheet as of December 31, 2023.
There was also a decrease of $2,554,072 in the ending inventory balance as of December 31, 2022 (an increase to net cash for the year ended December 31, 2022 cash flow purposes).
There was also an increase of $736,267 in the ending inventory balance as of December 31, 2023 (a decrease to net cash for the year ended December 31, 2023 cash flow purposes). In addition, the Company had non-cash expenses relating to depreciation and amortization in the amount of $14,225,990.
As of December 31, 2021, there were guaranteed short-term borrowings of $5,958,561 and unsecured bank loans of $nil. As of December 31, 2022, there were guaranteed short-term borrowings of $5,023,978 and unsecured bank loans of $574,333.
As of December 31, 2022, there were guaranteed short-term borrowings of $5,023,978 and unsecured bank loans of $574,333. As of December 31, 2023, there were guaranteed short-term borrowings of $nil and unsecured bank loans of $423,567. The average short-term borrowing rates for the years ended December 31, 2023, and 2022 were approximately 4.48% and 4.72%, respectively.
The utilization rates for the year ended December 31, 2022 and 2021 were 49.28% and 60.94%, respectively, representing a decrease of 11.66%.
The utilization rates for the year ended December 31, 2023 and 2022 were 51.98% and 49.28%, respectively, representing an increase of 2.70%.
A summary of changes in major inventory items is as follows: December 31, December 31, 2022 2021 $ Change % Change Raw Materials Recycled paper board $ 1,258,161 $ 2,097,062 -838,901 -40.00 % Recycled white scrap paper 10,809 11,808 -999 -8.46 % Tissue base paper 60,660 38,745 21,915 56.56 % Gas 42,237 32,753 9,484 28.96 % Mask fabric and other raw materials 99,569 167,786 -68,217 -40.66 % Total Raw Materials 1,471,436 2,348,154 -876,718 -37.34 % Semi-finished Goods 132,810 96,087 36,723 38.22 % Finished Goods 1,268,376 3,400,654 -2,132,278 -62.70 % Total inventory, gross 2,872,622 5,844,895 -2,972,273 -50.85 % Inventory reserve - - - Total inventory, net $ 2,872,622 $ 5,844,895 (2,972,273 ) -50.85 % 51 Renewal of operating lease On August 7, 2013, the Company’s Audit Committee and the Board of Directors approved the sale of the land use right of the Headquarters Compound (the “LUR”), the office building and essentially all industrial-use buildings in the Headquarters Compound (the “Industrial Buildings”), and three employee dormitory buildings located within the Headquarters Compound (the “Dormitories”) to Hebei Fangsheng for cash prices of approximately $2.77 million, $1.15 million, and $4.31 million respectively.
A summary of changes in major inventory items is as follows: December 31, December 31, 2023 2022 $ Change % Change Raw Materials Recycled paper board $ 198,744 $ 1,258,161 -1,059,417 -84.20 % Recycled white scrap paper 10,647 10,809 -162 -1.50 % Tissue base paper 21,138 60,660 -39,522 -65.15 % Gas 21,428 42,237 -20,809 -49.27 % Mask fabric and other raw materials 121,011 99,569 21,442 21.53 % Total Raw Materials 372,968 1,471,436 -1,098,468 -74.65 % Semi-finished Goods 300,207 132,810 167,397 126.04 % Finished Goods 2,885,019 1,268,376 1,616,643 127.46 % Total inventory, gross 3,558,194 2,872,622 685,572 23.87 % Inventory reserve (2,959 ) - -2,959 Total inventory, net $ 3,555,235 $ 2,872,622 682,613 23.76 % 54 Renewal of operating lease On August 7, 2013, the Company’s Audit Committee and the Board of Directors approved the sale of the land use right of the Headquarters Compound (the “LUR”), the office building and essentially all industrial-use buildings in the Headquarters Compound (the “Industrial Buildings”), and three employee dormitory buildings located within the Headquarters Compound (the “Dormitories”) to Hebei Fangsheng for cash prices of approximately $2.77 million, $1.15 million, and $4.31 million respectively.
Cost of Sales Total cost of sales for CMP, offset printing paper and tissue paper products in the year ended December 31, 2022 was $95,384,334, a decrease of $54,045,377, or 36.17%, from $149,429,711 for the year ended December 31, 2021.
Cost of Sales Total cost of sales for CMP, offset printing paper and tissue paper products in the year ended December 31, 2023 was $85,418,822, a decrease of $9,965,512, or 10.45%, from $95,384,334 for the year ended December 31, 2022. This was mainly due to the decrease of material costs of CMP.
The loans were unsecured and carried a fixed interest rate of 4.35% per annum. The loans were fully repaid by Mr. Zhenyong Liu in February 2023. As of December 31, 2022 and 2021, amount due to shareholder are $727,433, which represent funds from shareholders to pay for various expenses incurred in the U.S.
Zhengyong Liu in August 2023 and the remaining balance was repaid in December 2023. Interest income of the loan for the year ended December 31, 2023 was $290,275. As of December 31, 2023, and 2022, amount due to shareholder are $727,433, which represent funds from shareholders to pay for various expenses incurred in the U.S.
Interest payment is due quarterly and bore a rate of 7.68% per annum. With effective from November 15, 2022, the interest rate is reduced to 7% per annum. As of December 31, 2022, and 2021, the total outstanding loan balance was $2,297,332 and $2,509,528, respectively.
Interest payment is due monthly and bore a rate of 7.56% per annum. Effective from November 15, 2022, the interest rate was reduced to 7% per annum.
Zhenyong Liu was approximately $608,465 and $664,666, as of December 31, 2022 and 2021, respectively, which was recorded in other payables and accrued liabilities On December 8, 2021, the Company entered into an agreement with Mr. Zhenyong Liu, which allowed Mr. Zhenyong Liu to borrow from the Company an amount of $6,507,431 (RMB44,089,085).
On December 8, 2021, the Company entered into an agreement with Mr. Zhenyong Liu, which allows Mr. Zhenyong Liu to borrow from the Company an amount of $6,507,431 (RMB44,089,085). The loan was unsecured and carried a fixed interest rate of 3% per annum. The loan was repaid by Mr. Zhenyong Liu in February 2022.
Income (Loss) from Operations Operating loss for the year ended December 31, 2022 was $5,304,527, a decrease of $6,763,896, or 463.48%, from income from operations of $1,459,369 for the year ended December 31, 2021.
Loss from Operations Operating loss for the year ended December 31, 2023 was $9,575,888, a decrease of $4,271,361, or 80.52%, from $5,304,527 for the year ended December 31, 2022.
The interest expense incurred for such related party loans are $nil for the years ended December 31, 2022 and 2021. The accrued interest payable to Mr.
The interest expense incurred for such related party loans are $nil for the years ended December 31, 2023, and 2022. The accrued interest owe to Mr. Zhenyong Liu was approximately $598,319 and $608,465, as of December 31, 2023 and 2022, respectively, which was recorded in other payables and accrued liabilities.
Changes in cost of sales and cost per tonne by product for the year ended December 31, 2022 and 2021 are summarized below: Year Ended Year Ended December 31, 2022 December 31, 2021 Change in 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 Regular CMP $ 76,213,404 $ 421 $ 104,057,538 $ 487 $ (27,844,134 ) $ (66 ) -26.76 % -13.55 % Light-Weight CMP $ 14,880,487 $ 398 $ 21,387,619 $ 463 $ (6,507,132 ) $ (65 ) -30.42 % -14.04 % Total CMP $ 91,093,891 $ 417 $ 125,445,157 $ 483 $ (34,351,266 ) $ (66 ) -27.38 % -13.66 % Offset Printing Paper $ - $ - $ 13,963,983 $ 570 $ (13,963,983 ) $ (570 ) -100.00 % -100.00 % Tissue Paper Products $ 4,290,443 $ 3,370 $ 10,020,571 $ 1,214 $ (5,730,128 ) $ 2,156 -57.18 % 177.59 % Total CMP, Offset Printing Paper and Tissue Paper Revenue $ 95,384,334 $ n/a $ 149,429,711 $ n/a $ (54,045,377 ) $ n/a -36.17 % n/a % Our average unit purchase costs (net of applicable value added tax) of recycled paper board for the year ended December 31, 2022 were RMB 1,690/tonne (approximately $250/tonne), as compared to RMB 1,997/tonne (approximately $310/tonne) for the year ended December 31, 2021.
Changes in cost of sales and cost per tonne by product for the year ended December 31, 2023 and 2022 are summarized below: Year Ended December 31, 2023 Year Ended December 31, 2022 Change in 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 Regular CMP $ 63,818,509 $ 349 $ 76,213,404 $ 421 $ (12,394,895 ) $ (72 ) -16.26 % -17.10 % Light-Weight CMP $ 14,144,328 $ 345 $ 14,880,487 $ 398 $ (736,159 ) $ (53 ) -4.95 % -13.32 % Total CMP $ 77,962,837 $ 348 $ 91,093,891 $ 417 $ (13,131,054 ) $ (69 ) -14.41 % -16.55 % Offset Printing Paper $ 3,137,646 $ 563 $ - $ - $ 3,137,646 $ 563 - % 0.00 % Tissue Paper Products $ 4,318,339 $ 3,584 $ 4,290,443 $ 3,370 $ 27,896 $ 214 0.65 % 6.35 % Total CMP, Offset Printing Paper and Tissue Paper Revenue $ 85,418,822 $ n/a $ 95,384,334 $ n/a $ (9,965,512 ) $ n/a -10.45 % n/a % Our average unit purchase costs (net of applicable value added tax) of recycled paper board and recycled white scrap paper for the year ended December 31, 2023 were RMB 1,350/tonne (approximately $191/tonne) as compared to RMB 1,690/tonne (approximately $250/tonne) for the year ended December 31, 2022.
On June 21, 2018, the loan was extended for additional 5 years and will be due and payable in various installments from December 21, 2018 to June 20, 2023. The loan is secured by certain of the Company’s manufacturing equipment with net book value of $280,466 and $1,130,333 as of December 31, 2022, and 2021, respectively.
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.
This was mainly due to the increase in cost of tissue base paper and higher manufacturing overhead costs absorbed in the unit cost of sales due to low production yield.
The decrease was mainly due to the increase in cost of tissue base paper.
We sold 5,625 thousand pieces of face masks in the fourth quarter of 2022, as compared to 12,664 thousand pieces in the comparable period of 2021, a decrease of 7,039 thousand pieces, or 55.58%.
We sold 3,383 thousand pieces of face masks in 2023, as compared to 5,625 thousand pieces in 2022, a decrease of 2,242 thousand pieces, or 39.86%.

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