UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2025 or ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-34577 IT TECH PACKAGING, INC. (Exact name of registrant as specified in its charter) Nevada 20-4158835 (State or other jurisdiction of ...

Group 1 - The top five gaining Chinese concept stocks at closing were Everbright Digital, Kebo Technology, Gulf Resources, Ridgetech, and Internet Technology Packaging, with significant percentage increases [1] - Everbright Digital saw a remarkable increase of 114.43%, closing at a price of 1.0700, with a trading volume of 83.05 million [1] - Kebo Technology experienced a rise of 59.57%, closing at 3.000, with a trading volume of 134 million [1] Group 2 - Gulf Resources increased by 40.10%, closing at 0.7201, with a trading volume of 834,000 [1] - Ridgetech rose by 31.54%, closing at 1.960, with a trading volume of 823,200 [1] - Internet Technology Packaging saw an increase of 31.02%, closing at 0.3417, with a trading volume of 34.48 million [1]

Core Insights - IT Tech Packaging, Inc. has reported unusual trading activity in its common stock on the NYSE American on September 8 and September 9, 2025 [1] Company Summary - The company is listed on NYSE American under the ticker symbol ITP [1] - The announcement regarding the unusual trading activity was made on September 11, 2025 [1] Industry Context - The unusual trading activity may indicate potential market interest or volatility surrounding the company's stock [1]

Core Insights - CID-103 is identified as a potential best-in-class, clinical stage anti-CD38 monoclonal antibody [1] - The safety profile observed in the first four dose cohorts supports continued development of CID-103 [1] - No serious adverse events or dose-limiting toxicities have been reported during the study [1] Company Updates - CASI Pharmaceuticals, Inc. is focused on developing innovative therapies for patients with organ transplant rejection and autoimmune diseases [1] - The Safety Monitoring Committee (SMC) has completed its review of cohort 4 (600 mg target dose) and is continuing its assessment of the first three cohorts in the Phase 1 study [1] - The SMC has recommended that the trial continue, allowing for dose escalation to cohort 5 (900 mg target dose) as per the protocol design [1]

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=Part%20I.%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements of IT Tech Packaging, Inc. for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of income and comprehensive income, cash flows, and changes in stockholders' equity, along with detailed notes explaining the company's organization, accounting policies, and specific financial line items [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets show a slight decrease in total assets and stockholders' equity from December 31, 2024, to June 30, 2025, while total liabilities increased Condensed Consolidated Balance Sheets | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Total Assets | $175,162,562 | $177,546,786 | | Total Liabilities | $22,844,991 | $21,496,469 | | Total Stockholders' Equity | $152,317,571 | $156,050,317 | | Current Assets | $32,644,518 | $28,461,303 | | Current Liabilities | $21,341,552 | $20,146,767 | - Accounts receivable increased significantly from **$287,576** as of December 31, 2024, to **$1,841,007** as of June 30, 2025[8](index=8&type=chunk) - Inventories increased from **$2,351,876** as of December 31, 2024, to **$5,094,810** as of June 30, 2025[8](index=8&type=chunk) [Condensed Consolidated Statements of Income and Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) The company reported a net loss for both the three and six months ended June 30, 2025, which significantly worsened compared to the prior year, with revenues decreasing for the three-month period but increasing for the six-month period, while gross profit saw a substantial decline across both periods Condensed Consolidated Statements of Income and Comprehensive Income | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenues | $24,794,641 | $26,249,788 | $35,691,907 | $33,113,629 | | Gross Profit | $1,273,745 | $3,265,300 | $1,357,831 | $3,664,413 | | (Loss) Income from Operations | $(1,763,030) | $547,752 | $(5,140,265) | $(2,953,918) | | Net Loss | $(1,951,826) | $(77,747) | $(5,455,611) | $(3,824,283) | | Basic and Diluted Losses per Share | $(0.16) | $(0.01) | $(0.46) | $(0.38) | - Net loss for the three months ended June 30, 2025, increased by **2410.48%** to **$1,951,826** from **$77,747** in the prior year[10](index=10&type=chunk) - Gross profit decreased by **60.99%** for the three months ended June 30, 2025, and by **62.95%** for the six months ended June 30, 2025, compared to the respective prior periods[10](index=10&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents increased for the six months ended June 30, 2025, primarily due to significant cash provided by financing activities, despite net cash used in operating activities Condensed Consolidated Statements of Cash Flows | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------------- | :--------------------------- | :--------------------------- | | Net Cash (Used in) Provided by Operating Activities | $(1,111,313) | $1,346,337 | | Net Cash Used in Investing Activities | $(29,896) | $(62,640) | | Net Cash Provided by Financing Activities | $1,648,262 | $422,096 | | Net Increase in Cash and Cash Equivalents | $558,779 | $1,652,001 | | Cash, Cash Equivalents and Restricted Cash - End of Period | $7,509,355 | $6,043,922 | - Net cash used in operating activities was **$1,111,313** for the six months ended June 30, 2025, a decrease of **$2,457,650** or **182.54%** compared to net cash provided by operating activities in the prior year[13](index=13&type=chunk) - Net cash provided by financing activities increased significantly to **$1,648,262** in 2025 from **$422,096** in 2024, mainly due to proceeds from issuance of shares and short-term bank loans[13](index=13&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Stockholders' equity decreased from December 31, 2024, to June 30, 2025, primarily due to a net loss, partially offset by the issuance of new shares to an institutional investor Condensed Consolidated Statements of Changes in Stockholders' Equity | Metric | December 31, 2024 | June 30, 2025 | | :-------------------------------- | :---------------- | :-------------- | | Total Stockholders' Equity | $156,050,317 | $152,317,571 | | Common Stock Shares Outstanding | 10,065,920 | 16,965,420 | | Additional Paid-in Capital | $89,172,771 | $90,228,996 | | Retained Earnings | $73,785,892 | $68,330,281 | - The company issued **6,899,500 shares** to an institutional investor, increasing common stock and additional paid-in capital[15](index=15&type=chunk) - Net loss of **$5,455,611** for the six months ended June 30, 2025, reduced retained earnings[15](index=15&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide essential context and detail for the financial statements, covering the company's business structure, significant accounting policies, specific asset and liability breakdowns, related party transactions, and commitments [(1) Organization and Business Background](index=10&type=section&id=(1)%20Organization%20and%20Business%20Background) IT Tech Packaging, Inc. operates as a holding company for paper product producers in China, primarily through its variable interest entities (VIEs), Dongfang Paper and Tengsheng Paper, which account for nearly all of the company's revenue and assets - IT Tech Packaging, Inc. was incorporated in Nevada in 2005 and became a holding company for Hebei Baoding Dongfang Paper Milling Company Limited ('Dongfang Paper') in 2007[18](index=18&type=chunk) - The company controls Dongfang Paper and its subsidiary Tengsheng Paper as variable interest entities (VIEs) through contractual agreements, accounting for **100% of total revenue** and over **95% of total assets**[31](index=31&type=chunk) - Uncertainties in the PRC legal system could challenge the company's control over its VIEs, potentially leading to penalties or deconsolidation, though the company believes this possibility is remote[34](index=34&type=chunk)[35](index=35&type=chunk) [(2) Basis of Presentation and Significant Accounting Policies](index=14&type=section&id=(2)%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) The financial statements are prepared in accordance with GAAP, involving estimates and judgments, with a significant concern being the company's liquidity and going concern status, primarily due to losses in subsidiaries from high depreciation, decreased market demand, and elevated material costs - As of June 30, 2025, the company had a working capital of **$11,302,966**, but excluding VAT recoverable, it had a working capital deficit of **$1,906,169**[44](index=44&type=chunk) - Baoding Shengde and Tengsheng Paper incurred losses due to high depreciation costs, decreased market demand, and elevated material costs, raising substantial doubt about the company's ability to continue as a going concern[44](index=44&type=chunk) - Management plans to optimize raw material structure, stabilize manufacturing capacity, explore new products, adjust pricing, and maintain rigorous control over inventory and cash flow to mitigate financial risks[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) [(3) Restricted Cash](index=17&type=section&id=(3)%20Restricted%20Cash) Restricted cash balances remained stable, primarily due to legal proceedings against Tengsheng Paper and its executive director Restricted Cash | Metric | June 30, 2025 | December 31, 2024 | | :------------- | :-------------- | :---------------- | | Restricted cash | $1,038,874 | $1,034,203 | - The restricted cash is mainly deposited at the Industrial and Commercial Bank of China of Tengsheng Paper, due to a legal proceeding against Tengsheng Paper and Jie Ping[62](index=62&type=chunk) [(4) Inventories](index=17&type=section&id=(4)%20Inventories) Total net inventory significantly increased by **116.6%** from December 31, 2024, to June 30, 2025, driven primarily by a substantial increase in raw materials, particularly recycled paper board, in anticipation of rising purchase prices and expanded production Inventory by Category | Inventory Category | June 30, 2025 | December 31, 2024 | Change (%) | | :----------------- | :-------------- | :---------------- | :--------- | | Raw Materials | $3,923,194 | $1,512,716 | 159.3% | | Semi-finished Goods | $297,024 | $295,792 | 0.4% | | Finished Goods | $1,572,213 | $1,269,487 | 23.8% | | Total inventory, net | $5,094,810 | $2,351,876 | 116.6% | - Recycled paper board, a main raw material, increased by **172.54%** to **$3,688,955** as of June 30, 2025, from **$1,353,543** as of December 31, 2024[63](index=63&type=chunk) - The increase in raw material procurement was in anticipation of rising purchase prices and to prepare for expanded production output[203](index=203&type=chunk) [(5) Prepayments and other current assets](index=18&type=section&id=(5)%20Prepayments%20and%20other%20current%20assets) Prepayments and other current assets slightly decreased, mainly due to a reduction in prepayments for material purchases, partially offset by an increase in value-added tax recoverable Prepayments and Other Current Assets | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Prepayment for purchase of materials | $4,722,276 | $5,634,870 | | Value-added tax recoverable | $13,209,135 | $13,154,375 | | Total Prepayments and other current assets | $17,282,492 | $17,951,267 | - Allowance for doubtful accounts decreased from **$860,601** to **$801,284**[65](index=65&type=chunk) [(6) Property, plant and equipment, net](index=18&type=section&id=(6)%20Property%2C%20plant%20and%20equipment%2C%20net) Net property, plant, and equipment decreased due to accumulated depreciation, despite minor increases in gross values of land use rights, buildings, and machinery, with certain assets remaining pledged for bank loans Property, Plant and Equipment, Net | Asset Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Totals (Gross) | $304,694,021 | $303,409,386 | | Less: accumulated depreciation and amortization | $(164,258,575) | $(156,497,503) | | Property, Plant and Equipment, net | $140,435,446 | $146,911,883 | - Depreciation and amortization for the six months ended June 30, 2025, was **$7,090,582**, up from **$6,862,883** in the prior year[69](index=69&type=chunk) - Certain property, plant, and equipment of Baoding Shengde with net values of **$2,650,742** were pledged for short-term loans as of June 30, 2025[68](index=68&type=chunk) [(7) Leases](index=19&type=section&id=(7)%20Leases) The company acts as both an operating lease lessor and lessee, primarily leasing plant and production equipment, with lease liabilities calculated using the incremental borrowing rate, a weighted average remaining lease term of **3.1 years**, and a discount rate of **7.56%** as of June 30, 2025 Lease Metrics | Metric | June 30, 2025 | | :-------------------------------- | :-------------- | | Total operating lease payments | $558,768 | | Present value of lease liabilities | $496,502 | | Weighted average remaining lease term (years) | 3.1 | | Weighted average discount rate | 7.56% | - The company leases space under non-cancelable operating leases for plant and production equipment, with renewal options not included in right-of-use assets and lease liabilities unless reasonably certain of exercise[71](index=71&type=chunk)[72](index=72&type=chunk) [(8) Loans Payable](index=21&type=section&id=(8)%20Loans%20Payable) Total short-term bank loans increased, with new loans from Bank of Cangzhou and ICBC, while some older ICBC loans were repaid, and long-term loans remained stable with extensions and reduced interest rates on existing agreements, leading to an increased average short-term borrowing rate Loans Payable | Loan Type | June 30, 2025 | December 31, 2024 | | :-------------------- | :-------------- | :---------------- | | Total short-term bank loans | $5,056,855 | $4,451,616 | | Total long-term loans | $4,692,258 | $4,672,806 | | Current portion of long-term loans | $3,574,721 | $3,559,902 | | Long-term loans (non-current) | $1,117,537 | $1,112,904 | - The average short-term borrowing rate for the three months ended June 30, 2025, was approximately **5.72%**, up from **4.45%** in the prior year[90](index=90&type=chunk) - A long-term loan from Rural Credit Union of Xushui District was extended for another three years, due August 24, 2026, with the interest rate reduced to **6%** per annum[92](index=92&type=chunk) [(9) Related Party Transactions](index=23&type=section&id=(9)%20Related%20Party%20Transactions) The company has historically engaged in loan agreements with Mr. Liu Zhenyong, its CEO, for working capital purposes, and while no new loans were outstanding as of June 30, 2025, significant accrued interest from past loans remains, recorded in other payables and accrued liabilities - As of June 30, 2025, total loans due to Mr. Liu Zhenyong were **$nil**, but accrued interest of approximately **$305,868** was outstanding[99](index=99&type=chunk) - Interest expense incurred for related party loans was **$nil** for the three and six months ended June 30, 2025 and 2024[99](index=99&type=chunk) - An amount of **$119,974** was due to Mr. Liu Zhenyong as of June 30, 2025, representing funds for U.S. expenses, due on demand and interest-free[101](index=101&type=chunk) [(10) Other payables and accrued liabilities](index=24&type=section&id=(10)%20Other%20payables%20and%20accrued%20liabilities) Other payables and accrued liabilities increased, primarily driven by a significant increase in accrued electricity and payable for purchase of property, plant and equipment Other Payables and Accrued Liabilities | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Accrued electricity | $114,403 | $2,964 | | Accrued litigation costs | $494,742 | $461,855 | | Payable for purchase of property, plant and equipment | $10,756,269 | $10,711,678 | | Total | $12,053,116 | $11,545,990 | [(11) Derivative Liabilities](index=24&type=section&id=(11)%20Derivative%20Liabilities) Derivative liabilities, primarily related to warrants, decreased significantly due to a change in fair value, and these liabilities are classified as Level 3 fair value measurements and valued using the Black-Scholes pricing model Derivative Liabilities | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Derivative liability | $303 | $5,651 | - The change in fair value of derivative liability resulted in a gain of **$795** for the three months ended June 30, 2025, and **$5,348** for the six months ended June 30, 2025[106](index=106&type=chunk) - The fair value of derivative liabilities is determined using the Black-Scholes pricing model with Level 3 unobservable inputs[106](index=106&type=chunk) [(12) Common Stock](index=25&type=section&id=(12)%20Common%20Stock) The company issued **6,899,500 shares** of common stock in May 2025 to an institutional investor, generating approximately **$1.4 million** in gross proceeds - On May 13, 2025, the company issued **6,899,500 shares** of common stock at **$0.20 per share**, raising approximately **$1.4 million** in gross proceeds[108](index=108&type=chunk) - As of June 30, 2025, **16,965,420 shares** of common stock were issued and outstanding, compared to **10,065,920 shares** as of December 31, 2024[8](index=8&type=chunk) [(13) Warrants](index=25&type=section&id=(13)%20Warrants) As of June 30, 2025, the company had **3,016,635 warrants** outstanding and exercisable, with a weighted average exercise price of **$6.6907** and a remaining contractual life of **0.55 years**, and the intrinsic value of these warrants was nil Warrants Outstanding | Metric | June 30, 2025 | | :-------------------------------- | :-------------- | | Number of Warrants Outstanding and Exercisable | 3,016,635 | | Weighted Average Exercise Price | $6.6907 | | Weighted Average Remaining Contractual Life (years) | 0.55 | | Intrinsic Value of Warrants | nil | - The company classified warrants as liabilities and accounted for their issuance as a derivative[112](index=112&type=chunk) [(14) Earnings Per Share](index=26&type=section&id=(14)%20Earnings%20Per%20Share) The company reported basic and diluted net losses per share for both the three and six months ended June 30, 2025, which significantly increased compared to the prior year, reflecting the overall net loss Basic and Diluted Losses per Share | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic and Diluted Losses per Share | $(0.16) | $(0.01) | $(0.46) | $(0.38) | | Weighted average common stock outstanding | 11,905,787 | 10,065,920 | 11,905,787 | 10,065,920 | [(15) Income Taxes](index=27&type=section&id=(15)%20Income%20Taxes) The company recorded income tax expenses for both U.S. and PRC operations, with a significant decrease in PRC tax provision for the six months ended June 30, 2025, and negative effective income tax rates for both periods in 2025, influenced by valuation allowances on U.S. deferred tax assets due to limited operating history and continuing losses Income Tax Expenses and Rates | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Income Tax Expenses (Benefits) | $46,828 | $416,770 | $46,828 | $453,563 | | Effective income tax rate (3 months) | -2.5% | 122.9% | N/A | N/A | | Effective income tax rate (6 months) | N/A | N/A | -0.9% | -13.5% | - The company provided a **100% valuation allowance** on U.S. deferred tax assets due to limited operating history and continuing losses, believing the realization of benefits is not more than likely[122](index=122&type=chunk) - The company does not expect to recognize substantial current U.S. federal or state corporate income tax liability in the near future, as earnings are expected to be indefinitely reinvested offshore[126](index=126&type=chunk) [(16) Stock Incentive Plans](index=30&type=section&id=(16)%20Stock%20Incentive%20Plans) The company adopted the 2023 Omnibus Equity Incentive Plan, reserving **1,500,000 shares** of common stock for issuance to directors, officers, employees, and consultants - The 2023 Omnibus Equity Incentive Plan was adopted on October 31, 2023, reserving **1,500,000 shares** of common stock for awards[129](index=129&type=chunk) [(17) Commitments and Contingencies](index=30&type=section&id=(17)%20Commitments%20and%20Contingencies) The company has various commitments, including land leases, capital expenditure for a new tissue paper production line, and guarantees for a major supplier, and is also involved in legal proceedings that could materially impact its financial condition - The company leases **32.95 acres** of land with a **30-year term** expiring in 2031, requiring an annual rental payment of approximately **$16,718**[131](index=131&type=chunk) - Outstanding capital expenditure commitments for a new tissue paper production line (PM10) and industrial building improvements totaled **$3,453,189** as of June 30, 2025[136](index=136&type=chunk) - The company guaranteed a long-term loan of **$4,330,456** for Baoding Huanrun Trading Co., a major raw material supplier, maturing in 2028[137](index=137&type=chunk) - Tengsheng Paper is jointly liable for a loan repayment of **RMB3,320,000** in a civil loan dispute, with accrued litigation costs of **$463,778** recorded[138](index=138&type=chunk) [(18) Segment Reporting](index=31&type=section&id=(18)%20Segment%20Reporting) The company operates through three segments: Dongfang Paper and Tengsheng Paper (offset printing, corrugating medium, tissue paper) and Baoding Shengde (face masks, digital photo paper), with performance evaluated based on net income, and all sales to customers in the PRC, with Dongfang Paper generating all reported revenue for the three and six months ended June 30, 2025 - The company manages operations through three segments: Dongfang Paper, Tengsheng Paper, and Baoding Shengde, each with different technologies and marketing strategies[139](index=139&type=chunk) - Dongfang Paper generated **100%** of the company's total revenue for the three and six months ended June 30, 2025[142](index=142&type=chunk) Segment Net Income/Loss | Segment | 3 Months Ended June 30, 2025 (Net Income/Loss) | 6 Months Ended June 30, 2025 (Net Loss) | | :-------------- | :-------------------------------------- | :------------------------------------ | | Dongfang Paper | $629,336 | $(418,771) | | Tengsheng Paper | $(2,218,151) | $(4,414,021) | | Baoding Shengde | $(76,027) | $(141,336) | [(19) Concentration and Major Customers and Suppliers](index=34&type=section&id=(19)%20Concentration%20and%20Major%20Customers%20and%20Suppliers) The company had no single customer contributing over **10%** of total sales for the reported periods, but it relies on a few major suppliers, with two suppliers accounting for **74%** and **17%** of total purchases for the three months ended June 30, 2025 - No single customer contributed over **10%** of total sales for the three and six months ended June 30, 2025 and 2024[146](index=146&type=chunk)[147](index=147&type=chunk) - Two major suppliers accounted for **74%** and **17%** of total purchases for the three months ended June 30, 2025[146](index=146&type=chunk) [(20) Concentration of Credit Risk](index=34&type=section&id=(20)%20Concentration%20of%20Credit%20Risk) The company faces concentration of credit risk primarily in cash held in PRC financial institutions, where balances exceeding the RMB500,000 deposit insurance limit amounted to **$7,144,789** as of June 30, 2025 - Cash balances exceeding the PRC deposit insurance maximum coverage of **RMB500,000** amounted to **$7,144,789** as of June 30, 2025[148](index=148&type=chunk) - The company's U.S. bank accounts are fully covered by FDIC insurance[148](index=148&type=chunk) [(21) Risks and Uncertainties](index=34&type=section&id=(21)%20Risks%20and%20Uncertainties) The company is exposed to substantial risks including intense industry competition, financing and liquidity requirements, rapidly changing customer demands, foreign currency exchange rate fluctuations, and operating under PRC laws and restrictions [(22) Subsequent Event](index=34&type=section&id=(22)%20Subsequent%20Event) No subsequent events were reported [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition for the periods ended June 30, 2025 and 2024, highlighting operational results, liquidity, capital resources, critical accounting policies, and recent accounting pronouncements [Cautionary Notice Regarding Forward-Looking Statements](index=35&type=section&id=Cautionary%20Notice%20Regarding%20Forward-Looking%20Statements) This section advises readers that the report contains forward-looking statements about future operations, financial performance, and strategies, which are subject to various risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are identified by words like 'anticipate', 'believe', 'estimate', 'expect', 'intend', 'plan', 'project', 'target', 'can', 'could', 'may', 'should', 'will', 'would', and similar expressions[154](index=154&type=chunk) - Actual results may differ materially from forward-looking statements due to risks and uncertainties, including general economic conditions, managing growth, generating sufficient revenues, and fulfilling cash requirements[154](index=154&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) The company experienced a decline in gross profit and an increase in net loss for both the three and six months ended June 30, 2025, primarily due to decreased average selling prices and increased unit material costs for Corrugating Medium Paper (CMP), despite an increase in CMP sales volume for the six-month period [Comparison of the Three Months Ended June 30, 2025 and 2024](index=35&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202025%20and%202024) For the three months ended June 30, 2025, revenue decreased by **5.54%** due to lower sales volume and average selling prices of CMP, with gross profit declining significantly by **60.99%**, leading to an operating loss and a substantial increase in net loss Three Months Ended June 30, 2025 and 2024 Financial Highlights | Metric | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :--------- | :--------- | | Revenues | $24,794,641 | $26,249,788 | $(1,455,147) | (5.54)% | | Gross Profit | $1,273,745 | $3,265,300 | $(1,991,555) | (60.99)% | | (Loss) Income from Operations | $(1,763,030) | $547,752 | $(2,310,782) | (421.87)% | | Net Loss | $(1,951,826) | $(77,747) | $(1,874,079) | (2410.48)% | [Revenue of Offset Printing Paper, Corrugating Medium Paper and Tissue Paper Products (3 Months)](index=35&type=section&id=Revenue%20of%20Offset%20Printing%20Paper%2C%20Corrugating%20Medium%20Paper%20and%20Tissue%20Paper%20Products%20(3%20Months)) Revenue from CMP, the sole product sold, decreased by **5.41%** due to a **1.56%** decrease in total volume sold and lower average selling prices for both regular and light-weight CMP, while production of offset printing paper and tissue paper products remained suspended CMP Revenue (3 Months) | Product | 3 Months Ended June 30, 2025 (Quantity) | 3 Months Ended June 30, 2025 (Amount) | 3 Months Ended June 30, 2024 (Quantity) | 3 Months Ended June 30, 2024 (Amount) | Quantity Change (%) | Amount Change (%) | | :-------------------- | :-------------------------------------- | :------------------------------------ | :-------------------------------------- | :------------------------------------ | :------------------ | :---------------- | | Regular CMP | 61,554 tonnes | $20,652,429 | 62,813 tonnes | $21,983,621 | (2.00)% | (6.06)% | | Light-Weight CMP | 12,634 tonnes | $4,142,212 | 12,552 tonnes | $4,229,194 | 0.65% | (2.06)% | | Total CMP | 74,188 tonnes | $24,794,641 | 75,365 tonnes | $26,212,815 | (1.56)% | (5.41)% | CMP Average Selling Price (3 Months) | Product | June 30, 2025 ASP | June 30, 2024 ASP | Change ($) | Change (%) | | :-------------------- | :---------------- | :---------------- | :--------- | :--------- | | Regular CMP | $336 | $350 | $(14) | (4.00)% | | Light-Weight CMP | $328 | $337 | $(9) | (2.67)% | - Production of offset printing paper and tissue paper products was suspended from 2024 through the first half of 2025 and is expected to resume in the second half of 2025[156](index=156&type=chunk) [Cost of Sales (3 Months)](index=39&type=section&id=Cost%20of%20Sales%20(3%20Months)) Total cost of sales for CMP increased by **2.33%** due to a **3.93%** increase in the average unit cost of sales, primarily driven by higher average unit purchase costs of recycled paper board, partially offset by decreased sales quantity of regular CMP CMP Cost of Sales (3 Months) | Product | 3 Months Ended June 30, 2025 (Cost of Sales) | 3 Months Ended June 30, 2025 (Cost per Tonne) | 3 Months Ended June 30, 2024 (Cost of Sales) | 3 Months Ended June 30, 2024 (Cost per Tonne) | Cost of Sales Change (%) | Cost per Tonne Change (%) | | :-------------------- | :------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :-------------------------------------------- | :----------------------- | :------------------------ | | Regular CMP | $19,597,979 | $318 | $19,297,669 | $307 | 1.56% | 3.58% | | Light-Weight CMP | $3,922,917 | $311 | $3,686,819 | $294 | 6.40% | 5.78% | | Total CMP | $23,520,896 | $317 | $22,984,488 | $305 | 2.33% | 3.93% | - The average unit purchase cost of recycled paper board increased by **6.10%** year-over-year to approximately **$174/tonne**[168](index=168&type=chunk) - Electricity and gas accounted for approximately **5%** and **15.1%** of total sales, respectively, in Q2 2025, compared to **5%** and **12.9%** in Q2 2024[171](index=171&type=chunk) [Gross Profit (3 Months)](index=40&type=section&id=Gross%20Profit%20(3%20Months)) Gross profit for CMP and related products decreased by **60.54%**, with the overall gross profit margin falling by **7.18 percentage points** to **5.14%**, primarily due to decreased ASPs and increased unit costs of sales for both regular and light-weight CMP Gross Profit (3 Months) | Metric | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :--------- | :--------- | | Gross Profit | $1,273,745 | $3,265,300 | $(1,991,555) | (60.99)% | | Gross Profit Margin | 5.14% | 12.44% | (7.30)% | N/A | Gross Profit Margin by Product (3 Months) | Product | June 30, 2025 Gross Profit Margin | June 30, 2024 Gross Profit Margin | Change (pp) | | :-------------------- | :---------------------------------- | :---------------------------------- | :---------- | | Regular CMP | 5.11% | 12.22% | (7.11) | | Light-Weight CMP | 5.29% | 12.82% | (7.53) | [Selling, General and Administrative Expenses (3 Months)](index=41&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses%20(3%20Months)) Selling, general and administrative expenses increased by **11.75%** due to higher depreciation of idle fixed assets SG&A Expenses (3 Months) | Metric | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :--------- | :--------- | | SG&A Expenses | $3,036,775 | $2,717,548 | $319,227 | 11.75% | [(Loss) Income from Operations (3 Months)](index=41&type=section&id=(Loss)%20Income%20from%20Operations%20(3%20Months)) Operating results shifted from income to a significant loss, decreasing by **421.87%**, primarily due to the decline in gross profit and increased selling, general, and administrative expenses (Loss) Income from Operations (3 Months) | Metric | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :--------- | :--------- | | (Loss) Income from Operations | $(1,763,030) | $547,752 | $(2,310,782) | (421.87)% | [Other Income and Expenses (3 Months)](index=41&type=section&id=Other%20Income%20and%20Expenses%20(3%20Months)) Interest expense decreased by **$67,580**, reflecting a reduction in total interest-bearing loans Interest Expense (3 Months) | Metric | June 30, 2025 | June 30, 2024 | Change ($) | | :---------------- | :-------------- | :-------------- | :--------- | | Interest expense | $143,971 | $211,551 | $(67,580) | - Total interest-bearing loans decreased from **$12,149,914** as of June 30, 2024, to **$9,749,113** as of June 30, 2025[181](index=181&type=chunk) [Gain on Derivative Liability (3 Months)](index=42&type=section&id=Gain%20on%20Derivative%20Liability%20(3%20Months)) The company recognized a gain on derivative liability, which increased significantly compared to the prior year, reflecting changes in the fair market value of warrants Gain on Derivative Liability (3 Months) | Metric | June 30, 2025 | June 30, 2024 | | :------------------------ | :-------------- | :-------------- | | Gain on derivative liability | $795 | $15 | [Net Loss (3 Months)](index=42&type=section&id=Net%20Loss%20(3%20Months)) Net loss for the quarter ended June 30, 2025, increased by **2410.48%** to **$1,951,826**, primarily due to the factors mentioned above, including decreased gross profit and increased operating expenses Net Loss (3 Months) | Metric | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :------- | :-------------- | :-------------- | :--------- | :--------- | | Net Loss | $(1,951,826) | $(77,747) | $(1,874,079) | 2410.48% | [Comparison of the Six Months Ended June 30, 2025 and 2024](index=42&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) For the six months ended June 30, 2025, revenue increased by **7.79%** driven by higher CMP sales volume, despite decreased ASPs, however, gross profit significantly decreased by **62.95%**, leading to a **42.66%** increase in net loss Six Months Ended June 30, 2025 and 2024 Financial Highlights | Metric | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :--------- | :--------- | | Revenues | $35,691,907 | $33,113,629 | $2,578,278 | 7.79% | | Gross Profit | $1,357,831 | $3,664,413 | $(2,306,582) | (62.95)% | | Loss from Operations | $(5,140,265) | $(2,953,918) | $(2,186,347) | (74.02)% | | Net Loss | $(5,455,611) | $(3,824,283) | $(1,631,328) | (42.66)% | [Revenue of Offset Printing Paper, Corrugating Medium Paper and Tissue Paper Products (6 Months)](index=42&type=section&id=Revenue%20of%20Offset%20Printing%20Paper%2C%20Corrugating%20Medium%20Paper%20and%20Tissue%20Paper%20Products%20(6%20Months)) Revenue from CMP increased by **8.03%** due to a **12.51%** increase in total volume sold, partially offset by decreased average selling prices for both regular and light-weight CMP, while production of offset printing paper and tissue paper products remained suspended CMP Revenue (6 Months) | Product | 6 Months Ended June 30, 2025 (Quantity) | 6 Months Ended June 30, 2025 (Amount) | 6 Months Ended June 30, 2024 (Quantity) | 6 Months Ended June 30, 2024 (Amount) | Quantity Change (%) | Amount Change (%) | | :-------------------- | :-------------------------------------- | :------------------------------------ | :-------------------------------------- | :------------------------------------ | :------------------ | :---------------- | | Regular CMP | 88,316 tonnes | $29,930,545 | 78,452 tonnes | $27,734,222 | 12.57% | 7.92% | | Light-Weight CMP | 17,479 tonnes | $5,761,362 | 15,582 tonnes | $5,305,393 | 12.17% | 8.59% | | Total CMP | 105,795 tonnes | $35,691,907 | 94,034 tonnes | $33,039,615 | 12.51% | 8.03% | CMP Average Selling Price (6 Months) | Product | June 30, 2025 ASP | June 30, 2024 ASP | Change ($) | Change (%) | | :-------------------- | :---------------- | :---------------- | :--------- | :--------- | | Regular CMP | $339 | $354 | $(15) | (4.24)% | | Light-Weight CMP | $330 | $340 | $(10) | (2.94)% | [Cost of Sales (6 Months)](index=43&type=section&id=Cost%20of%20Sales%20(6%20Months)) Total cost of sales for CMP increased by **16.59%** due to higher sales volume and a **3.83%** increase in the average unit cost of sales, driven by increased unit material costs CMP Cost of Sales (6 Months) | Product | 6 Months Ended June 30, 2025 (Cost of Sales) | 6 Months Ended June 30, 2025 (Cost per Tonne) | 6 Months Ended June 30, 2024 (Cost of Sales) | 6 Months Ended June 30, 2024 (Cost per Tonne) | Cost of Sales Change (%) | Cost per Tonne Change (%) | | :-------------------- | :------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :-------------------------------------------- | :----------------------- | :------------------------ | | Regular CMP | $28,741,566 | $325 | $24,721,681 | $315 | 16.26% | 3.17% | | Light-Weight CMP | $5,592,510 | $320 | $4,727,272 | $303 | 18.30% | 5.61% | | Total CMP | $34,334,076 | $325 | $29,448,953 | $313 | 16.59% | 3.83% | [Gross Profit (6 Months)](index=43&type=section&id=Gross%20Profit%20(6%20Months)) Gross profit for CMP and related products decreased by **62.95%**, with the overall gross profit margin falling by **7.07 percentage points** to **3.80%**, primarily due to decreased ASPs and increased material costs, partially offset by higher sales volume Gross Profit (6 Months) | Metric | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :--------- | :--------- | | Gross Profit | $1,357,831 | $3,664,413 | $(2,306,582) | (62.95)% | | Gross Profit Margin | 3.80% | 11.07% | (7.27)% | N/A | Gross Profit Margin by Product (6 Months) | Product | June 30, 2025 Gross Profit Margin | June 30, 2024 Gross Profit Margin | Change (pp) | | :-------------------- | :---------------------------------- | :---------------------------------- | :---------- | | Regular CMP | 3.97% | 10.86% | (6.89) | | Light-Weight CMP | 2.93% | 10.90% | (7.97) | [Selling, General and Administrative Expenses (6 Months)](index=43&type=section&id=Selling%20General%20and%20Administrative%20Expenses%20(6%20Months)) Selling, general and administrative expenses decreased by **1.82%**, mainly due to lower manpower costs and reduced depreciation of idle fixed assets during production suspension SG&A Expenses (6 Months) | Metric | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :--------- | :--------- | | SG&A Expenses | $6,498,096 | $6,618,331 | $(120,235) | (1.82)% | [Loss from Operations (6 Months)](index=43&type=section&id=Loss%20from%20Operations%20(6%20Months)) Operating loss for the six months ended June 30, 2025, increased by **74.02%**, primarily due to the decrease in gross profit, partially offset by lower selling, general, and administrative expenses Loss from Operations (6 Months) | Metric | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :-------------- | :-------------- | :--------- | :--------- | | Loss from Operations | $(5,140,265) | $(2,953,918) | $(2,186,347) | (74.02)% | [Other Income and Expenses (6 Months)](index=45&type=section&id=Other%20Income%20and%20Expenses%20(6%20Months)) Interest expense decreased by **$145,023**, reflecting a reduction in total interest-bearing loans Interest Expense (6 Months) | Metric | June 30, 2025 | June 30, 2024 | Change ($) | | :---------------- | :-------------- | :-------------- | :--------- | | Interest expense | $276,818 | $421,841 | $(145,023) | - Total interest-bearing loans decreased from **$12,149,914** as of June 30, 2024, to **$9,749,113** as of June 30, 2025[195](index=195&type=chunk) [Gain on Derivative Liability (6 Months)](index=45&type=section&id=Gain%20on%20Derivative%20Liability%20(6%20Months)) The company recognized a gain on derivative liability, which increased significantly compared to the prior year, reflecting changes in the fair market value of warrants Gain on Derivative Liability (6 Months) | Metric | June 30, 2025 | June 30, 2024 | | :------------------------ | :-------------- | :-------------- | | Gain on derivative liability | $5,348 | $49 | [Net Loss (6 Months)](index=45&type=section&id=Net%20Loss%20(6%20Months)) Net loss for the six months ended June 30, 2025, increased by **42.66%** to **$5,455,611**, primarily due to the factors mentioned above, including decreased gross profit Net Loss (6 Months) | Metric | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :------- | :-------------- | :-------------- | :--------- | :--------- | | Net Loss | $(5,455,611) | $(3,824,283) | $(1,631,328) | 42.66% | [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) The company faces liquidity challenges with a working capital deficit (excluding VAT recoverable) and doubts about its subsidiaries' going concern ability due to losses, planning to optimize costs, explore new products, and utilize capital market financing, with cash and cash equivalents increasing due to financing activities despite cash used in operations - As of June 30, 2025, the company had a working capital deficit of **$1,906,169**, excluding VAT recoverable, raising substantial doubt about its ability to continue as a going concern[198](index=198&type=chunk) - Management plans to optimize raw material structure, stabilize manufacturing capacity, explore new products, adjust pricing, and strategically utilize financing quotas to ensure smooth operations[199](index=199&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk) - Cash, cash equivalents, and restricted cash increased by **$558,779** to **$7,509,355** as of June 30, 2025, primarily driven by net cash provided by financing activities[208](index=208&type=chunk) [Accounts Receivable (Liquidity)](index=45&type=section&id=Accounts%20Receivable%20(Liquidity)) Net accounts receivable increased significantly by **540.18%** from December 31, 2024, to June 30, 2025 Accounts Receivable | Metric | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :---------------- | :-------------- | :---------------- | :--------- | :--------- | | Accounts Receivable | $1,841,007 | $287,576 | $1,553,431 | 540.18% | [Inventories (Liquidity)](index=45&type=section&id=Inventories%20(Liquidity)) Net inventory increased by **116.6%**, primarily due to a **159.3%** rise in raw materials, especially recycled paper board, procured in anticipation of rising prices and expanded production Inventory (Liquidity) | Inventory Category | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :----------------- | :-------------- | :---------------- | :--------- | :--------- | | Total Raw Materials | $3,923,194 | $1,512,716 | $2,410,478 | 159.3% | | Total inventory, net | $5,094,810 | $2,351,876 | $2,742,934 | 116.6% | - The inventory of recycled paper board increased by **172.54%** to **$3,688,955**, reflecting increased procurement for future production[203](index=203&type=chunk)[204](index=204&type=chunk) [Renewal of Operating Lease (Liquidity)](index=46&type=section&id=Renewal%20of%20Operating%20Lease%20(Liquidity)) The lease agreement for industrial buildings was renewed in August 2022 for a six-year term with an annual rental payment of approximately **$139,318** - The lease for industrial buildings was renewed for a six-year term in August 2022, with an annual rental payment of approximately **$139,318**[205](index=205&type=chunk) [Capital Expenditure Commitment (Liquidity)](index=46&type=section&id=Capital%20Expenditure%20Commitment%20(Liquidity)) The company has approximately **$3.5 million** in capital expenditure commitments, mainly for a new tissue paper production line (PM10), expected to be financed by bank loans and business operations - As of June 30, 2025, capital expenditure commitments totaled approximately **$3.5 million**, primarily for the PM10 paper machine[207](index=207&type=chunk) - These commitments are expected to be financed by bank loans and cash flows from business operations[207](index=207&type=chunk) [Cash and Cash Equivalents (Liquidity)](index=46&type=section&id=Cash%20and%20Cash%20Equivalents%20(Liquidity)) Cash, cash equivalents, and restricted cash increased by **$558,779**, reaching **$7,509,355** as of June 30, 2025, driven by financing activities, despite net cash used in operations Cash, Cash Equivalents and Restricted Cash | Metric | June 30, 2025 | December 31, 2024 | Change ($) | | :--------------------------------------- | :-------------- | :---------------- | :--------- | | Cash, Cash Equivalents and Restricted Cash | $7,509,355 | $6,950,576 | $558,779 | - Net cash used in operating activities was **$1,111,313**, a decrease of **$2,457,650** compared to cash provided in the prior year[208](index=208&type=chunk) - Net cash provided by financing activities was **$1,648,262**, mainly from common stock issuance and short-term bank loans[210](index=210&type=chunk) [Short-term Bank Loans (Liquidity)](index=47&type=section&id=Short-term%20Bank%20Loans%20(Liquidity)) Total short-term bank loans increased to **$5,056,855** as of June 30, 2025, with new loans from Bank of Cangzhou and ICBC, while several older ICBC loans were repaid, and the average short-term borrowing rate increased to **5.73%** for the six months ended June 30, 2025 Short-term Bank Loans | Metric | June 30, 2025 | December 31, 2024 | | :-------------------- | :-------------- | :---------------- | | Total short-term bank loans | $5,056,855 | $4,451,616 | | Guaranteed short-term borrowings | $2,821,781 | $2,225,808 | | Unsecured bank loans | $419,076 | $417,339 | - New working capital loans were secured from Bank of Cangzhou and ICBC in late 2024 and early 2025, with interest rates ranging from **3.00%** to **6.00%**[213](index=213&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk) - The average short-term borrowing rate for the six months ended June 30, 2025, was approximately **5.73%**, up from **4.46%** in the prior year[222](index=222&type=chunk) [Long-term Loans (Liquidity)](index=48&type=section&id=Long-term%20Loans%20(Liquidity)) Long-term loans remained stable at **$4,692,258** as of June 30, 2025, with existing loans from the Rural Credit Union of Xushui District extended and their interest rates reduced to **6%** per annum Long-term Loans | Metric | June 30, 2025 | December 31, 2024 | | :-------------------- | :-------------- | :---------------- | | Total long-term loans | $4,692,258 | $4,672,806 | | Current portion of long-term loans | $3,574,721 | $3,559,902 | | Long-term loans (non-current) | $1,117,537 | $1,112,904 | - A loan from the Rural Credit Union of Xushui District was extended to August 24, 2026, with the interest rate reduced to **6%** per annum[224](index=224&type=chunk) - Total interest expense for short-term and long-term loans for the six months ended June 30, 2025, was **$276,818**, a decrease from **$421,841** in the prior year[226](index=226&type=chunk) [Shareholder Loans (Liquidity)](index=50&type=section&id=Shareholder%20Loans%20(Liquidity)) As of June 30, 2025, there were no outstanding loans from Mr. Liu Zhenyong, the CEO, to the company, however, accrued interest from past loans totaling **$305,868** remains, and a separate interest-free amount of **$119,974** was due to Mr. Liu Zhenyong for U.S. expenses - No loans were outstanding to Mr. Liu Zhenyong as of June 30, 2025, and December 31, 2024[230](index=230&type=chunk) - Net interest owed to Mr. Liu Zhenyong was approximately **$305,868** as of June 30, 2025, recorded in other payables and accrued liabilities[230](index=230&type=chunk) - An amount of **$119,974** was due to Mr. Liu Zhenyong as of June 30, 2025, for U.S. expenses, which is interest-free and due on demand[233](index=233&type=chunk) [Critical Accounting Policies and Estimates](index=51&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's financial statements rely on critical accounting policies and estimates, particularly for revenue recognition, valuation of long-lived assets, and foreign currency translation, with management continuously evaluating these estimates, and no impairment of long-lived assets identified for the reported periods - Revenue is recognized upon goods delivery, fixed price, and assured collectability[235](index=235&type=chunk) - Long-lived assets are reviewed for impairment when circumstances warrant, with fair value determined by discounted cash flows; no impairment was required for the six months ended June 30, 2025 and 2024[236](index=236&type=chunk) - The functional currency of PRC subsidiaries is RMB, with assets and liabilities translated at current exchange rates and revenues/expenses at average rates, with adjustments in other comprehensive income (loss)[237](index=237&type=chunk) [Off-Balance Sheet Arrangements](index=51&type=section&id=Off-Balance%20Sheet%20Arrangements) The company has a significant off-balance sheet arrangement as a guarantor for a major raw material supplier's long-term bank loans totaling **$4,330,456**, which could materially affect the company if the supplier becomes insolvent - The company guaranteed **$4,330,456** in long-term bank loans for Baoding Huanrun Trading Co., a major raw material supplier, maturing in 2028[238](index=238&type=chunk) - Insolvency of the guaranteed supplier could materially and adversely affect the company[238](index=238&type=chunk) [Recent Accounting Pronouncements](index=52&type=section&id=Recent%20Accounting%20Pronouncements) The company is evaluating the impact of new FASB ASUs on income tax disclosures (ASU 2023-09, effective after December 15, 2024) and expense disaggregation (ASU 2024-03, effective after December 15, 2026), which aim to enhance transparency and comparability in financial reporting - ASU 2023-09 (Income Taxes) requires annual disclosure of specific categories in rate reconciliation and additional information for significant reconciling items, effective for annual periods beginning after December 15, 2024[239](index=239&type=chunk) - ASU 2024-03 (Expense Disaggregation Disclosures) mandates disaggregation of expenses by nature and function on the income statement, effective for annual periods beginning after December 15, 2026[240](index=240&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to foreign exchange risk due to its operations primarily in RMB while reporting in USD, and inflation risk, which could adversely affect operating results if cost increases are not passed on to customers - The company is exposed to foreign exchange risk as most revenues, costs, and assets are denominated in RMB, while the reporting currency is USD[241](index=241&type=chunk) - Depreciation of the RMB against the USD would reduce the value of RMB-denominated revenues, earnings, and assets in USD financial statements[241](index=241&type=chunk) - Inflation, particularly in product and overhead costs, could adversely affect operating results if selling prices do not keep pace with increased costs[242](index=242&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting occurring during the quarter - As of June 30, 2025, disclosure controls and procedures were deemed effective at a reasonable assurance level[243](index=243&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[244](index=244&type=chunk) [PART II - OTHER INFORMATION](index=53&type=section&id=Part%20II.%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in two significant legal proceedings: a breach of contract lawsuit by FT Global Capital, Inc., where a default judgment on liability was granted against the company, and a civil loan dispute in China involving Tengsheng Paper, which was ordered to repay **RMB3,320,000** - FT Global Capital, Inc. filed a breach of contract lawsuit against the company, resulting in a default judgment on liability against the company as of August 20, 2024[246](index=246&type=chunk) - Tengsheng Paper is jointly liable for a loan repayment of **RMB3,320,000** in a civil loan dispute, with property preservation measures freezing **RMB3.35 million** worth of bank deposits[247](index=247&type=chunk) - The ultimate resolution of these proceedings may have a material adverse impact on the company's business, financial condition, results of operations, or cash flows[248](index=248&type=chunk) [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, the registrant is not required to provide information under this item - The company is a smaller reporting company and is not required to provide risk factors under this item[249](index=249&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=53&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported - No unregistered sales of equity securities and use of proceeds were reported[250](index=250&type=chunk) [Item 3. Defaults Upon Senior Securities](index=53&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - No defaults upon senior securities were reported[252](index=252&type=chunk) [Item 4. Mine Safety Disclosures](index=53&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[254](index=254&type=chunk) [Item 5. Other Information](index=54&type=section&id=Item%205.%20Other%20Information) No directors or officers reported the adoption or termination of Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2025 - No directors or officers reported adoption or termination of Rule 10b5-1 or non-Rule 10b5-1 trading arrangements[255](index=255&type=chunk) [Item 6. Exhibits](index=54&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer, and Inline XBRL documents - Exhibits include certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[256](index=256&type=chunk) [SIGNATURES](index=55&type=section&id=SIGNATURES) [SIGNATURES](index=55&type=section&id=SIGNATURES) The report was duly signed on August 14, 2025, by Zhenyong Liu, Chief Executive Officer, and Jing Hao, Chief Financial Officer, on behalf of IT Tech Packaging, Inc - The report was signed by Zhenyong Liu, CEO, and Jing Hao, CFO, on August 14, 2025[260](index=260&type=chunk)

Company Overview - IT Tech Packaging Inc. is a leading manufacturer and distributor of diversified paper products in North China, founded in 1996 [5] - The company primarily uses recycled paper as its raw material, except for tissue paper products, and produces three categories: corrugating medium paper, offset printing paper, and tissue paper products [5] - IT Tech Packaging is strategically located in Baoding and Xingtai, Hebei Province, close to major markets in Beijing and Tianjin [5] - The company has been listed on the NYSE American since December 2009 [5] Recent Offering - IT Tech Packaging announced a public offering of 6,899,500 shares of its common stock at a price of $0.20 per share, expecting gross proceeds of approximately $1.4 million before fees and expenses [1] - The offering is expected to close on May 14, 2025, subject to customary closing conditions [1] - Maxim Group LLC is acting as the sole placement agent for this offering [2] Use of Proceeds - The net proceeds from the offering will be used for working capital and other general corporate purposes [2] Regulatory Information - A shelf registration statement for the shares was filed with the SEC on April 3, 2023, and declared effective on April 14, 2023 [3] - The offering is being made only by means of a written prospectus and prospectus supplement [3]

[PART I. - FINANCIAL INFORMATION](index=4&type=section&id=Part%20I.%20-%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income, cash flow, and equity statements, along with detailed notes on accounting policies and commitments [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and stockholders' equity slightly decreased, while total liabilities increased, driven by changes in cash, accounts receivable, inventories, and short-term bank loans Condensed Consolidated Balance Sheet Highlights | Metric | March 31, 2025 | December 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | :------------- | :---------------- | :--------- | :--------- | | Total Assets | $175,204,130 | $177,546,786 | $(2,342,656) | -1.32% | | Total Liabilities | $22,427,150 | $21,496,469 | $930,681 | 4.33% | | Total Stockholders' Equity | $152,776,980 | $156,050,317 | $(3,273,337) | -2.10% | | Cash and bank balances | $4,034,428 | $5,916,373 | $(1,881,945) | -31.81% | | Accounts receivable | $2,127,629 | $287,576 | $1,840,053 | 639.85% | | Inventories | $4,642,056 | $2,351,876 | $2,290,180 | 97.38% | | Short-term bank loans | $5,043,047 | $4,451,616 | $591,431 | 13.28% | [Condensed Consolidated Statements of Income and Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) Revenues increased, but a significant decrease in gross profit led to a higher net loss, despite reduced selling, general, and administrative expenses and interest expense Condensed Consolidated Statements of Income and Comprehensive Income Highlights | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Revenues | $10,897,266 | $6,863,841 | $4,033,425 | 58.76% | | Cost of sales | $(10,813,180) | $(6,464,728) | $(4,348,452) | 67.27% | | Gross Profit | $84,086 | $399,113 | $(315,027) | -78.93% | | Selling, general and administrative expenses | $(3,461,321) | $(3,900,783) | $439,462 | -11.27% | | Loss from Operations | $(3,377,235) | $(3,501,670) | $124,435 | -3.55% | | Interest expense | $(132,847) | $(210,290) | $77,443 | -36.83% | | Net Loss | $(3,503,785) | $(3,746,536) | $242,751 | -6.48% | | Basic and Diluted Losses per Share | $(0.35) | $(0.37) | $0.02 | -5.41% | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) A net decrease in cash and cash equivalents resulted from significant net cash used in operating activities, reversing the prior year's inflow Condensed Consolidated Statements of Cash Flows Highlights | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Net Cash (Used in) Provided by Operating Activities | $(2,474,978) | $624,420 | $(3,099,398) | -496.36% | | Net Cash Used in Investing Activities | $(8,364) | $(9,027) | $663 | -7.34% | | Net Cash Provided by Financing Activities | $585,456 | $422,488 | $162,968 | 38.57% | | Net (Decrease) Increase in Cash and Cash Equivalents | $(1,880,216) | $1,025,639 | $(2,905,855) | -283.32% | | Cash, Cash Equivalents and Restricted Cash - End of Period | $5,070,360 | $5,417,560 | $(347,200) | -6.41% | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Stockholders' equity decreased due to the net loss, partially mitigated by a positive foreign currency translation adjustment Condensed Consolidated Statements of Changes in Stockholders' Equity Highlights | Metric | March 31, 2025 | December 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | :------------- | :---------------- | :--------- | :--------- | | Total Stockholders' Equity | $152,776,980 | $156,050,317 | $(3,273,337) | -2.10% | | Net loss | $(3,503,785) | N/A | N/A | N/A | | Foreign currency translation adjustment | $230,448 | N/A | N/A | N/A | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of accounting policies, financial instrument valuations, and specific financial statement line items [(1) Organization and Business Background](index=9&type=section&id=(1)%20Organization%20and%20Business%20Background) IT Tech Packaging, Inc. operates primarily through its wholly-owned subsidiary and VIEs in the PRC, which account for nearly all of its revenue and assets - IT Tech Packaging, Inc. (ITP) was incorporated in Nevada on December 9, 2005, and became the holding company for Dongfang Paper on October 29, 2007[16](index=16&type=chunk) - The company's name changed to IT Tech Packaging, Inc. on August 1, 2018, and its common stock trades under the NYSE symbol 'ITP'[17](index=17&type=chunk) - Dongfang Paper and Tengsheng Paper, as VIEs, accounted for **100% of total revenue** and approximately **96% of total assets** as of March 31, 2025, and December 31, 2024[29](index=29&type=chunk) [(2) Basis of Presentation and Significant Accounting Policies](index=13&type=section&id=(2)%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) This section outlines the basis for preparing financial statements, addresses liquidity and going concern status, and details valuation methods for assets and liabilities - As of March 31, 2025, the Company had a working capital deficit of **$4,607,992**, excluding a VAT recoverable of $13,173,067, which is deemed unrecoverable in the short term[41](index=41&type=chunk) - The company faces **substantial doubt about its ability to continue as a going concern** due to losses from high depreciation, decreased market demand, and elevated material costs[41](index=41&type=chunk) - Management determined derivative liabilities to be a **Level 3 fair value measurement**, calculated using the Black-Scholes pricing model with unobservable inputs[52](index=52&type=chunk) [(3) Restricted Cash](index=16&type=section&id=(3)%20Restricted%20Cash) Restricted cash balances were held at the Industrial and Commercial Bank of China for Tengsheng Paper, primarily due to legal proceedings Restricted Cash Balances | Metric | March 31, 2025 | December 31, 2024 | | :------------- | :------------- | :---------------- | | Restricted cash | $1,035,932 | $1,034,203 | - The restricted cash is due to legal proceedings against Tengsheng Paper and Jie Ping, its executive director and legal representative[58](index=58&type=chunk) [(4) Inventories](index=16&type=section&id=(4)%20Inventories) Total net inventory significantly increased, driven by a substantial rise in raw materials in anticipation of increased production Inventory Breakdown | Metric | March 31, 2025 | December 31, 2024 | Change ($) | Change (%) | | :----------------------- | :------------- | :---------------- | :--------- | :--------- | | Total inventory, net | $4,642,056 | $2,351,876 | $2,290,180 | 97.38% | | Raw Materials | $3,524,066 | $1,512,716 | $2,011,350 | 133.0% | | Recycled paper board | $3,244,750 | $1,353,543 | $1,891,207 | 139.7% | | Finished Goods | $1,517,494 | $1,269,487 | $248,007 | 19.5% | | Inventory reserve | $(695,717) | $(726,119) | $30,402 | -4.19% | [(5) Prepayments and other current assets](index=17&type=section&id=(5)%20Prepayments%20and%20other%20current%20assets) Prepayments and other current assets decreased slightly, mainly due to a reduction in prepayments for material purchases Prepayments and Other Current Assets Highlights | Metric | March 31, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------- | :---------------- | :--------- | :--------- | | Prepayments and other current assets | $16,744,643 | $17,951,267 | $(1,206,624) | -6.72% | | Prepayment for purchase of materials | $4,137,228 | $5,634,870 | $(1,497,642) | -26.58% | | Value-added tax recoverable | $13,320,909 | $13,154,375 | $166,534 | 1.27% | [(6) Property, plant and equipment, net](index=17&type=section&id=(6)%20Property%2C%20plant%20and%20equipment%2C%20net) Net property, plant, and equipment decreased slightly due to accumulated depreciation, with certain assets pledged as collateral for loans Property, Plant and Equipment, Net Highlights | Metric | March 31, 2025 | December 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | :------------- | :---------------- | :--------- | :--------- | | Property, Plant and Equipment, net | $143,575,368 | $146,911,883 | $(3,336,515) | -2.27% | | Accumulated depreciation and amortization | $(160,265,154) | $(156,497,503) | $(3,767,651) | 2.41% | | Depreciation and amortization (3 months) | $3,547,398 | $3,481,788 | $65,610 | 1.88% | - Certain property, plant, and equipment of Baoding Shengde and Dongfang Paper are pledged as collateral for short-term and long-term loans[64](index=64&type=chunk) [(7) Leases](index=18&type=section&id=(7)%20Leases) The company acts as both an operating lease lessor and lessee, with lease expenses for Q1 2025 at RMB 26,065 Lease Metrics | Metric | March 31, 2025 | | :----------------------------------- | :------------- | | Operating lease cost (RMB) | 26,065 | | Weighted average remaining lease term (years) | 3.4 | | Weighted average discount rate | 7.56% | [(8) Loans Payable](index=20&type=section&id=(8)%20Loans%20Payable) The company's loans payable consist of increasing short-term and stable long-term bank loans, secured by equipment or guarantees, with varying fixed interest rates Loans Payable Highlights | Loan Type | March 31, 2025 | December 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | :------------- | :---------------- | :--------- | :--------- | | Total short-term bank loans | $5,043,047 | $4,451,616 | $591,431 | 13.28% | | Total long-term loans | $4,679,447 | $4,672,806 | $6,641 | 0.14% | | Current portion of long-term loans | $3,564,961 | $3,559,902 | $5,059 | 0.14% | | Long-term loans (non-current) | $1,114,486 | $1,112,904 | $1,582 | 0.14% | | Average short-term borrowing rates (Q1 2025) | 5.74% | 4.48% (Q1 2024) | 1.26% | 28.12% | | Total interest expenses (Q1 2025) | $132,847 | $209,586 (Q1 2024) | $(76,739) | -36.62% | - Short-term loans are secured by Baoding Shengde's equipment and guaranteed by a third party or Mr. Zhenyong Liu[74](index=74&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk) - Long-term loans from Rural Credit Union of Xushui District have been extended, with the latest maturity in August 2026 and December 2026[85](index=85&type=chunk)[87](index=87&type=chunk) [(9) Related Party Transactions](index=22&type=section&id=(9)%20Related%20Party%20Transactions) All principal amounts due to Mr. Zhenyong Liu were repaid, but outstanding interest of approximately $305,033 remained recorded in other payables - Total loans due to Mr. Zhenyong Liu were **$nil** as of March 31, 2025, and December 31, 2024[92](index=92&type=chunk) Net Interest Owed to Mr. Zhenyong Liu | Metric | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :------------- | :---------------- | | Net interest owed to Mr. Zhenyong Liu | $305,033 | $304,600 | - Interest expense for related party loans was **$nil** for the three months ended March 31, 2025 and 2024[92](index=92&type=chunk) [(10) Other payables and accrued liabilities](index=23&type=section&id=(10)%20Other%20payables%20and%20accrued%20liabilities) Other payables and accrued liabilities increased slightly, primarily driven by a rise in accrued electricity and payable for property, plant and equipment Other Payables and Accrued Liabilities Highlights | Metric | March 31, 2025 | December 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | :------------- | :---------------- | :--------- | :--------- | | Totals | $11,823,467 | $11,545,990 | $277,477 | 2.40% | | Accrued electricity | $154,824 | $2,964 | $151,860 | 5123.41% | | Payable for purchase of property, plant and equipment | $10,726,899 | $10,711,678 | $15,221 | 0.14% | | Accrued litigation costs | $462,511 | $461,855 | $656 | 0.14% | [(11) Derivative Liabilities](index=23&type=section&id=(11)%20Derivative%20Liabilities) Warrants are classified as derivative liabilities and measured at fair value, with a gain of $4,553 recognized in Q1 2025 - Warrants are classified as derivative liabilities and measured at fair value using the Black-Scholes pricing model (Level 3 fair value measurement)[97](index=97&type=chunk)[99](index=99&type=chunk) Derivative Liabilities Balance | Metric | March 31, 2025 | | :----------------------------------- | :------------- | | Balance at December 31, 2024 | $5,651 | | Change in fair value of derivative liability | $(4,553) | | Balance at March 31, 2025 | $1,098 | [(12) Common Stock](index=24&type=section&id=(12)%20Common%20Stock) The company issued common stock and warrants in public offerings in 2021, with 10,065,920 shares outstanding as of March 31, 2025 - On January 20, 2021, the Company sold **2,618,182 shares of common stock** and warrants for approximately **$14.4 million**[101](index=101&type=chunk) - On March 1, 2021, the Company sold **2,927,786 shares of common stock** and warrants for approximately **$21.9 million**[102](index=102&type=chunk) - As of March 31, 2025, **10,065,920 shares of common stock** were issued and outstanding[8](index=8&type=chunk) [(13) Warrants](index=24&type=section&id=(13)%20Warrants) As of March 31, 2025, the company had 3,016,635 outstanding warrants with a weighted average exercise price of $6.6907 and a remaining contractual life of 0.80 years Warrants Outstanding | Metric | March 31, 2025 | | :----------------------------------- | :------------- | | Outstanding and exercisable warrants | 3,016,635 | | Weighted average exercise price | $6.6907 | | Weighted average remaining contractual life (years) | 0.80 | | Intrinsic value of warrants | nil | - The company classified warrants as liabilities and accounted for their issuance as a derivative[106](index=106&type=chunk) [(14) Earnings Per Share](index=25&type=section&id=(14)%20Earnings%20Per%20Share) Basic and diluted net loss per share improved to $(0.35) despite an increased net loss, due to the same number of weighted average common shares outstanding Earnings Per Share Highlights | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss for the period | $(3,503,785) | $(3,746,536) | | Weighted average common stock outstanding | 10,065,920 | 10,065,920 | | Basic and Diluted Losses per Share | $(0.35) | $(0.37) | [(15) Income Taxes](index=26&type=section&id=(15)%20Income%20Taxes) The company's PRC operating companies are subject to a 25% Enterprise Income Tax, with an effective income tax rate of 0% for Q1 2025 Income Tax Expenses and Rates | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Total Income Tax Expenses (Benefits) | $0 | $36,793 | | Effective income tax rate | 0% | 1% | | PRC Statutory rate | 25.0% | 25.0% | | Change in valuation allowance | (0.8)% | (22.6)% | - The company has a **100% valuation allowance** on U.S. deferred tax assets due to limited operating history and continuing losses[114](index=114&type=chunk) [(16) Stock Incentive Plans](index=28&type=section&id=(16)%20Stock%20Incentive%20Plans) The company adopted the 2023 Omnibus Equity Incentive Plan, reserving 1,500,000 shares of common stock for issuance to eligible participants - The **2023 Omnibus Equity Incentive Plan** was adopted on October 31, 2023[121](index=121&type=chunk) - A total of **1,500,000 shares of common stock** are reserved for issuance under the 2023 ISP[121](index=121&type=chunk) [(17) Commitments and Contingencies](index=28&type=section&id=(17)%20Commitments%20and%20Contingencies) The company has various commitments, including a land lease, a lease-back agreement, capital expenditure for a new production line, and a loan guarantee for a major supplier - The company leases **32.95 acres of land** in Xushui District, China, with an annual rental payment of approximately **$16,727**, expiring December 31, 2031[123](index=123&type=chunk) - Capital expenditure commitments totaled **$3,443,760** as of March 31, 2025, mainly for a new tissue paper production line (PM10)[128](index=128&type=chunk) - The company guarantees a **$4,318,631 long-term loan** for Baoding Huanrun Trading Co., a major raw material supplier, maturing in 2028[129](index=129&type=chunk) - Tengsheng Paper was ordered by a PRC court to repay a loan of **RMB3,320,000**, with accrued litigation costs of **$462,511** recorded as current liabilities[130](index=130&type=chunk) [(18) Segment Reporting](index=29&type=section&id=(18)%20Segment%20Reporting) The company manages operations through three segments: Dongfang Paper and Tengsheng Paper (paper products) and Baoding Shengde (face masks and digital photo paper), with all sales to PRC customers Segment Performance (Q1 2025) | Segment | Revenues (Q1 2025) | Net Loss (Q1 2025) | Total Assets (March 31, 2025) | | :---------------- | :----------------- | :----------------- | :---------------------------- | | Dongfang Paper | $10,897,266 | $(1,048,107) | $54,288,217 | | Tengsheng Paper | $0 | $(2,195,870) | $114,378,010 | | Baoding Shengde | $0 | $(65,309) | $5,575,644 | | Consolidated | $10,897,266 | $(3,503,785) | $175,204,130 | - Dongfang Paper and Tengsheng Paper produce offset printing paper, corrugating medium paper, and tissue paper, while Baoding Shengde produces face masks and digital photo paper[131](index=131&type=chunk) [(19) Concentration and Major Customers and Suppliers](index=31&type=section&id=(19)%20Concentration%20and%20Major%20Customers%20and%20Suppliers) For Q1 2025, no single customer contributed over 10% of total sales, but two major suppliers accounted for 77% and 16% of total purchases - No single customer contributed over **10% of total sales** for the three months ended March 31, 2025 and 2024[136](index=136&type=chunk) - Two major suppliers accounted for **77% and 16% of total purchases** for the three months ended March 31, 2025[136](index=136&type=chunk) [(20) Concentration of Credit Risk](index=31&type=section&id=(20)%20Concentration%20of%20Credit%20Risk) The company's primary credit risk concentration is in cash held in PRC financial institutions, with approximately $4.8 million exceeding deposit insurance limits - Cash balances exceeding the PRC deposit insurance maximum coverage (RMB500,000) amounted to RMB34,751,252 (approximately **$4,841,221**) as of March 31, 2025[137](index=137&type=chunk) - U.S. bank accounts are **fully covered by FDIC insurance**[137](index=137&type=chunk) [(21) Risks and Uncertainties](index=31&type=section&id=(21)%20Risks%20and%20Uncertainties) The company is exposed to substantial risks including intense competition, financing and liquidity requirements, rapidly changing customer demands, and foreign currency exchange rates - Key risks include intense competition, financing/liquidity needs, changing customer requirements, foreign currency exchange rates, and PRC operational restrictions[138](index=138&type=chunk) [(22) Subsequent Event](index=31&type=section&id=(22)%20Subsequent%20Event) There were no subsequent events to report after March 31, 2025 - No subsequent events were reported[139](index=139&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition, highlighting increased CMP sales volume, decreased ASP, and lower gross profit margins [Cautionary Notice Regarding Forward-Looking Statements](index=32&type=section&id=Cautionary%20Notice%20Regarding%20Forward-Looking%20Statements) This section advises that the report contains forward-looking statements subject to risks and factors that could cause actual results to differ materially from projections - The report contains forward-looking statements that are subject to risks and uncertainties, and actual results may differ materially[142](index=142&type=chunk) - The company intends for these statements to be covered by safe harbor provisions of the Securities Act and Exchange Act[142](index=142&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Revenues increased significantly due to higher sales volume of corrugating medium paper (CMP), but gross profit declined sharply due to decreased average selling prices (ASPs) and increased cost of sales, widening the net loss Results of Operations Highlights | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Revenue | $10,897,266 | $6,863,841 | $4,033,425 | 58.76% | | Gross Profit | $84,086 | $399,113 | $(315,027) | -78.93% | | Selling, general and administrative expenses | $(3,461,321) | $(3,900,783) | $439,462 | -11.27% | | Loss from Operations | $(3,377,235) | $(3,501,670) | $124,435 | -3.55% | | Net Loss | $(3,503,785) | $(3,746,536) | $242,751 | -6.48% | [Revenue of Offset Printing Paper, Corrugating Medium Paper and Tissue Paper Products](index=33&type=section&id=Revenue%20of%20Offset%20Printing%20Paper%2C%20Corrugating%20Medium%20Paper%20and%20Tissue%20Paper%20Products) Revenue from paper products increased by 59.62% year-over-year, primarily driven by a 69.29% increase in Corrugating Medium Paper (CMP) sales volume Revenue by Paper Product | Product | Quantity Sold (2025 Tonnes) | Revenue (2025) | Quantity Sold (2024 Tonnes) | Revenue (2024) | Quantity Change (%) | Revenue Change (%) | | :-------------------------- | :-------------------------- | :------------- | :-------------------------- | :------------- | :------------------ | :----------------- | | Regular CMP | 26,762 | $9,278,116 | 15,640 | $5,750,601 | 71.11% | 61.34% | | Light-Weight CMP | 4,845 | $1,619,150 | 3,030 | $1,076,199 | 59.90% | 50.45% | | Total CMP | 31,607 | $10,897,266 | 18,670 | $6,826,800 | 69.29% | 59.62% | | Offset Printing Paper | - | $0 | - | $0 | -% | -% | | Tissue Paper Products | - | $0 | - | $0 | -% | -% | - Production of offset printing paper and tissue paper products was suspended from 2024 through Q1 2025, with resumption expected in H2 2025[144](index=144&type=chunk) [Corrugating Medium Paper (CMP)](index=34&type=section&id=Corrugating%20Medium%20Paper%20(CMP)) CMP revenue increased by 59.62% due to a 69.29% increase in sales volume, despite a decrease in average selling prices (ASPs) for both regular and light-weight CMP Corrugating Medium Paper Average Selling Prices | Product | ASP (Q1 2025) | ASP (Q1 2024) | ASP Change ($) | ASP Change (%) | | :---------------- | :------------ | :------------ | :------------- | :------------- | | Regular CMP | $347/tonne | $368/tonne | $(21) | -5.71% | | Light-Weight CMP | $334/tonne | $355/tonne | $(21) | -5.92% | - Sales volume of CMP increased by **69.29% (12,937 tonnes)** to 31,607 tonnes in Q1 2025[149](index=149&type=chunk) - PM6 production line utilization rate increased by **15.33% to 30.44%** in Q1 2025 from 15.11% in Q1 2024[152](index=152&type=chunk) [Cost of Sales](index=36&type=section&id=Cost%20of%20Sales) Total cost of sales for paper products increased by 67.27% due to higher CMP sales volume, partially offset by a decrease in the average unit cost of sales for CMP Cost of Sales Highlights | Metric | Cost of Sales (Q1 2025) | Cost of Sales (Q1 2024) | Change ($) | Change (%) | | :----------------------------------- | :---------------------- | :---------------------- | :--------- | :--------- | | Total cost of sales (CMP, offset, tissue) | $10,813,180 | $6,464,464 | $4,348,716 | 67.27% | | Average cost of sales per tonne for CMP | $342 | $346 | $(4) | -1.16% | | Average unit purchase costs of recycled paper board (USD/tonne) | $184 | $180 | $4 | 2.22% | - The decrease in average cost of sales was mainly due to improved PM6 utilization, reducing unit manufacturing costs, despite higher raw material costs[156](index=156&type=chunk) [Gross Profit (Loss)](index=37&type=section&id=Gross%20Profit%20(Loss)) Gross profit significantly decreased by 78.93% to $84,086, resulting in a gross profit margin of 0.77%, primarily due to lower ASPs for CMP Gross Profit and Margin Analysis | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Gross Profit | $84,086 | $399,113 | $(315,027) | -78.93% | | Overall gross profit margin | 0.77% | 5.81% | -5.04% | -86.75% | | Gross profit margin for regular CMP | 1.45% | 5.68% | -4.23% | -74.47% | | Gross profit margin for light-weight CMP | -3.12% | 3.32% | -6.44% | -193.98% | [Selling, General and Administrative Expenses](index=38&type=section&id=Selling%20General%20and%20Administrative%20Expenses) Selling, general and administrative expenses decreased by 11.27% year-over-year, mainly attributed to a reduction in depreciation of idle fixed assets Selling, General and Administrative Expenses | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Selling, general and administrative expenses | $3,461,321 | $3,900,783 | $(439,462) | -11.27% | - The decrease was mainly due to reduced depreciation of idle fixed assets during production suspension[170](index=170&type=chunk) [Loss from Operations](index=38&type=section&id=Loss%20from%20Operations) Operating loss for the quarter ended March 31, 2025, increased by 3.55% to $3,377,235, primarily due to decreased gross profit Operating Loss | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Operating loss | $(3,377,235) | $(3,501,670) | $124,435 | -3.55% | [Other Income and Expenses](index=38&type=section&id=Other%20Income%20and%20Expenses) Interest expense decreased by 36.83% due to lower outstanding interest-bearing loans, and the company recognized a gain on derivative liability Other Income and Expenses Highlights | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Interest expense | $(132,847) | $(210,290) | $77,443 | -36.83% | | Gain on derivative liability | $4,553 | $34 | $4,519 | 13291.18% | - Total interest-bearing loans decreased from **$12,204,370** as of March 31, 2024, to **$9,722,494** as of March 31, 2025[172](index=172&type=chunk) [Net Loss](index=39&type=section&id=Net%20Loss) The net loss for the quarter ended March 31, 2025, was $3,503,785, representing a 6.48% increase from the prior year Net Loss | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Net Loss | $(3,503,785) | $(3,746,536) | $242,751 | -6.48% | [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) The company faces substantial doubt about its ability to continue as a going concern due to a working capital deficit and ongoing losses, with management planning various strategies to improve financial stability - As of March 31, 2025, the company had a working capital deficit of **$4,607,992**, excluding unrecoverable VAT[175](index=175&type=chunk) - The company's continued existence as a going concern depends on successful implementation of its business plan, including increasing sales, improving marketing, and controlling costs[178](index=178&type=chunk) - Net cash used in operating activities was **$2,474,978** for Q1 2025, a significant decrease from $624,420 provided in Q1 2024[185](index=185&type=chunk) [Accounts Receivable](index=39&type=section&id=Accounts%20Receivable) Net accounts receivable increased substantially by 639.85% to $2,127,629 as of March 31, 2025 Net Accounts Receivable | Metric | March 31, 2025 | December 31, 2024 | Change ($) | Change (%) | | :------------------- | :------------- | :---------------- | :--------- | :--------- | | Net accounts receivable | $2,127,629 | $287,576 | $1,840,053 | 639.85% | [Inventories](index=39&type=section&id=Inventories) Total net inventory increased by 97.4% to $4,642,056, primarily driven by a 139.7% increase in recycled paper board raw materials in anticipation of rising prices and expanded production Inventory Breakdown | Metric | March 31, 2025 | December 31, 2024 | Change ($) | Change (%) | | :----------------------- | :------------- | :---------------- | :--------- | :--------- | | Total inventory, net | $4,642,056 | $2,351,876 | $2,290,180 | 97.4% | | Recycled paper board | $3,244,750 | $1,353,543 | $1,891,207 | 139.7% | | Total Raw Materials | $3,524,066 | $1,512,716 | $2,011,350 | 133.0% | [Renewal of operating lease](index=40&type=section&id=Renewal%20of%20operating%20lease) The lease agreement for the Industrial Buildings was renewed in August 2022 for a term of six years with an annual rental payment of approximately $139,394 - The lease agreement for Industrial Buildings was renewed in August 2022 for **six years** with an annual rental payment of approximately **$139,394 (RMB1,000,000)**[182](index=182&type=chunk) [Capital Expenditure Commitment](index=40&type=section&id=Capital%20Expenditure%20Commitment) As of March 31, 2025, the company had approximately $3.4 million in capital expenditure commitments, mainly for the new PM10 tissue paper production line - Capital expenditure commitments totaled approximately **$3.4 million** as of March 31, 2025, mainly for the PM10 tissue paper production line[184](index=184&type=chunk) - These commitments are expected to be financed by bank loans and cash flows from business operations[184](index=184&type=chunk) [Cash and Cash Equivalents](index=40&type=section&id=Cash%20and%20Cash%20Equivalents) Cash, cash equivalents, and restricted cash decreased by $1,880,216 to $5,070,360, primarily due to net cash used in operating activities Cash and Cash Equivalents Highlights | Metric | March 31, 2025 | December 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | :------------- | :---------------- | :--------- | :--------- | | Cash, cash equivalents and restricted cash | $5,070,360 | $6,950,576 | $(1,880,216) | -27.05% | | Net cash used in operating activities | $(2,474,978) | $624,420 (Q1 2024) | $(3,099,398) | -496.36% | | Net cash provided by financing activities | $585,456 | $422,488 (Q1 2024) | $162,968 | 38.57% | [Short-term bank loans](index=41&type=section&id=Short-term%20bank%20loans) Total short-term bank loans increased by 13.28% to $5,043,047, with new loans from Bank of Cangzhou and existing loans from Rural Credit Union and ICBC Short-term Bank Loans Highlights | Metric | March 31, 2025 | December 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | :------------- | :---------------- | :--------- | :--------- | | Total short-term bank loans | $5,043,047 | $4,451,616 | $591,431 | 13.28% | | Guaranteed short-term borrowings | $2,814,076 | $2,225,808 | $588,268 | 26.43% | | Unsecured bank loans | $417,932 | $417,339 | $593 | 0.14% | | Average short-term borrowing rates (Q1 2025) | 5.74% | 4.48% (Q1 2024) | 1.26% | 28.12% | - New working capital loans were obtained from Bank of Cangzhou in December 2024 and March 2025, secured by manufacturing equipment and/or guaranteed by Mr. Zhenyong Liu[190](index=190&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk) [Long-term loans](index=42&type=section&id=Long-term%20loans) Total long-term loans remained stable at $4,679,447, with current portions amounting to $3,564,961, and extended maturities in August and December 2026 Long-term Loans Highlights | Metric | March 31, 2025 | December 31, 2024 | Change ($) | Change (%) | | :----------------------------------- | :------------- | :---------------- | :--------- | :--------- | | Total long-term loans | $4,679,447 | $4,672,806 | $6,641 | 0.14% | | Current portion of long-term loans | $3,564,961 | $3,559,902 | $5,059 | 0.14% | | Long-term loans (non-current) | $1,114,486 | $1,112,904 | $1,582 | 0.14% | - Long-term loans from the Rural Credit Union of Xushui District were extended, with maturities in August 2026 and December 2026, and bear a **7% annual interest rate**[200](index=200&type=chunk)[201](index=201&type=chunk) [Shareholder Loans](index=43&type=section&id=Shareholder%20Loans) All principal amounts of loans from Mr. Zhenyong Liu have been repaid, but approximately $305,033 in net interest owed remained outstanding - Total loans due to Mr. Zhenyong Liu were **$nil** as of March 31, 2025, and December 31, 2024[207](index=207&type=chunk) Net Interest Owed to Mr. Zhenyong Liu | Metric | March 31, 2025 | December 31, 2024 | | :----------------------------------- | :------------- | :---------------- | | Net interest owed to Mr. Zhenyong Liu | $305,033 | $304,600 | - Interest expense for related party loans was **$nil** for the three months ended March 31, 2025 and 2024[207](index=207&type=chunk) [Critical Accounting Policies and Estimates](index=44&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's critical accounting policies involve significant estimates and assumptions in revenue recognition, long-lived asset valuation, and foreign currency translation - Revenue is recognized upon goods delivery, fixed price, and assured collectability[211](index=211&type=chunk) - Long-lived assets are reviewed for impairment when circumstances indicate carrying value may not be recoverable, based on undiscounted cash flows[212](index=212&type=chunk) - The functional currency for Dongfang Paper and Baoding Shengde is RMB, with translation adjustments included in other comprehensive income (loss)[213](index=213&type=chunk) [Off-Balance Sheet Arrangements](index=44&type=section&id=Off-Balance%20Sheet%20Arrangements) The company has one material off-balance sheet arrangement: a guarantee for Baoding Huanrun Trading Co.'s long-term bank loans amounting to $4,318,631 - The company guarantees **$4,318,631 (RMB31,000,000)** in long-term bank loans for Baoding Huanrun Trading Co., a major supplier, maturing in 2028[214](index=214&type=chunk) - Insolvency of Baoding Huanrun Trading Co. could materially adversely affect the company[214](index=214&type=chunk) [Recent Accounting Pronouncements](index=45&type=section&id=Recent%20Accounting%20Pronouncements) The company is evaluating the impact of ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation Disclosures), which require enhanced disclosures in future periods - ASU 2023-09 (Income Taxes) requires specific categories in rate reconciliation and additional information for significant reconciling items, effective for annual periods beginning after December 15, 2024[215](index=215&type=chunk) - ASU 2024-03 (Expense Disaggregation Disclosures) mandates disaggregation of expenses by nature and function, effective for annual periods beginning after December 15, 2026[216](index=216&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to foreign exchange risk due to its PRC-based operations and is subject to inflation risk, which could affect operating results - The company is exposed to **foreign exchange risk** as most consolidated revenues, costs, expenses, and assets are denominated in RMB, while the reporting currency is USD[217](index=217&type=chunk) - Depreciation of RMB against USD would reduce the value of RMB-denominated revenues, earnings, and assets in USD financial statements[217](index=217&type=chunk) - The company is subject to **inflation risk**, which could adversely affect operating results if product selling prices do not keep pace with increased costs[218](index=218&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) As of March 31, 2025, the company's disclosure controls and procedures were deemed effective at a reasonable assurance level, with no material changes to internal control over financial reporting - Disclosure controls and procedures were **effective** at the reasonable assurance level as of March 31, 2025[219](index=219&type=chunk) - No material changes occurred in internal control over financial reporting during the quarter ended March 31, 2025[220](index=220&type=chunk) [PART II. - OTHER INFORMATION](index=46&type=section&id=Part%20II.%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in two significant legal proceedings: a breach of contract lawsuit in New York and a civil loan dispute in China - FT Global Capital, Inc. filed a breach of contract lawsuit against the company in New York, resulting in a **default judgment on liability** against the company[222](index=222&type=chunk) - Tengsheng Paper was ordered by a PRC court to repay a loan of **RMB3,320,000** in a civil loan dispute[223](index=223&type=chunk) - The ultimate resolution of these proceedings may have a **material adverse impact** on the company's business, financial condition, results of operations, or cash flows[224](index=224&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, IT Tech Packaging, Inc. is not required to provide specific information under this item - The company is a smaller reporting company and is **not required to provide information** under Item 1A. Risk Factors[225](index=225&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report during the period - No unregistered sales of equity securities or use of proceeds occurred[226](index=226&type=chunk) [Item 3. Defaults Upon Senior Securities](index=46&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report during the period - No defaults upon senior securities occurred[227](index=227&type=chunk) [Item 4. Mine Safety Disclosures](index=46&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable[228](index=228&type=chunk) [Item 5. Other Information](index=47&type=section&id=Item%205.%20Other%20Information) No directors or officers informed the company of the adoption or termination of any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended March 31, 2025 - No directors or officers reported adoption or termination of Rule 10b5-1 or non-Rule 10b5-1 trading arrangements[229](index=229&type=chunk) [Item 6. Exhibits](index=47&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer, and Inline XBRL documents - Exhibits include certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[230](index=230&type=chunk) [SIGNATURES](index=48&type=section&id=SIGNATURES) The report was duly signed on May 9, 2025, by Zhenyong Liu, Chief Executive Officer, and Jing Hao, Chief Financial Officer, on behalf of IT Tech Packaging, Inc. - The report was signed by Zhenyong Liu (CEO) and Jing Hao (CFO) on May 9, 2025[234](index=234&type=chunk)

PART I [Item 1. Business](index=5&type=section&id=Item%201.%20Business) IT Tech Packaging, Inc. (ITP) is a Nevada holding company operating in China through subsidiaries and a VIE, producing paper products and medical face masks [Introduction & Corporate Structure](index=5&type=section&id=Introduction%20%26%20Corporate%20Structure) ITP, a Nevada holding company, operates in China via PRC subsidiaries and a VIE, Dongfang Paper, due to foreign investment restrictions - IT Tech Packaging, Inc. is a Nevada holding company with no direct operations, relying on its PRC subsidiaries and the VIE, Dongfang Paper, for business activities in China[17](index=17&type=chunk)[18](index=18&type=chunk) - The company controls and receives economic benefits from Dongfang Paper through contractual arrangements (VIE Agreements), consolidating its financial results under U.S. GAAP[19](index=19&type=chunk)[21](index=21&type=chunk) - Investors in ITP common stock do not directly hold equity interests in the Chinese operating entities, but rather in the Nevada holding company[19](index=19&type=chunk)[20](index=20&type=chunk) [Recent Regulatory Developments](index=10&type=section&id=Recent%20Regulatory%20Developments) Recent Chinese regulatory changes in cybersecurity and overseas listings introduce uncertainties for ITP's operations and securities offerings - The revised Measures on Cyberspace Security Review (effective Feb 15, 2022) require 'network platform operators' controlling personal information of no less than one million users seeking foreign listing to undergo cybersecurity review[40](index=40&type=chunk) - The Trial Administrative Measures for Administration of Overseas Securities Offerings and Listings by Domestic Companies (effective March 31, 2023) require domestic companies seeking overseas listing to fulfill filing procedures with the CSRC[43](index=43&type=chunk) - The Prevention and Control of Noise Pollution Law (effective June 5, 2022) mandates compliance with industrial noise limits and requires a pollutant discharge permit, which ITP complies with through quarterly tests[44](index=44&type=chunk) [Consolidation and Cash Flow](index=11&type=section&id=Consolidation%20and%20Cash%20Flow) ITP consolidates its VIE, Dongfang Paper, facing PRC cash transfer restrictions and HFCAA delisting risks due to auditor inspection issues - The VIE (Dongfang Paper) accounted for **96.07%** of total assets and **78.97%** of total liabilities as of December 31, 2024[46](index=46&type=chunk) VIE Financial Summary (as of December 31, 2024 and 2023) | Metric | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Total Assets | $170,571,325 | $184,873,623 | | Total Liabilities | $16,976,765 | $20,084,995 | | Net cash provided by operating activities | $5,779,834 | $17,444,376 | | Net cash used in investing activities | $(22,239,297) | $(329,611) | | Net cash (used in) provided by financing activities | $(2,529,263) | $3,965,631 | - PRC regulations restrict dividend payments from PRC subsidiaries, requiring allowances for statutory reserves and approval for foreign currency conversion for capital expenses[48](index=48&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) - The company's common stock faces delisting risk under the HFCAA if the PCAOB cannot adequately inspect its China-based auditor for two consecutive years[53](index=53&type=chunk) [Summary of Risk Factors](index=14&type=section&id=Summary%20of%20Risk%20Factors) The company faces significant risks across business operations, PRC presence, corporate structure, and common stock, including regulatory and VIE challenges - Risks Relating to Business: Operating history, competition, growth management, acquisitions, key personnel dependence, operational fluctuations, product liability, raw material/energy availability and pricing, manufacturing disruptions, regulatory compliance, pricing pressures, product development, limited insurance, and intellectual property[55](index=55&type=chunk) - Risks Related to Doing Business in the PRC: Government oversight, CSRC/CAC regulations, cybersecurity, changes in government policies, vague laws, economic slowdown, dividend restrictions, currency conversion controls, and international trade tensions[57](index=57&type=chunk) - Risks Related to Corporate Structure: PRC regulation of loans/investments, Renminbi fluctuation, offshore SPV regulations, M&A rules, PRC legal system, enforcement of judgments, overseas regulator investigations, social security programs, Foreign Investment Law, VIE contractual obligations, and conflicts of interest[59](index=59&type=chunk) - Risks Related to Common Stock: Delisting under HFCAA, Sarbanes-Oxley Act compliance, scrutiny of U.S. listed Chinese companies, control by officers/directors, dividend policy, limited trading volume, and future financings[61](index=61&type=chunk) [Our Business Operations](index=18&type=section&id=Our%20Business%20Operations) ITP produces corrugating medium paper, offset printing paper, tissue paper, and face masks in China, focusing on recycled materials and North China markets - ITP produces corrugating medium paper, offset printing paper, tissue paper products, and medical face masks in China[62](index=62&type=chunk) - Corrugating medium paper comprised approximately **100%** of total paper production quantities and **99.82%** of total revenue for the year ended December 31, 2024[70](index=70&type=chunk) - Production of offset printing paper, tissue paper products, and face masks was suspended during the year ended December 31, 2024[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) Paper Production Capacities by Province (2023 vs. 2022) | Province | 2023 Capacity (10k tonnes) | 2022 Capacity (10k tonnes) | % Change | |:---|:---|:---|:---|\ | Shandong | 2,150 | 2,015 | 6.70 | | Guangdong | 2,113 | 1,969 | 7.31 | | Jiangsu | 1,417 | 1,373 | 3.20 | | Zhejiang | 1,213 | 1,193 | 1.68 | | Fujian | 869 | 821 | 5.85 | | Henan | 706 | 715 | (1.26) | | Guangxi | 660 | 559 | 18.07 | | Hubei | 645 | 592 | 8.95 | | Hebei | 432 | 378 | 14.29 | | Chongqing | 351 | 408 | (13.97) | Top 10 Major Customers (2024) | Company | Sales Amount (USD$, net of VAT) | % of Total Revenue | |:---|:---|:---|\ | Company A (Hebei) | 5,872,762 | 7.74% | | Company B (Hebei) | 5,630,649 | 7.42% | | Company C (Shandong) | 5,617,724 | 7.41% | | Company D (Tianjin) | 5,562,521 | 7.33% | | Company E (Tianjin) | 5,561,284 | 7.33% | | Company F (Hebei) | 4,204,968 | 5.54% | | Company G (Hebei) | 4,141,651 | 5.46% | | Company H (Hebei) | 4,003,315 | 5.28% | | Company I (Hebei) | 3,826,432 | 5.05% | | Company J (Hebei) | 3,815,617 | 5.03% | | **Total Major Customers** | **48,236,923** | **63.59%** | Production Lines Status (as of December 31, 2024) | PM | Paper Product Produced | Capacity (tonnes/year) | Owned by | Operated by | Status as of Dec 31, 2024 | |:---|:---|:---|:---|:---|:---|\ | PM1 | Corrugating Medium Paper | 60,000 | Dongfang Paper | Dongfang Paper | In production | | PM2 | Offset Printing Paper | 50,000 | Dongfang Paper | Dongfang Paper | Suspended during 2024 | | PM3 | Offset Printing Paper | 40,000 | Dongfang Paper | Dongfang Paper | Suspended during 2024 | | 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 | Suspended during 2024 | | PM9 | Tissue paper | 15,000 | Dongfang Paper | Dongfang Paper | Suspended during 2024 | | PM10 | Tissue paper | 20,000 | Dongfang Paper | Dongfang Paper | In construction | Top 3 Major Suppliers (2024) | Company | Purchase Amount (USD$) | % of Total Purchase | |:---|:---|:---|\ | Company A (Hebei) | 47,049,870 | 73% | | Company B (Hebei) | 11,201,353 | 17% | | Company C (Hebei) | 4,691,261 | 7% | | **Total Major Suppliers** | **62,942,484** | **97%** | - The company holds eight registered trademarks and twelve utility patent certificates related to paper manufacturing equipment[102](index=102&type=chunk)[104](index=104&type=chunk) - As of December 31, 2024, ITP had **383** full-time employees, all based in the PRC, with **19.6%** female and **80.4%** male[114](index=114&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) This section details ITP's significant business, PRC, corporate structure, and common stock risks, including regulatory uncertainties and VIE challenges [Risks Relating to our Business](index=30&type=section&id=Risks%20Relating%20to%20our%20Business) ITP's business risks include inadequate operating history, intense competition, growth management, key personnel dependence, and raw material/energy volatility - Operating history may not adequately predict future results, with risks including failure to raise capital, implement strategy, increase brand awareness, manage operations, control expenses, or adapt to market changes[122](index=122&type=chunk)[125](index=125&type=chunk) - The company is highly dependent on key personnel, including CEO Zhenyong Liu, and the loss of these individuals could materially affect business operations[131](index=131&type=chunk)[132](index=132&type=chunk) - The company does not maintain product liability insurance, exposing it to substantial costs and adverse publicity from potential claims[134](index=134&type=chunk)[146](index=146&type=chunk) - Operating results are sensitive to the availability and pricing of energy (natural gas) and raw materials (recycled paper), with potential disruptions from supply interruptions or government-mandated restrictions[136](index=136&type=chunk)[137](index=137&type=chunk) - Failure to renew essential certificates, permits, and licenses, such as the Pollution Discharge Permit, could lead to termination of operations[140](index=140&type=chunk)[142](index=142&type=chunk) - Inadequate protection of intellectual property rights (trademarks, trade secrets, patents) could undermine competitive position and lead to infringement claims[147](index=147&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk) [Risks Related To Doing Business in the PRC](index=36&type=section&id=Risks%20Related%20To%20Doing%20Business%20in%20the%20PRC) Operating in China exposes ITP to significant government oversight, regulatory uncertainties, economic fluctuations, and currency conversion restrictions - The PRC government has significant oversight and discretion over business operations, with potential for intervention that could materially change operations or the value of securities[151](index=151&type=chunk)[152](index=152&type=chunk) - The CSRC's Trial Measures for Administration of Overseas Securities Offerings and Listings by Domestic Companies (effective March 31, 2023) may subject ITP to additional filing procedures and compliance requirements, with potential penalties for non-compliance[154](index=154&type=chunk)[155](index=155&type=chunk) - The CAC's Cybersecurity Review Measures and Draft Regulations on Network Data Security Administration could require cybersecurity reviews for companies with over one million users' personal data or those affecting national security, potentially disrupting operations[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk)[169](index=169&type=chunk)[172](index=172&type=chunk) - Changes in PRC government policies, vague laws, and inconsistent enforcement create substantial uncertainties for business operations and foreign investment[173](index=173&type=chunk)[176](index=176&type=chunk) - A slowdown, inflation, or other adverse developments in the PRC economy could reduce demand for products and harm profitability[179](index=179&type=chunk)[180](index=180&type=chunk) - PRC subsidiaries are subject to restrictions on dividend payments and other distributions, including statutory reserve requirements and withholding taxes, limiting cash available to the holding company[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk)[185](index=185&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk) - Governmental control of Renminbi convertibility into foreign currencies may limit ITP's ability to utilize revenues effectively or pay dividends in foreign currencies[191](index=191&type=chunk)[193](index=193&type=chunk) [Risks Related to Our Corporate Structure](index=44&type=section&id=Risks%20Related%20to%20Our%20Corporate%20Structure) ITP's VIE structure introduces risks from PRC regulations, Renminbi fluctuations, potential government intervention, and enforceability of contractual arrangements - PRC regulations on loans and direct investment in PRC entities by offshore holding companies may delay or hinder ITP's ability to fund and expand its business[194](index=194&type=chunk)[197](index=197&type=chunk) - Fluctuations in the Renminbi exchange rate against the U.S. dollar can materially and adversely affect cash flows, revenues, and financial condition[198](index=198&type=chunk) - Failure to comply with SAFE regulations (e.g., Circular No. 37) for offshore special purpose companies by PRC residents could lead to fines, restrictions on investment activities, or limitations on dividend distributions[201](index=201&type=chunk)[202](index=202&type=chunk) - The M&A Rules and other PRC regulations establish complex procedures for foreign acquisitions of Chinese companies, potentially delaying or inhibiting ITP's growth through acquisitions[208](index=208&type=chunk)[209](index=209&type=chunk) - The PRC's legal and judicial system is rudimentary and inconsistent, potentially failing to adequately protect ITP's business, operations, and foreign investors' rights[210](index=210&type=chunk)[211](index=211&type=chunk) - The newly enacted Foreign Investment Law (effective Jan 1, 2020) introduces uncertainties regarding the classification of VIEs as foreign-invested enterprises, potentially requiring restructuring if ITP's business falls under 'restricted' or 'prohibited' categories[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk) - Any failure by the consolidated VIE or its shareholders to perform obligations under contractual arrangements could result in substantial costs to enforce rights or loss of effective control over business operations[222](index=222&type=chunk)[223](index=223&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk) - Reliance on the consulting services agreement with Dongfang Paper for revenue and cash flows means any difficulty in payment could materially affect operations, and the arrangement may be challenged by the PRC government[224](index=224&type=chunk) - Conflicts of interest between Dongfang Paper shareholders (e.g., CEO Zhenyong Liu) and ITP could adversely affect the business if shareholders do not act in ITP's best interests[229](index=229&type=chunk)[230](index=230&type=chunk) - If the VIE goes bankrupt or liquidates, ITP may lose the ability to use material assets (permits, domain names, IP rights) held by the VIE, severely disrupting business[231](index=231&type=chunk)[233](index=233&type=chunk) - Arrangements with Dongfang Paper and its shareholders may be subject to transfer pricing adjustments by PRC tax authorities, leading to additional taxes, penalties, and interest[232](index=232&type=chunk) - Exercise of the call option to purchase equity interests in Dongfang Paper may require PRC government approval, and failure to obtain it could impair ITP's control[234](index=234&type=chunk)[235](index=235&type=chunk) [Risks Related to Our Common Stock](index=57&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) Common stock risks include potential delisting under HFCAA, Sarbanes-Oxley compliance, scrutiny of Chinese companies, and control by officers/directors - The company's common stock may be delisted from the NYSE American under the HFCAA if the PCAOB is unable to adequately inspect audit documentation located in China for two consecutive years[237](index=237&type=chunk)[240](index=240&type=chunk) - Failure to comply with Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner could harm the business and lead to a decline in stock price[241](index=241&type=chunk) - The CEO, Zhenyong Liu, beneficially owns approximately **5.3%** of common stock, allowing him to influence stockholder votes, and his interests may differ from other stockholders[243](index=243&type=chunk) - The company does not expect to pay cash dividends in the foreseeable future, limiting return on investment to stock value[244](index=244&type=chunk) [Item 1B. Unresolved Staff Comments](index=59&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments to report - The company states that Item 1B is not applicable, indicating no unresolved staff comments[247](index=247&type=chunk) [Item 1C. Cybersecurity](index=59&type=section&id=Item%201C.%20Cybersecurity) The Board oversees the company's cybersecurity program, with no material breaches or threats identified in the last three years - The Board of Directors oversees the company's cybersecurity program, with senior management responsible for identifying, managing, and mitigating cybersecurity risks[248](index=248&type=chunk) - The company's cybersecurity policy and procedures ensure timely information flow to senior management regarding threats and incident response, and oversee third-party vendor risks[249](index=249&type=chunk) - The company performs regular internal audits and engages third-party experts for cyber penetration testing[250](index=250&type=chunk) - To its knowledge, the company has not experienced a material cybersecurity breach or identified material cybersecurity threats in the last three years[251](index=251&type=chunk) [Item 2. Properties](index=59&type=section&id=Item%202.%20Properties) The company's headquarters and two production bases are in China, operating on leased and owned land with multiple production lines - Headquarters are in Baoding City, Hebei Province, China, with two main production bases[252](index=252&type=chunk) - The Xushui Paper Mill (first production base) operates on **33 acres** of land leased from the local government until December 31, 2031[254](index=254&type=chunk) - The Xingtai Paper Mill (second production base) operates on **50 acres** of land owned by Hebei Tengsheng Paper Co., Ltd., acquired for approximately **$45 million**[255](index=255&type=chunk) - As of December 31, 2024, facilities include nine production lines (PM7 under renovation, PM4/PM5 suspended), nine warehouses, two office buildings, two cafeterias, and five dormitories[257](index=257&type=chunk) [Item 3. Legal Proceedings](index=60&type=section&id=Item%203.%20Legal%20Proceedings) The company faces a breach of contract lawsuit in New York and a civil loan dispute in China, with frozen assets and repayment orders - FT Global Capital, Inc. filed a breach of contract lawsuit against the company in New York Supreme Court. A default judgment on liability was granted against the company on August 20, 2024, with damages to be determined[258](index=258&type=chunk) - Tengsheng Paper is a defendant in a civil loan dispute in China. The PRC Court froze **RMB3.35 million** of bank deposits and ordered Tengsheng Paper to be jointly liable for repaying a **RMB3.32 million** loan[259](index=259&type=chunk) - Accrued litigation costs of **$461,855** were recorded as current liabilities as of December 31, 2024[520](index=520&type=chunk) [Item 4. Mine Safety Disclosures](index=60&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - The company states that Item 4, Mine Safety Disclosures, is not applicable[261](index=261&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=62&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) ITP common stock trades on NYSE American, with approximately 10,000 shareholders, and no dividends are expected in the foreseeable future - IT Tech Packaging's common stock is traded on the NYSE American under the symbol 'ITP'[263](index=263&type=chunk) - As of April 11, 2025, there were approximately **10,000** shareholders of record[264](index=264&type=chunk) - The company declared and paid quarterly cash dividends in April 2012 and November 2013, but does not expect to pay any cash dividends in the foreseeable future, intending to retain all future earnings for operations and business expansion[52](index=52&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk) - No recent sales of unregistered securities or purchases of equity securities by the issuer or affiliated purchasers were reported[268](index=268&type=chunk)[269](index=269&type=chunk) [Item 6. [RESERVED]](index=62&type=section&id=Item%206.%20%5BRESERVED%5D) This item is reserved and contains no information - Item 6 is reserved, indicating no information is provided for this section[270](index=270&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=63&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes ITP's 2024 financial performance, highlighting decreased revenue, increased gross profit, a net loss, and liquidity concerns [Results of Operations](index=63&type=section&id=Results%20of%20Operations) ITP's 2024 revenue decreased by **12.37%** to **$75.84 million** due to lower CMP sales, while gross profit increased significantly despite higher SG&A expenses Revenue Summary (Year Ended December 31) | Metric | 2024 (USD) | 2023 (USD) | Change (USD) | % Change | |:---|:---|:---|:---|:---|\ | Total Revenues | $75,837,943 | $86,546,950 | $(10,709,007) | (12.37)% | | CMP, Offset Printing Paper & Tissue Paper Revenue | $75,702,427 | $86,412,058 | $(10,709,631) | (12.39)% | | Face Mask Revenue | $0 | $106,064 | $(106,064) | (100.00)% | Sales Quantity and Revenue by Product (Year Ended December 31) | Product | 2024 Quantity (Tonne) | 2024 Amount (USD) | 2023 Quantity (Tonne) | 2023 Amount (USD) | Change in Quantity (Tonne) | Change in Amount (USD) | % Change in Quantity | % Change in Amount | |:---|:---|:---|:---|:---|:---|:---|:---|:---|\ | Regular CMP | 182,972 | $63,196,615 | 182,870 | $67,371,471 | 102 | $(4,174,856) | 0.06% | (6.20)% | | Light-Weight CMP | 37,580 | $12,505,812 | 40,953 | $14,520,205 | (3,373) | $(2,014,393) | (8.24)% | (13.87)% | | **Total CMP** | **220,552** | **$75,702,427** | **223,823** | **$81,891,676** | **(3,271)** | **$(6,189,249)** | **(1.46)%** | **(7.56)%** | | Offset Printing Paper | - | $0 | 5,573 | $3,215,190 | (5,573) | $(3,215,190) | (100.00)% | (100.00)% | | Tissue Paper Products | - | $0 | 1,205 | $1,305,192 | (1,205) | $(1,305,192) | (100.00)% | (100.00)% | | **Total CMP, Offset Printing Paper and Tissue Paper Revenue** | **220,552** | **$75,702,427** | **230,601** | **$86,412,058** | **(10,049)** | **$(10,709,631)** | **(4.36)%** | **(12.39)%** | Average Selling Price (ASP) by Product (Year Ended December 31) | Product | 2024 ASP (USD/tonne) | 2023 ASP (USD/tonne) | Decrease (USD) | Decrease (%) | |:---|:---|:---|:---|:---|\ | Offset Printing Paper | $0 | $577 | $(577) | -% | | Regular CMP | $345 | $368 | $(23) | (6.25)% | | Light-Weight CMP | $333 | $355 | $(22) | (6.20)% | | Tissue Paper Products | $0 | $1083 | $(1083) | -% | Cost of Sales and Cost per Tonne by Product (Year Ended December 31) | Product | 2024 Cost of Sales (USD) | 2024 Cost per Tonne (USD) | 2023 Cost of Sales (USD) | 2023 Cost per Tonne (USD) | Change in Cost of Sales (USD) | Change in Cost per Tonne (USD) | % Change in Cost of Sales | % Change in Cost per Tonne | |:---|:---|:---|:---|:---|:---|:---|:---|:---|\ | Regular CMP | $57,643,462 | $315 | $63,818,509 | $349 | $(6,175,047) | $(34) | (9.68)% | (9.74)% | | Light Weight CMP | $11,502,196 | $306 | $14,144,328 | $345 | $(2,642,132) | $(39) | (18.68)% | (11.30)% | | **Total CMP** | **$69,145,658** | **$314** | **$77,962,837** | **$348** | **$(8,817,179)** | **$(34)** | **(11.31)%** | **(9.77)%** | | Offset Printing Paper | $0 | $0 | $3,137,646 | $563 | $(3,137,646) | $(563) | (100.00)% | (100.00)% | | Tissue Paper Products | $0 | $0 | $4,318,339 | $3,584 | $(4,318,339) | $(3,584) | (100.00)% | (100.00)% | | **Total CMP, Offset Printing Paper and Tissue Paper Revenue** | **$69,145,658** | **n/a** | **$85,418,822** | **n/a** | **$(16,273,164)** | **n/a** | **(19.05)%** | **n/a%** | Key Financial Performance Indicators (Year Ended December 31) | Metric | 2024 (USD) | 2023 (USD) | Change (USD) | % Change | |:---|:---|:---|:---|:---|\ | Gross Profit | $6,691,740 | $999,885 | $5,691,855 | 569.25% | | Selling, General and Administrative Expenses | $14,799,969 | $9,075,475 | $5,724,494 | 63.08% | | Loss from Operations | $(8,210,719) | $(9,575,888) | $1,365,169 | (14.26)% | | Net Loss | $(9,843,094) | $(9,946,035) | $102,941 | (1.03)% | | Basic and Diluted Losses per Share | $(0.98) | $(0.99) | $0.01 | (1.01)% | - Selling, general and administrative expenses increased by **$5.72 million**, mainly due to **$3.9 million** in depreciation of idle fixed assets, **$0.4 million** in legal proceeding liability, **$0.7 million** for obsolete inventory reserve, and **$0.9 million** for doubtful receivables[302](index=302&type=chunk) - Net accounts receivable decreased by **50.03%** to **$287,576** as of December 31, 2024[307](index=307&type=chunk) - Net inventories decreased by **33.8%** to **$2,351,876** as of December 31, 2024, primarily due to a significant increase in inventory reserve of **$723,160**[308](index=308&type=chunk)[309](index=309&type=chunk) [Liquidity and Capital Resources](index=70&type=section&id=Liquidity%20and%20Capital%20Resources) ITP faces going concern doubts due to a working capital deficit, despite increased cash from operations and refinancing of long-term debt - As of December 31, 2024, current assets were **$28,461,303** and current liabilities were **$20,146,767**, resulting in a working capital of **$8,314,536**. Excluding VAT recoverable, the net working capital was a deficit of **$4,839,839**, raising substantial doubt about the company's ability to continue as a going concern[390](index=390&type=chunk) - Cash, cash equivalents, and restricted cash increased by **$2,558,655** to **$6,950,576** as of December 31, 2024[313](index=313&type=chunk) Cash Flow Summary (Year Ended December 31) | Cash Flow Activity | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Net Cash Provided by Operating Activities | $6,299,469 | $12,871,086 | | Net Cash Used in Investing Activities | $(329,611) | $(22,239,297) | | Net Cash (Used in) Provided by Financing Activities | $(3,256,696) | $4,410,099 | - Short-term bank loans increased significantly from **$423,567** in 2023 to **$4,451,616** in 2024, primarily due to refinancing existing long-term debt at lower market rates[317](index=317&type=chunk)[318](index=318&type=chunk)[324](index=324&type=chunk) - Long-term loan balance decreased from **$11,378,429** in 2023 to **$4,672,806** in 2024, largely due to refinancing and repayments[325](index=325&type=chunk)[466](index=466&type=chunk) - Total outstanding loans due to Mr. Zhenyong Liu (CEO) were **$nil** as of December 31, 2024 and 2023, with only accrued interest of approximately **$304,600** outstanding in 2024[335](index=335&type=chunk) - Capital expenditure commitments totaled approximately **$3.4 million** as of December 31, 2024, mainly for the new tissue paper production line PM10[312](index=312&type=chunk)[518](index=518&type=chunk) [Critical Accounting Policies and Estimates](index=74&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's financial statements rely on critical accounting policies for revenue, asset impairment, and foreign currency, with ongoing evaluation of new pronouncements - Revenue is recognized when goods are delivered, price is fixed, delivery is complete, no other significant obligations exist, and collectability is assured[339](index=339&type=chunk) - Long-lived assets are evaluated for recoverability and written down to fair value if anticipated undiscounted cash flows are less than carrying value[340](index=340&type=chunk) - The functional currency of PRC entities is RMB, translated to USD using current exchange rates for assets/liabilities and average rates for revenues/expenses, with adjustments in other comprehensive income[341](index=341&type=chunk) - The company guarantees **$4,312,503** of long-term bank loans for Baoding Huanrun Trading Co., a major raw material supplier, maturing in 2028[342](index=342&type=chunk)[519](index=519&type=chunk) - The company is evaluating the impact of ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation Disclosures) on its financial reporting[343](index=343&type=chunk)[344](index=344&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=75&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to foreign exchange risk from RMB/USD fluctuations and inflation risk, with no current hedging strategies - The company is exposed to foreign exchange risk as most revenues, costs, and assets are RMB-denominated, while the reporting currency is USD. RMB depreciation against USD would reduce the value of RMB-denominated financial items[345](index=345&type=chunk) - The company does not currently use hedging transactions to reduce foreign exchange risk[345](index=345&type=chunk) - Inflation, especially in raw material and overhead costs, could adversely affect operating results if selling prices do not increase proportionally[346](index=346&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=75&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for 2024 and 2023, including the auditor's report and detailed notes on accounting policies and financial accounts [Report of Independent Registered Public Accounting Firm](index=76&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) GGF CPA Limited issued an unqualified opinion on ITP's 2024 and 2023 financial statements, highlighting deferred tax assets as a critical audit matter - GGF CPA Limited issued an unqualified opinion on the consolidated financial statements for the years ended December 31, 2024 and 2023[349](index=349&type=chunk) - A critical audit matter involved the significant accumulated balance and carrying value of deferred tax assets, which required complex judgments due to temporary differences and varying tax laws in multiple jurisdictions[354](index=354&type=chunk) - GGF CPA Limited has served as the company's auditor since March 1, 2024[355](index=355&type=chunk) [Consolidated Balance Sheets](index=78&type=section&id=Consolidated%20Balance%20Sheets) As of December 31, 2024, total assets decreased to **$177.55 million**, liabilities decreased to **$21.50 million**, and stockholders' equity was **$156.05 million** Consolidated Balance Sheet Highlights (as of December 31) | Metric | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Total Assets | $177,546,786 | $194,743,649 | | Current Assets | $28,461,303 | $28,357,901 | | Cash and bank balances | $5,916,373 | $3,918,938 | | Restricted cash | $1,034,203 | $472,983 | | Accounts receivable (net) | $287,576 | $575,526 | | Inventories | $2,351,876 | $3,555,235 | | Total Liabilities | $21,496,469 | $26,406,786 | | Short-term bank loans | $4,451,616 | $423,567 | | Current portion of long-term loans | $3,559,902 | $6,874,497 | | Total Stockholders' Equity | $156,050,317 | $168,336,863 | [Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)](index=79&type=section&id=Consolidated%20Statements%20of%20Income%20(Loss)%20and%20Comprehensive%20Income%20(Loss)) For 2024, revenues were **$75.84 million**, gross profit **$6.69 million**, and net loss **$9.84 million**, with a total comprehensive loss of **$12.29 million** Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Highlights (Year Ended December 31) | Metric | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Revenues | $75,837,943 | $86,546,950 | | Cost of sales | $(69,146,203) | $(85,547,065) | | Gross Profit | $6,691,740 | $999,885 | | Selling, general and administrative expenses | $(14,799,969) | $(9,075,475) | | Loss from Operations | $(8,210,719) | $(9,575,888) | | Net Loss | $(9,843,094) | $(9,946,035) | | Foreign currency translation adjustment | $(2,443,452) | $(3,040,994) | | Total Comprehensive Loss | $(12,286,546) | $(12,987,029) | | Basic and Diluted Losses per Share | $(0.98) | $(0.99) | [Consolidated Statements of Changes in Stockholders' Equity](index=80&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Total stockholders' equity decreased to **$156.05 million** in 2024, primarily due to a net loss and foreign currency translation adjustment Consolidated Statements of Changes in Stockholders' Equity Highlights (Year Ended December 31) | Metric | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Balance at beginning of year | $168,336,863 | $181,323,892 | | Foreign currency translation adjustment | $(2,443,452) | $(3,040,994) | | Net loss | $(9,843,094) | $(9,946,035) | | Balance at end of year | $156,050,317 | $168,336,863 | | Common Stock Shares Outstanding | 10,065,920 | 10,065,920 | | Additional Paid-in Capital | $89,172,771 | $89,172,771 | | Statutory Earnings Reserve | $6,080,574 | $6,080,574 | | Accumulated Other Comprehensive Loss | $(12,998,986) | $(10,555,534) | | Retained Earnings | $73,785,892 | $83,628,986 | [Consolidated Statements of Cash Flows](index=81&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations was **$6.30 million** in 2024, with overall cash and equivalents increasing by **$2.56 million** to **$6.95 million** Consolidated Statements of Cash Flows Highlights (Year Ended December 31) | Cash Flow Activity | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Net Cash Provided by Operating Activities | $6,299,469 | $12,871,086 | | Net Cash Used in Investing Activities | $(329,611) | $(22,239,297) | | Net Cash (Used in) Provided by Financing Activities | $(3,256,696) | $4,410,099 | | Effect of Exchange Rate Changes on Cash and Cash Equivalents | $(154,507) | $(174,835) | | Net Increase (Decrease) in Cash and Cash Equivalents | $2,558,655 | $(5,132,947) | | Cash, Cash Equivalents and Restricted Cash - End of Year | $6,950,576 | $4,391,921 | - Cash paid for interest was **$1,812,864** in 2024, up from **$1,484,461** in 2023[362](index=362&type=chunk) - Cash paid for income taxes was **$797,473** in 2024, up from **$759,458** in 2023[362](index=362&type=chunk) [Notes to Consolidated Financial Statements](index=83&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail ITP's organizational structure, accounting policies, liquidity concerns, and specific financial accounts, including VIE consolidation and legal contingencies [(1) Organization and Business Background](index=83&type=section&id=%281%29%20Organization%20and%20Business%20Background) ITP, a Nevada holding company, controls its PRC operations, primarily Dongfang Paper, through a VIE structure due to foreign ownership restrictions - ITP was incorporated in Nevada on December 9, 2005, and became a holding company for Dongfang Paper's operations in China on October 29, 2007[23](index=23&type=chunk)[365](index=365&type=chunk) - The company's name changed to 'IT Tech Packaging, Inc.' on August 1, 2018, and its common stock began trading under the symbol 'ITP'[23](index=23&type=chunk)[366](index=366&type=chunk) - A 1-for-10 reverse stock split became effective on July 7, 2022[367](index=367&type=chunk) - ITP controls Dongfang Paper through a series of contractual agreements (VIE Agreements) with Baoding Shengde and Dongfang Paper's equity owners, allowing consolidation under US GAAP[27](index=27&type=chunk)[373](index=373&type=chunk)[378](index=378&type=chunk) - Dongfang Paper and Tengsheng Paper accounted for **100%** and **99.88%** of the company's total revenue in 2024 and 2023, respectively, and **96.07%** and **94.93%** of total assets as of December 31, 2024 and 2023, respectively[378](index=378&type=chunk) Company's Subsidiaries and VIE (as of December 31, 2024 and 2023) | Name | Place of Incorporation | Percentage of Ownership | Principal Activity | |:---|:---|:---|:---|\ | **Subsidiary:** | | | | | Dongfang Holding | BVI | 100% | Inactive investment holding | | Shengde Holdings | State of Nevada | 100% | Investment holding | | Baoding Shengde | PRC | 100% | Paper production and distribution | | Qianrong | PRC | 100% | New material technology service | | **Variable interest entity ("VIE"):** | | | | | Dongfang Paper | PRC | Control* | Paper production and distribution | | Tengsheng Paper | PRC | Control** | Paper production and distribution | * Dongfang Paper is treated as a 100% controlled variable interest entity of the Company. ** Tengsheng Paper is 100% subsidiary of Dongfang Paper. [(2) Basis of Presentation and Significant Accounting Policies](index=88&type=section&id=%282%29%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) Financial statements adhere to US GAAP, consolidating subsidiaries and VIEs, with significant liquidity concerns and reliance on key accounting estimates - The company's consolidated financial statements are prepared in accordance with US GAAP, consolidating all subsidiaries and the VIE[389](index=389&type=chunk) - As of December 31, 2024, the company had a working capital deficit of **$4,839,839** (excluding VAT recoverable), indicating substantial doubt about its ability to continue as a going concern[390](index=390&type=chunk) - The functional currency of Dongfang Paper and Baoding Shengde is RMB, translated to USD for reporting. Assets and liabilities are translated at year-end rates, while revenues and expenses use average rates[394](index=394&type=chunk)[395](index=395&type=chunk) - Key estimates include allowance for uncollectible accounts receivable, inventory valuation, useful lives and impairment for property, plant and equipment, valuation allowance for deferred tax assets, and contingencies[397](index=397&type=chunk) Allowance for Doubtful Accounts (as of December 31) | Metric | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Opening balance | $11,745 | $881,878 | | Provision (Reversal) for the year | $41,956 | $(858,689) | | Exchange difference | $(590) | $(11,444) | | Closing balance | $53,111 | $11,745 | - Inventories are stated at the lower of cost (weighted average basis) or net realizable value, with provisions for excess, obsolescence, or impairment[401](index=401&type=chunk) - Property, plant, and equipment are stated at cost less accumulated depreciation and impairment losses, depreciated using the straight-line method[403](index=403&type=chunk)[405](index=405&type=chunk) - Revenue from contracts with customers is recognized using a five-step model, primarily from sales of paper products upon delivery[413](index=413&type=chunk)[416](index=416&type=chunk)[417](index=417&type=chunk) - Research and development costs (**$99,610** in 2024, **$90,766** in 2023) and advertising costs (**$nil** in 2024 and 2023) are expensed as incurred[420](index=420&type=chunk)[421](index=421&type=chunk) - Income taxes are accounted for using an asset and liability approach, with deferred tax assets and liabilities recognized for temporary differences, and a valuation allowance established for unrealizable deferred tax assets[423](index=423&type=chunk) - The company is evaluating ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation Disclosures) for their impact on future financial reporting[437](index=437&type=chunk)[438](index=438&type=chunk) [(3) Restricted Cash](index=97&type=section&id=%283%29%20Restricted%20Cash) Restricted cash increased to **$1.03 million** in 2024, representing Tengsheng Paper's bank deposits frozen due to a legal proceeding Restricted Cash (as of December 31) | Metric | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Restricted cash | $1,034,203 | $472,983 | - The restricted cash represents bank deposits of Tengsheng Paper, held due to a legal proceeding against the entity and its executive director[440](index=440&type=chunk) [(4) Inventories](index=97&type=section&id=%284%29%20Inventories) Net inventory decreased by **33.8%** to **$2.35 million** in 2024, primarily due to a significant increase in inventory reserve Inventories (as of December 31) | Inventory Category | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Recycled paper board | $1,353,543 | $198,744 | | Recycled white scrap paper | $10,491 | $10,647 | | Gas | $16,334 | $21,428 | | Base paper and other raw materials | $132,348 | $142,149 | | **Total Raw Materials** | **$1,512,716** | **$372,968** | | Semi-finished Goods | $295,792 | $300,207 | | Finished Goods | $1,269,487 | $2,885,019 | | Total inventory, gross | $3,077,995 | $3,558,194 | | Inventory reserve | $(726,119) | $(2,959) | | **Total inventory, net** | **$2,351,876** | **$3,555,235** | Movement of Inventory Reserve (Year Ended December 31) | Metric | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Balance at beginning of year | $2,959 | $0 | | Additional charge (written off), net | $730,490 | $2,970 | | Foreign currency translation difference | $(7,330) | $(11) | | Balance at the end of year | $726,119 | $2,959 | [(5) Prepayments and other current assets](index=97&type=section&id=%285%29%20Prepayments%20and%20other%20current%20assets) Prepayments and other current assets decreased to **$17.95 million** in 2024, mainly due to lower VAT recoverable and prepaid gas Prepayments and Other Current Assets (as of December 31) | Category | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Prepayment for purchase of materials | $5,634,870 | $5,446,823 | | Value-added tax recoverable | $13,154,375 | $13,409,459 | | Prepaid gas | $14,096 | $116,372 | | Others | $8,527 | $8,636 | | Allowance for doubtful accounts | $(860,601) | $0 | | **Totals** | **$17,951,267** | **$18,981,290** | Movement of Allowance for Doubtful Accounts (Year Ended December 31) | Metric | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Balance at beginning of year | $0 | $0 | | Additional charge (written off), net | $869,272 | $0 | | Foreign currency translation difference | $(8,671) | $0 | | Balance at the end of year | $860,601 | $0 | [(6) Property, plant and equipment](index=98&type=section&id=%286%29%20Property%2C%20plant%20and%20equipment) Net property, plant, and equipment decreased to **$146.91 million** in 2024, primarily due to accumulated depreciation and asset disposals Property, Plant, and Equipment (as of December 31) | Category | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Land use rights | $80,306,144 | $81,504,608 | | Building and improvements | $66,580,793 | $67,939,059 | | Machinery and equipment | $156,179,361 | $158,629,858 | | Vehicles | $343,088 | $348,209 | | Construction in progress | $0 | $0 | | **Totals** | **$303,409,386** | **$308,421,734** | | Less: accumulated depreciation and amortization | $(156,497,503) | $(144,447,712) | | **Property, Plant and Equipment, net** | **$146,911,883** | **$163,974,022** | - Depreciation and amortization of property, plant and equipment was **$14,221,082** in 2024 and **$14,225,990** in 2023[447](index=447&type=chunk) - Loss from disposal and impairment of property, plant and equipment was **$102,490** in 2024 and **$1,500,298** in 2023[447](index=447&type=chunk) - Certain property, plant and equipment of Dongfang Paper (net value **$nil**) and Baoding Shengde (net value **$3,407,848**) were pledged as collateral for loans as of December 31, 2024[446](index=446&type=chunk) [(7) Leases](index=98&type=section&id=%287%29%20Leases) The company acts as both lessor and lessee, with a weighted average remaining lease term of **3.6 years** and a discount rate of **7.56%** - The company leases a plant to a tenant under a non-cancellable operating lease for one year (November 2023 to November 2024)[448](index=448&type=chunk) - As a lessee, the company leases space for plant and production equipment under non-cancellable operating leases[449](index=449&type=chunk) Operating Lease Costs (Year Ended December 31, 2024) | Metric | 2024 (RMB) | |:---|:---|\ | Operating lease cost | 100,004 | | Short-term lease cost | - | | **Lease cost** | **100,004** | Maturities of Lease Liabilities (as of December 31, 2024) | Fiscal year | Amount (USD) | |:---|:---|\ | 2025 | 139,113 | | 2026 | 139,113 | | 2027 | 139,113 | | 2028 | 139,113 | | 2029 | - | | Thereafter | - | | **Total operating lease payments** | **$556,452** | | Less: Interest | $(79,701) | | **Present value of lease liabilities** | **$476,751** | | Less: current portion, record in current liabilities | $(245,604) | | **Present value of lease liabilities (non-current)** | **$231,147** | Weighted Average Lease Terms and Discount Rates (as of December 31, 2024) | Metric | 2024 | |:---|:---|\ | Weighted average remaining lease term (years) | 3.6 | | Weighted average discount rate | 7.56% | [(8) Loans Payable](index=100&type=section&id=%288%29%20Loans%20Payable) Short-term bank loans significantly increased to **$4.45 million** in 2024 due to refinancing, while long-term loans decreased to **$1.11 million** Short-term Bank Loans (as of December 31) | Loan Type | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Rural Credit Union of Xushui District Loan 1 | $1,808,469 | $0 | | Rural Credit Union of Xushui District Loan 2 | $2,225,808 | $0 | | ICBC Loan 1 | $0 | $2,824 | | ICBC Loan 2 | $0 | $70,594 | | ICBC Loan 3 | $0 | $350,149 | | ICBC Loan 4 | $2,782 | $0 | | ICBC Loan 5 | $139,113 | $0 | | ICBC Loan 6 | $139,113 | $0 | | ICBC Loan 7 | $136,331 | $0 | | **Total short-term bank loans** | **$4,451,616** | **$423,567** | - Two new short-term loans from Rural Credit Union of Xushui District, totaling **$4,034,277**, were secured by Baoding Shengde's equipment and a third-party guarantee, bearing a **6%** fixed rate and due December 23, 2025[458](index=458&type=chunk)[459](index=459&type=chunk) - Several ICBC working capital loans from 2023 were repaid in June 2024, and new ICBC loans totaling **$417,339** were obtained in June 2024, bearing a **3.45%** fixed rate and due in June 2025[460](index=460&type=chunk)[461](index=461&type=chunk)[462](index=462&type=chunk)[463](index=463&type=chunk)[464](index=464&type=chunk) Long-term Loans (as of December 31) | Loan Type | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Rural Credit Union of Xushui District Loan 1 | $3,476,434 | $3,528,315 | | Rural Credit Union of Xushui District Loan 2 | $0 | $2,259,026 | | Rural Credit Union of Xushui District Loan 3 | $0 | $1,835,458 | | Rural Credit Union of Xushui District Loan 4 | $0 | $2,541,404 | | Rural Credit Union of Xushui District Loan 5 | $1,196,372 | $1,214,226 | | **Total** | **$4,672,806** | **$11,378,429** | | Less: Current portion of long-term loans | $(3,559,902) | $(6,874,497) | | **Long-term loans (non-current)** | **$1,112,904** | **$4,503,932** | - Total interest expenses for short-term and long-term bank loans were **$762,377** in 2024, down from **$977,678** in 2023[474](index=474&type=chunk) [(9) Related Party Transactions](index=104&type=section&id=%289%29%20Related%20Party%20Transactions) All principal amounts of loans due to CEO Mr. Zhenyong Liu were repaid by 2024, with only accrued interest of **$304,600** outstanding - As of December 31, 2024, total loans due to Mr. Zhenyong Liu were **$nil**, with accrued interest of approximately **$304,600** outstanding[479](index=479&type=chunk) - Mr. Zhenyong Liu repaid all loans borrowed from the company by December 2023, with interest income of **$nil** in 2024 and **$290,275** in 2023[480](index=480&type=chunk) - Amount due to shareholder (for U.S. expenses) was **$nil** in 2024, down from **$727,433** in 2023, due on demand with interest-free terms[481](index=481&type=chunk) [(10) Other payables and accrued liabilities](index=105&type=section&id=%2810%29%20Other%20payables%20and%20accrued%20liabilities) Other payables and accrued liabilities decreased to **$11.55 million** in 2024, including **$461,855** in accrued litigation costs Other Payables and Accrued Liabilities (as of December 31) | Category | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Accrued electricity | $2,964 | $3,054 | | Value-added tax payable | $21,868 | $696 | | Accrued interest to a related party | $304,600 | $598,319 | | Payable for purchase of property, plant and equipment | $10,711,678 | $11,175,858 | | Accrued commission to salesmen | $3,877 | $47,040 | | Accrued bank loan interest | $14,955 | $1,070,708 | | Accrued litigation costs | $461,855 | $0 | | Others | $24,193 | $16,842 | | **Totals** | **$11,545,990** | **$12,912,517** | [(11) Derivative Liabilities](index=105&type=section&id=%2811%29%20Derivative%20Liabilities) Derivative liabilities, primarily from warrants, increased to **$5,651** in 2024, resulting in a **$5,597** loss from fair value changes - Derivative liabilities, primarily from warrants, are classified as Level 3 fair value measurements and valued using the Black-Scholes pricing model[485](index=485&type=chunk)[487](index=487&type=chunk) Derivative Liabilities (as of December 31) | Metric | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Balance at December 31 | $5,651 | $54 | | Change in fair value of derivative liability | $5,597 | $(646,229) | | **Loss (Gain) on derivative liability** | **$5,597** | **$(646,229)** | [(12) Common Stock](index=107&type=section&id=%2812%29%20Common%20Stock) The company issued common stock and warrants in 2021 public offerings, raising approximately **$14.4 million** and **$21.9 million** - On January 20, 2021, the company sold **2,618,182** shares of common stock and corresponding warrants for approximately **$14.4 million**[491](index=491&type=chunk) - On March 1, 2021, the company sold **2,927,786** shares of common stock and corresponding warrants for approximately **$21.9 million**[492](index=492&type=chunk) [(13) Warrants](index=107&type=section&id=%2813%29%20Warrants) As of December 31, 2024, **3,016,635** warrants were outstanding with a weighted average exercise price of **$6.6907** and **1.08 years** remaining life - As of December 31, 2024, **3,016,635** warrants were outstanding and exercisable, with a weighted average exercise price of **$6.6907** and a weighted average remaining contractual life of **1.08 years**[499](index=499&type=chunk)[500](index=500&type=chunk) - May 2020 Warrants: **352,000** outstanding, exercise price **$7.425**, expiring July 23, 2025[493](index=493&type=chunk) - January 2021 Warrants: **1,207,492** outstanding, exercise price **$5.5**, expiring January 20, 2026[494](index=494&type=chunk) - March 2021 Warrants: **1,457,143** outstanding, exercise price **$7.5**, expiring March 1, 2026[495](index=495&type=chunk) - The warrants are classified as liabilities and accounted for as derivatives[496](index=496&type=chunk) [(14) Earnings Per Share](index=108&type=section&id=%2814%29%20Earnings%20Per%20Share) Basic and diluted net loss per share were **$(0.98)** in 2024 and **$(0.99)** in 2023, with **10,065,920** weighted average shares outstanding Earnings Per Share (Year Ended December 31) | Metric | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Net (loss) income for the year - numerator | $(9,843,094) | $(9,946,035) | | Weighted average common stock outstanding - denominator | 10,065,920 | 10,065,920 | | Basic Net (loss) income per share | $(0.98) | $(0.99) | | Diluted Net (loss) income per share | $(0.98) | $(0.99) | [(15) Income Taxes](index=109&type=section&id=%2815%29%20Income%20Taxes) Total income tax expenses were **$879,194** in 2024, with PRC companies subject to a **25%** rate and a **100%** valuation allowance on U.S. deferred tax assets - PRC operating companies (Dongfang Paper and Baoding Shengde) are subject to PRC Enterprise Income Tax at a statutory rate of **25%**[505](index=505&type=chunk) Provision for Income Taxes (Year Ended December 31) | Category | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Current Tax Provision U.S. | $36,793 | $0 | | Current Tax Provision PRC | $842,401 | $346,954 | | Deferred Tax Provision PRC | $0 | $0 | | **Total Income Tax Expenses (Benefits)** | **$879,194** | **$346,954** | Deferred Tax Assets (Liabilities) (as of December 31) | Category | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Depreciation and amortization of property, plant and equipment | $18,875,162 | $16,922,756 | | Impairment of property, plant and equipment | $602,139 | $585,380 | | Impairment of inventory | $181,530 | $0 | | Provision for doubtful debts | $446,064 | $0 | | Miscellaneous | $247,969 | $135,714 | | Net operating loss carryover of PRC company | $432,365 | $274,525 | | (Gain) Loss on asset disposal | $(63,123) | $(64,065) | | **Total deferred tax assets** | **$20,722,106** | **$17,854,310** | | Less: Valuation allowance | $(20,722,106) | $(17,854,310) | | **Total deferred tax assets, net** | **$0** | **$0** | Effective Income Tax Rate Reconciliation (Year Ended December 31) | Metric | 2024 | 2023 | |:---|:---|:---|\ | PRC Statutory rate | 25.0% | 25.0% | | Effect of tax and book difference | (2.8)% | (20.7)% | | Change in valuation allowance | (32.0)% | (7.9)% | | **Effective income tax rate** | **(9.8)%** | **(3.6)%** | - A **100%** valuation allowance is provided on U.S. deferred tax assets due to limited operating history and continuing losses, as management believes realization is not more than likely[506](index=506&type=chunk)[509](index=509&type=chunk) [(16) Stock Incentive Plans](index=110&type=section&id=%2816%29%20Stock%20Incentive%20Plans) The company has two stock incentive plans, with **150,000** shares issued under the 2021 ISP and **1,500,000** shares reserved under the 2023 ISP - The 2021 Incentive Stock Plan (2021 ISP) authorized **150,000** shares of common stock, all of which have been issued[596](index=596&type=chunk)[597](index=597&type=chunk) - The 2023 Omnibus Equity Incentive Plan (2023 ISP) reserved **1,500,000** shares of common stock for awards to directors, officers, employees, and consultants[511](index=511&type=chunk)[598](index=598&type=chunk) - All shares authorized under the 2023 ISP have been reserved as of December 31, 2024[512](index=512&type=chunk)[599](index=599&type=chunk) [(17) Commitments and Contingencies](index=112&type=section&id=%2817%29%20Commitments%20and%20Contingencies) Commitments include land and operating leases, **$3.44 million** for a new production line, a **$4.31 million** supplier loan guarantee, and **$461,855** in litigation costs - The Xushui Paper Mill land lease requires annual payments of approximately **$16,694** (**RMB120,000**) until December 31, 2031[514](index=514&type=chunk)[515](index=515&type=chunk) - Industrial buildings are leased back for an annual rental payment of approximately **$139,113** (**RMB1,000,000**), with the lease renewed in August 2022 for six years[256](index=256&type=chunk)[310](index=310&type=chunk)[517](index=517&type=chunk) - Capital expenditure commitments totaled **$3,436,091** as of December 31, 2024, mainly for the PM10 tissue paper production line[518](index=518&type=chunk) - The company guarantees a **$4,312,503** long-term bank loan for Baoding Huanrun Trading Co., a major supplier, maturing in 2028[519](index=519&type=chunk) - Tengsheng Paper is jointly liable in a civil loan dispute for **RMB3,320,000**, with accrued litigation costs of **$461,855** recorded as current liabilities[520](index=520&type=chunk) [(18) Segment Reporting](index=113&type=section&id=%2818%29%20Segment%20Reporting) The company operates through three segments: Dongfang Paper, Tengsheng Paper, and Baoding Shengde, with all sales to PRC customers - The company manages operations through three segments: Dongfang Paper, Tengsheng Paper, and Baoding Shengde[522](index=522&type=chunk) - Dongfang Paper and Tengsheng Paper produce offset printing paper, corrugating medium paper, and tissue paper. Baoding Shengde produces face masks and digital photo paper[522](index=522&type=chunk) Segment Financial Information (Year Ended December 31, 2024) | Metric | Dongfang Paper (USD) | Tengsheng Paper (USD) | Baoding Shengde (USD) | Not Attributable to Segments (USD) | Elimination of Intersegment (USD) | Enterprise-wide, Consolidated (USD) | |:---|:---|:---|:---|:---|:---|:---|\ | Revenues | $75,702,427 | $135,516 | $0 | $0 | $0 | $75,837,943 | | Gross profit | $6,556,487 | $135,253 | $0 | $0 | $0 | $6,691,740 | | Depreciation and amortization | $3,842,408 | $8,814,279 | $1,564,395 | $0 | $0 | $14,221,082 | | Loss on impairment of assets | $0 | $0 | $102,490 | $0 | $0 | $102,490 | | Interest income | $12,316 | $1,845 | $598 | $34 | $0 | $14,793 | | Interest expense | $356,788 | $94,334 | $296,891 | $14,364 | $0 | $762,377 | | Income tax expense | $842,401 | $0 | $0 | $36,793 | $0 | $879,194 | | Net income (loss) | $2,161,939 | $(10,051,366) | $(440,633) | $(1,513,034) | $0 | $(9,843,094) | Segment Total Assets (as of December 31, 2024) | Metric | Dongfang Paper (USD) | Tengsheng Paper (USD) | Baoding Shengde (USD) | Not Attributable to Segments (USD) | Elimination of Intersegment (USD) | Enterprise-wide, Consolidated (USD) | |:---|:---|:---|:---|:---|:---|:---|\ | Total assets | $54,180,471 | $116,390,854 | $6,020,713 | $954,748 | $0 | $177,546,786 | [(19) Concentration and Major Customers and Suppliers](index=115&type=section&id=%2819%29%20Concentration%20and%20Major%20Customers%20and%20Suppliers) No single customer exceeded **10%** of sales in 2024, but three major suppliers accounted for **73%**, **17%**, and **7%** of total purchases - No single customer contributed over **10%** of total sales for the years ended December 31, 2024 and 2023[527](index=527&type=chunk) - For 2024, three major suppliers accounted for **73%**, **17%**, and **7%** of total purchases, respectively[527](index=527&type=chunk) [(20) Concentration of Credit Risk](index=115&type=section&id=%2820%29%20Concentration%20of%20Credit%20Risk) Credit risk is concentrated in PRC bank balances, with **$6.67 million** exceeding China's deposit insurance coverage as of December 31, 2024 - Cash is placed in reputable financial institutions in the PRC and the United States[528](index=528&type=chunk) - U.S. bank accounts are fully covered by FDIC insurance[528](index=528&type=chunk) - PRC bank balances exceeding **RMB500,000** (approximately **$69,557**) are not fully covered by China's deposit insurance system. As of December 31, 2024, **RMB47,952,082** (approximately **$6,670,759**) exceeded this coverage[528](index=528&type=chunk) [(21) Risks and Uncertainties](index=115&type=section&id=%2821%29%20Risks%20and%20Uncertainties) ITP faces substantial risks from intense competition, liquidity challenges, changing customer demands, foreign currency fluctuations, and PRC regulatory complexities - The company faces substantial risks from intense industry competition, financing and liquidity requirements, rapidly changing customer requirements, foreign currency exchange rates, and operating in the PRC under various laws and restrictions[529](index=529&type=chunk) [(22) Subsequent Event](index=116&type=section&id=%2822%29%20Subsequent%20Event) There are no subsequent events to report as of the date of this filing - No subsequent events have been reported[532](index=532&type=chunk) [(23) Summarized Quarterly Financial Data (Unaudited)](index=116&type=section&id=%2823%29%20Summarized%20Quarterly%20Financial%20Data%20(Unaudited)) Unaudited 2024 quarterly data shows fluctuating revenues and gross profits, with net losses reported in all quarters Summarized Quarterly Financial Data (Unaudited) - 2024 | Metric | Q1 2024 (USD) | Q2 2024 (USD) | Q3 2024 (USD) | Q4 2024 (USD) | |:---|:---|:---|:---|:---|\ | Revenues | $6,863,841 | $26,249,788 | $25,081,500 | $17,642,814 | | Gross profit | $399,113 | $3,265,300 | $1,917,381 | $1,109,946 | | (Loss) income from operations | $(3,501,670) | $547,752 | $(1,464,121) | $(3,792,680) | | Net loss | $(3,746,536) | $(77,747) | $(1,973,946) | $(4,044,865) | | Net loss per share (Basic & Diluted) | $(0.37) | $(0.01) | $(0.20) | $(0.40) | Summarized Quarterly Financial Data (Unaudited) - 2023 | Metric | Q1 2023 (USD) | Q2 2023 (USD) | Q3 2023 (USD) | Q4 2023 (USD) | |:---|:---|:---|:---|:---|\ | Revenues | $19,790,877 | $30,019,914 | $15,771,560 | $20,964,599 | | Gross (loss) profit | $(276,999) | $1,179,858 | $(153,223) | $250,249 | | Loss from operations | $(2,772,361) | $(518,683) | $(2,484,513) | $(3,800,331) | | Net loss | $(2,733,165) | $(1,253,493) | $(1,975,368) | $(3,984,009) | | Net income per share (Basic & Diluted) | $(0.27) | $(0.125) | $(0.20) | $(0.40) | [(24) Condensed Financial Information of the Parent Company](index=117&type=section&id=%2824%29%20Condensed%20Financial%20Information%20of%20the%20Parent%20Company) The parent company reported **$160.75 million** in total assets and a **$(9.95) million** net income in 2024, with PRC laws restricting asset transfers Parent Company Condensed Balance Sheet (as of December 31) | Metric | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Total Assets | $160,752,834 | $173,060,775 | | Current Assets | $1,694 | $678,347 | | Investment in subsidiaries | $160,751,140 | $172,382,428 | | Total Liabilities | $4,732,548 | $4,754,391 | | Inter-company payable | $4,726,897 | $4,026,904 | | Total Stockholders' Equity | $156,020,286 | $168,306,384 | Parent Company Condensed Statements of Income and Comprehensive Income (Loss) (Year Ended December 31) | Metric | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Selling, general and administrative expenses | $562,421 | $708,638 | | Loss from Operations | $(562,421) | $(708,638) | | Equity in earnings of unconsolidated subsidiaries | $(9,238,283) | $(9,883,626) | | Loss on derivative liability | $(5,597) | $646,229 | | Income before Income Taxes | $(9,806,301) | $(9,946,035) | | Provision for Income Taxes | $(36,793) | $0 | | Net Income | $(9,946,035) | $(9,843,094) | | Other comprehensive income /(loss) | $(2,443,452) | $(3,040,994) | | Total Comprehensive Income (loss) | $(12,987,029) | $(12,286,546) | Parent Company Condensed Statements of Cash Flows (Year Ended December 31) | Cash Flow Activity | 2024 (USD) | 2023 (USD) | |:---|:---|:---|\ | Net Cash Used in Operating Activities | $(591,173) | $(708,641) | | Net Cash Used in Investing Activities | $(50,000) | $(500,000) | | Net Cash Provided by Financing Activities | $(35,480) | $(43,253) | | Net Increase (Decrease) in Cash and Cash Equivalents | $(676,653) | $(1,251,894) | | Cash and Cash Equivalents - End of Year | $1,694 | $678,347 | - Under PRC laws, the company's PRC subsidiaries are restricted from transferring certain net assets (paid-in capital, capital surplus, statutory reserves) to the parent company, totaling **$82,691,643** as of December 31, 2024[535](index=535&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=119&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) WWC, P.C. resigned as auditor on February 29, 2024, with no disagreements, and GGF CPA LIMITED was engaged as the new auditor on March 1, 2024 - WWC, P.C. Certified Public Accountants resigned as the independent registered public accounting firm on February 29, 2024[540](index=540&type=chunk) - WWC's audit reports for 2021 and 2022 were unqualified, and there were no disagreements or reportable events with WWC[540](index=540&type=chunk)[541](index=541&type=chunk) - GGF CPA LIMITED was engaged as the new indepen

[Company Information](index=8&type=section&id=1_Company_Information) This section provides an overview of IT Tech Packaging, Inc., detailing its business operations and including standard forward-looking statements [About IT Tech Packaging, Inc.](index=8&type=section&id=1_1_About_IT_Tech_Packaging_Inc.) IT Tech Packaging Inc. (ITP), established in 1996, is a prominent manufacturer and distributor of diversified paper products and single-use face masks in North China, primarily utilizing recycled paper for its products - IT Tech Packaging, Inc. is a leading manufacturer and distributor of diversified paper products and single-use face masks in North China, founded in 1996[30](index=30&type=chunk) - The company produces corrugating medium paper, offset printing paper, and tissue paper products, primarily using recycled paper (except for tissue paper products)[30](index=30&type=chunk) - Production is based in Baoding and Xingtai, Hebei Province, strategically located near the Beijing and Tianjin region[30](index=30&type=chunk) [Forward-Looking Statement](index=8&type=section&id=1_2_Forward-Looking_Statement) This section includes standard forward-looking statements, advising investors that future events and performance are subject to various risks, uncertainties, and assumptions - The release contains forward-looking statements as defined by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934[31](index=31&type=chunk) - These statements are subject to risks, uncertainties, and assumptions, including market and other conditions[31](index=31&type=chunk) - Investors are urged to read the Company's SEC filings for more detailed information on risk factors[31](index=31&type=chunk) [Third Quarter 2024 Unaudited Financial Highlights](index=1&type=section&id=2_Third_Quarter_2024_Unaudited_Financial_Highlights) This section presents the unaudited financial performance of IT Tech Packaging, Inc. for the third quarter of 2024, highlighting key revenue, profit, and loss metrics [Key Financial Metrics Overview](index=1&type=section&id=2_1_Key_Financial_Metrics_Overview) For the third quarter of 2024, IT Tech Packaging Inc. reported a substantial increase in revenue and gross profit, alongside a significant reduction in operating loss and a slight decrease in net loss, with EBITDA also showing positive growth compared to the same period last year Third Quarter 2024 Unaudited Financial Results Summary | ($ millions) | 2024 | 2023 | % Change | |:----------------------------------------|:-----|:-----|:---------| | Revenues | 25.08 | 15.77 | 59.03% | | Gross profit (loss) | 1.92 | (0.15) | 1351.37% | | Gross profit (loss) margin | 7.64% | -0.97% | 8.61pp | | Operating income (loss) | (1.46) | (2.48) | -41.07% | | Net income (loss) | (1.97) | (1.98) | -0.07% | | EBITDA | 2.03 | 1.69 | 20.12% | | Basic and Diluted earnings (loss) per share | (0.20) | (0.20) | - | - Revenue increased by **59.03%** to approximately **$25.08 million**, primarily due to increased sales volume of corrugating medium paper (CMP), partially offset by a decrease in CMP's average selling prices[2](index=2&type=chunk) - Gross profit surged by **1351.37%** to approximately **$1.92 million**, with the total gross profit margin increasing by **8.61 percentage points** to **7.64%**[3](index=3&type=chunk) [Revenue Analysis](index=1&type=section&id=2_2_Revenue_Analysis) Total revenue for Q3 2024 increased significantly, primarily driven by higher sales volume of Corrugating Medium Paper (CMP), which now constitutes nearly all of the company's revenue - Total revenue increased by **59.03%** to approximately **$25.08 million** in Q3 2024 from $15.77 million in Q3 2023, mainly due to increased CMP sales volume, partially offset by lower CMP ASP[5](index=5&type=chunk) - Revenue from CMP (regular and light-weight) increased by **62.38%** to approximately **$25.04 million**, accounting for **99.85% of total revenue** for Q3 2024[5](index=5&type=chunk) - The Company sold **74,884 tonnes of CMP** at an ASP of **$334/tonne** in Q3 2024, compared to 44,396 tonnes at an ASP of $347/tonne in Q3 2023[5](index=5&type=chunk) [Total Revenue](index=1&type=section&id=2_2_1_Total_Revenue) Total revenue for the third quarter of 2024 saw a substantial increase of 59.03% year-over-year, reaching $25.08 million, primarily fueled by higher sales volumes of corrugating medium paper - Total revenue for Q3 2024 was approximately **$25.08 million**, a **59.03% increase** from $15.77 million in Q3 2023[5](index=5&type=chunk) - The increase was mainly due to the increase of sales volume of corrugating medium paper (CMP), partially offset by the decrease in average selling prices (ASP) of CMP[5](index=5&type=chunk) [Revenue by Product](index=1&type=section&id=2_2_2_Revenue_by_Product) Corrugating Medium Paper (CMP) dominated revenue in Q3 2024, with regular CMP revenue increasing by 74.93% and light-weight CMP by 19.16%, while other product lines generated no revenue Q3 2024 Revenue, Volume, and ASP by Product | Product | Revenue ($'000) 2024 | Volume (tonne) 2024 | ASP ($/tonne) 2024 | Revenue ($'000) 2023 | Volume (tonne) 2023 | ASP ($/tonne) 2023 | |:--------------------------|:---------------------|:--------------------|:-------------------|:---------------------|:--------------------|:-------------------| | Regular CMP | 20,910 | 62,121 | 337 | 11,954 | 34,186 | 350 | | Light-Weight CMP | 4,134 | 12,763 | 324 | 3,470 | 10,210 | 340 | | Offset Printing Paper | - | - | - | 69 | 170 | 407 | | Tissue Paper Products | - | - | - | 264 | 241 | 1,096 | | Face Masks | - | - | - | 15 | 507 (k pieces) | 30 (k pieces) | - Regular CMP revenue increased by **74.93%** to approximately **$20.91 million**, with sales volume up to **62,121 tonnes** (ASP **$337/tonne**)[6](index=6&type=chunk) - Revenue from offset printing paper, tissue paper products, and face masks was **$nil** for the three months ended September 30, 2024, compared to $0.07 million, $0.26 million, and $0.02 million respectively for the same period last year[7](index=7&type=chunk)[8](index=8&type=chunk) [Gross Profit and Gross Margin](index=2&type=section&id=2_3_Gross_Profit_and_Gross_Margin) The company achieved a significant turnaround in gross profit for Q3 2024, moving from a gross loss in the prior year to a positive gross profit, driven by increased CMP sales volume and decreased unit material costs - Total gross profit was approximately **$1.92 million** for Q3 2024, compared to a gross loss of approximately $0.15 million for the same period last year, an increase of **1351.37%**[2](index=2&type=chunk)[9](index=9&type=chunk) - Overall gross profit margin improved to **7.64%** for Q3 2024, compared to a gross loss margin of 0.97% for the same period last year, an increase of **8.61 percentage points**[2](index=2&type=chunk)[9](index=9&type=chunk) - The improvement was mainly due to the increase in sales quantity of CMP, partially offset by the decrease of the unit material cost of CMP products[8](index=8&type=chunk) Q3 2024 Gross Profit Margins by Product | Product | Q3 2024 Gross Profit Margin | Q3 2023 Gross Profit Margin | |:--------------------------|:----------------------------|:----------------------------| | Regular CMP | 7.54% | 7.01% | | Light-Weight CMP | 7.33% | -7.47% | | Offset Printing Paper | n/a | 7.53% | | Tissue Paper Products | n/a | -278.10% | | Face Masks | n/a | -15.75% | [Operating Expenses and Loss from Operations](index=3&type=section&id=2_4_Operating_Expenses_and_Loss_from_Operations) Selling, general, and administrative (SG&A) expenses increased in Q3 2024, but the company significantly reduced its operating loss compared to the prior year, improving its operating loss margin - Selling, general and administrative expenses (SG&A) increased by **44.83%** to approximately **$3.38 million** for Q3 2024 from $2.33 million for the same period last year[10](index=10&type=chunk) - Loss from operations was approximately **$1.46 million** for Q3 2024, a decrease of **41.07%** from a loss of approximately $2.48 million for the same period last year[2](index=2&type=chunk)[10](index=10&type=chunk) - Operating loss margin improved to **5.84%** for Q3 2024, compared to 15.75% for the same period last year[10](index=10&type=chunk) [Net Loss and Earnings Per Share](index=3&type=section&id=2_5_Net_Loss_and_Earnings_Per_Share) The net loss for Q3 2024 remained relatively stable compared to the prior year, with basic and diluted loss per share unchanged - Net loss was approximately **$1.97 million**, or loss per share of **$0.20**, for Q3 2024[3](index=3&type=chunk)[11](index=11&type=chunk) - This compares to a net loss of approximately $1.98 million, or loss per share of $0.20, for the same period last year, representing a **-0.07% change in net loss**[2](index=2&type=chunk)[3](index=3&type=chunk)[11](index=11&type=chunk) [EBITDA (Non-GAAP Financial Measure)](index=3&type=section&id=2_6_EBITDA_%28Non-GAAP_Financial_Measure%29) EBITDA increased in Q3 2024, reflecting improved operational performance, with management using this non-GAAP measure to evaluate results and make strategic decisions - EBITDA was approximately **$2.03 million** for Q3 2024, compared to $1.69 million for the same period last year, representing a **20.12% increase**[2](index=2&type=chunk)[4](index=4&type=chunk)[11](index=11&type=chunk) [EBITDA Definition](index=3&type=section&id=2_6_1_EBITDA_Definition) EBITDA is a non-GAAP financial measure defined as net income before interest, income taxes, depreciation, and amortization, used by management to assess operational performance and strategic decisions - EBITDA is defined as net income before interest, income taxes, depreciation and amortization[11](index=11&type=chunk) - Management uses EBITDA as a key measure to evaluate results and make strategic decisions, believing it is useful to investors as an indicator of operational performance[11](index=11&type=chunk) [EBITDA Reconciliation](index=4&type=section&id=2_6_2_EBITDA_Reconciliation) The reconciliation shows the calculation of EBITDA from net loss for Q3 2024 and Q3 2023, highlighting the adjustments for income tax, net interest expense, and depreciation and amortization Reconciliation of Net Income to EBITDA (Q3 2024 vs Q3 2023) | ($ millions) | For the Three Months Ended September 30, 2024 | For the Three Months Ended September 30, 2023 | |:--------------------------|:----------------------------------------------|:----------------------------------------------| | Net loss | -1.97 | -1.98 | | Add: Income tax | 0.35 | 0.00 | | Net interest expense | 0.17 | 0.25 | | Depreciation and amortization | 3.48 | 3.42 | | EBITDA | 2.03 | 1.69 | [Nine Months Ended September 30, 2024 Unaudited Financial Highlights](index=4&type=section&id=3_Nine_Months_Ended_September_30%2C_2024_Unaudited_Financial_Highlights) This section details the unaudited financial performance of IT Tech Packaging, Inc. for the nine months ended September 30, 2024, covering revenue, profitability, and operational efficiency [Key Financial Metrics Overview](index=4&type=section&id=3_1_Key_Financial_Metrics_Overview) For the nine months ended September 30, 2024, the company experienced a decrease in total revenue but a significant improvement in gross profit and a reduction in operating and net losses, while EBITDA saw a modest increase compared to the prior year Nine Months Ended September 30, 2024 Unaudited Financial Results Summary | ($ millions) | For the Nine Months Ended September 30, 2024 | For the Nine Months Ended September 30, 2023 | % Change | |:----------------------------------------|:---------------------------------------------|:---------------------------------------------|:---------| | Revenues | 58.20 | 65.58 | -11.26% | | Gross profit | 5.58 | 0.75 | 644.60% | | Gross profit (loss) margin | 9.59% | 1.14% | 8.45pp | | Operating loss | (4.42) | (5.78) | -23.50% | | Net loss | (5.80) | (5.96) | -2.75% | | EBITDA | 5.94 | 5.73 | 3.66% | | Basic and Diluted loss per share | (0.58) | (0.59) | -1.69% | - Revenue decreased by **11.26%** to approximately **$58.20 million**, mainly due to a decrease in ASP of CMP, partially offset by an increase in sales quantity of regular CMP[14](index=14&type=chunk)[15](index=15&type=chunk) - Gross profit increased by **644.60%** to approximately **$5.58 million**, with the gross profit margin improving by **8.45 percentage points** to **9.59%**[14](index=14&type=chunk) [Revenue Analysis](index=5&type=section&id=3_2_Revenue_Analysis) Total revenue for the nine months ended September 30, 2024, decreased by 11.26%, primarily due to a decline in the average selling price of CMP, despite an increase in regular CMP sales volume - Total revenue decreased by **11.26%** to approximately **$58.20 million** for the nine months ended September 30, 2024, from $65.58 million for the same period last year[15](index=15&type=chunk) - Revenue from CMP (regular and light-weight) decreased by **5.44%** to approximately **$58.08 million**, accounting for **99.81% of total revenue** for the nine months ended September 30, 2024[15](index=15&type=chunk) - The Company sold **168,919 tonnes of CMP** at an ASP of **$344/tonne** in the nine months ended September 30, 2024, compared to 167,018 tonnes at an ASP of $368/tonne in the same period last year[15](index=15&type=chunk) [Total Revenue](index=5&type=section&id=3_2_1_Total_Revenue) For the nine months ended September 30, 2024, total revenue decreased by 11.26% to $58.20 million, primarily due to a reduction in the average selling price of Corrugating Medium Paper (CMP), despite an increase in regular CMP sales volume - Total revenue for the nine months ended September 30, 2024, was approximately **$58.20 million**, an **11.26% decrease** from $65.58 million for the same period last year[15](index=15&type=chunk) - This was mainly due to the decrease in ASP of CMP, partially offset by the increase in sales quantity of regular CMP[15](index=15&type=chunk) [Revenue by Product](index=5&type=section&id=3_2_2_Revenue_by_Product) For the nine months ended September 30, 2024, regular CMP revenue decreased by 3.39%, and light-weight CMP revenue decreased by 14.76%, both impacted by lower ASPs, with other product lines generating no revenue Nine Months Ended September 30, 2024 Revenue, Volume, and ASP by Product | Product | Revenue ($'000) 2024 | Volume (tonne) 2024 | ASP ($/tonne) 2024 | Revenue ($'000) 2023 | Volume (tonne) 2023 | ASP ($/tonne) 2023 | |:--------------------------|:---------------------|:--------------------|:-------------------|:---------------------|:--------------------|:-------------------| | Regular CMP | 48,644 | 140,574 | 346 | 50,353 | 135,912 | 370 | | Light-Weight CMP | 9,440 | 28,345 | 333 | 11,074 | 31,106 | 356 | | Offset Printing Paper | - | - | - | 3,225 | 5,573 | 579 | | Tissue Paper Products | - | - | - | 831 | 726 | 1,145 | | Face Masks | - | - | - | 95 | 3,023 (k pieces) | 31 (k pieces) | - Regular CMP revenue decreased by **3.39%** to approximately **$48.64 million**, with sales volume increasing to **140,574 tonnes** (ASP **$346/tonne**)[16](index=16&type=chunk) - Revenue from offset printing paper, tissue paper products, and face masks was **$nil** for the nine months ended September 30, 2024, compared to $3.23 million, $0.83 million, and $0.10 million respectively in the prior year[17](index=17&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk) [Gross Profit and Gross Margin](index=5&type=section&id=3_3_Gross_Profit_and_Gross_Margin) For the nine months ended September 30, 2024, the company achieved a substantial increase in gross profit and gross margin, primarily due to a significant decrease in the unit material costs of CMP - Total gross profit was approximately **$5.58 million** for the nine months ended September 30, 2024, compared to approximately $0.75 million for the same period last year, an increase of **644.60%**[14](index=14&type=chunk)[20](index=20&type=chunk) - Overall gross margin was **9.59%** for the nine months ended September 30, 2024, compared to 1.14% for the same period last year, an increase of **8.45 percentage points**[14](index=14&type=chunk)[20](index=20&type=chunk) - The improvement was mainly due to the decrease in the unit material costs of CMP[19](index=19&type=chunk) Nine Months Ended September 30, 2024 Gross Profit Margins by Product | Product | YTD 2024 Gross Profit Margin | YTD 2023 Gross Profit Margin | |:--------------------------|:---------------------------|:---------------------------| | Regular CMP | 9.44% | 5.26% | | Light-Weight CMP | 9.33% | 1.68% | | Offset Printing Paper | n/a | 2.53% | | Tissue Paper Products | n/a | -258.64% | | Face Masks | n/a | -9.26% | [Operating Expenses and Loss from Operations](index=6&type=section&id=3_4_Operating_Expenses_and_Loss_from_Operations) Selling, general, and administrative (SG&A) expenses increased significantly for the nine months ended September 30, 2024, but the company still managed to reduce its operating loss and improve its operating loss margin - Selling, general and administrative expenses (SG&A) increased by **62.51%** to approximately **$10.00 million** for the nine months ended September 30, 2024, from $6.15 million for the same period last year[21](index=21&type=chunk) - Loss from operations was approximately **$4.42 million** for the nine months ended September 30, 2024, a decrease of **23.50%** from a loss of approximately $5.78 million for the same period last year[14](index=14&type=chunk)[21](index=21&type=chunk) - Operating loss margin improved to **7.59%** for the nine months ended September 30, 2024, compared to 8.81% for the same period last year[21](index=21&type=chunk) [Net Loss and Earnings Per Share](index=6&type=section&id=3_5_Net_Loss_and_Earnings_Per_Share) The net loss for the nine months ended September 30, 2024, slightly decreased, leading to a marginal improvement in loss per share - Net loss was approximately **$5.80 million**, or loss per share of **$0.58**, for the nine months ended September 30, 2024[14](index=14&type=chunk)[22](index=22&type=chunk) - This compares to a net loss of approximately $5.96 million, or loss per share of $0.59, for the same period last year, representing a **-2.75% change in net loss** and **-1.69% change in loss per share**[14](index=14&type=chunk)[22](index=22&type=chunk) [EBITDA (Non-GAAP Financial Measure)](index=6&type=section&id=3_6_EBITDA_%28Non-GAAP_Financial_Measure%29) EBITDA for the nine months ended September 30, 2024, showed a modest increase, indicating a slight improvement in operational performance before non-operating items - EBITDA was approximately **$5.94 million** for the nine months ended September 30, 2024, compared to approximately $5.73 million for the same period last year, representing a **3.66% increase**[14](index=14&type=chunk)[23](index=23&type=chunk) [EBITDA Reconciliation](index=7&type=section&id=3_6_1_EBITDA_Reconciliation) The reconciliation for the nine months ended September 30, 2024, shows the calculation of EBITDA from net loss, adjusting for income tax, net interest expense, and depreciation and amortization Reconciliation of Net Income to EBITDA (Nine Months Ended September 30, 2024 vs 2023) | ($ millions) | For the Nine Months Ended September 30, 2024 | For the Nine Months Ended September 30, 2023 | |:--------------------------|:---------------------------------------------|:---------------------------------------------| | Net loss | -5.80 | -5.96 | | Add: Income tax | 0.80 | 0.35 | | Net interest expense | 0.59 | 0.77 | | Depreciation and amortization | 10.35 | 10.57 | | EBITDA | 5.94 | 5.73 | [Financial Position and Cash Flows](index=7&type=section&id=4_Financial_Position_and_Cash_Flows) This section outlines the company's financial position, including balance sheet details and cash flow activities, as of and for the nine months ended September 30, 2024 [Cash, Liquidity and Financial Position Overview](index=7&type=section&id=4_1_Cash%2C_Liquidity_and_Financial_Position_Overview) As of September 30, 2024, the company improved its cash position and working capital compared to December 31, 2023, while reducing short-term debt Key Financial Position Metrics (as of September 30, 2024 vs December 31, 2023) | Metric | Sep 30, 2024 ($ millions) | Dec 31, 2023 ($ millions) | |:--------------------------|:--------------------------|:--------------------------| | Cash and bank balances | 4.41 | 3.92 | | Short-term debt | 5.95 | 8.03 | | Long-term debt | 4.57 | 4.50 | | Net accounts receivable | 1.73 | 0.58 | | Net inventory | 5.73 | 3.56 | | Current assets | 32.97 | 28.36 | | Current liabilities | 20.75 | 21.42 | | Working capital | 12.22 | 6.94 | - Net cash provided by operating activities was approximately **$2.83 million** for the nine months ended September 30, 2024, compared to approximately $7.49 million for the same period last year[29](index=29&type=chunk) - Net cash provided by financing activities was approximately **$2.11 million** for the nine months ended September 30, 2024, compared to approximately $2.00 million for the same period last year[29](index=29&type=chunk) [Condensed Consolidated Balance Sheets](index=9&type=section&id=4_2_Condensed_Consolidated_Balance_Sheets) The balance sheet as of September 30, 2024, shows an increase in cash and accounts receivable, and a decrease in total assets and total liabilities compared to December 31, 2023 Condensed Consolidated Balance Sheets (as of September 30, 2024 vs December 31, 2023) | ASSETS ($) | September 30, 2024 | December 31, 2023 | |:-------------------------------------------------------------------------------------------------------------------|:-------------------|:------------------| | Cash and bank balances | 4,414,848 | 3,918,938 | | Accounts receivable (net) | 1,727,370 | 575,526 | | Inventories | 5,732,539 | 3,555,235 | | Total current assets | 32,974,897 | 28,357,901 | | Property, plant, and equipment, net | 154,755,386 | 163,974,022 | | Total Assets | 190,018,239 | 194,743,649 | | LIABILITIES AND STOCKHOLDERS' EQUITY ($) | | | | Short-term bank loans | 856,238 | 423,567 | | Current portion of long-term loans | 4,365,385 | 6,874,497 | | Total current liabilities | 20,754,624 | 21,418,934 | | Long-term loans | 4,566,601 | 4,503,932 | | Total liabilities | 25,694,194 | 26,406,786 | | Total stockholders' equity | 164,324,045 | 168,336,863 | [Condensed Consolidated Statements of Income and Comprehensive Income](index=10&type=section&id=4_3_Condensed_Consolidated_Statements_of_Income_and_Comprehensive_Income) The condensed consolidated statements of income and comprehensive income provide a detailed overview of the company's financial performance for both the three and nine months ended September 30, 2024 and 2023 Condensed Consolidated Statements of Income and Comprehensive Income (Q3 & YTD 2024 vs 2023) | Metric ($) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | |:---------------------------------------|:--------------------------------|:--------------------------------|:-------------------------------|:-------------------------------| | Revenues | 25,081,500 | 15,771,560 | 58,195,129 | 65,582,351 | | Cost of sales | (23,164,119) | (15,924,783) | (52,613,335) | (64,832,715) | | Gross Profit (Loss) | 1,917,381 | (153,223) | 5,581,794 | 749,636 | | Selling, general and administrative expenses | (3,381,502) | (2,334,746) | (9,999,833) | (6,153,513) | | Loss from Operations | (1,464,121) | (2,484,513) | (4,418,039) | (5,775,557) | | Net Loss | (1,973,946) | (1,975,368) | (5,798,229) | (5,962,026) | | Foreign currency translation adjustment | 2,843,180 | 1,143,608 | 1,785,411 | (5,417,331) | | Total Comprehensive Income (Loss) | 869,234 | (831,760) | (4,012,818) | (11,379,357) | | Basic and Diluted Losses per Share | (0.20) | (0.20) | (0.53) | (0.59) | [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=4_4_Condensed_Consolidated_Statements_of_Cash_Flows) The cash flow statement for the nine months ended September 30, 2024, indicates a decrease in cash provided by operating activities but a significant reduction in cash used in investing activities, and an increase in cash provided by financing activities Condensed Consolidated Statements of Cash Flows (Nine Months Ended September 30, 2024 vs 2023) | Cash Flow Category ($) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | |:-------------------------------------------------------------------------------------------------------------------|:-------------------------------|:-------------------------------| | Net Cash Provided by Operating Activities | 2,831,111 | 7,494,114 | | Net Cash Used in Investing Activities | (315,152) | (9,211,711) | | Net Cash (Used in) Provided by Financing Activities | (2,112,706) | 1,997,269 | | Effect of Exchange Rate Changes on Cash and Cash Equivalents | 97,740 | (366,599) | | Net Increase (Decrease) in Cash and Cash Equivalents | 500,993 | (86,927) | | Cash, Cash Equivalents and Restricted Cash - End of Period | 4,892,914 | 9,437,941 | | Cash paid for interest, net | 382,493 | 1,118,672 | | Cash paid for income taxes | 454,003 | 761,801 |

PART I - FINANCIAL INFORMATION This section provides comprehensive financial statements and management's analysis of the company's financial performance and condition [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of income and comprehensive income, cash flows, and changes in stockholders' equity, along with detailed notes explaining the company's organization, accounting policies, and specific financial line items [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheets | Metric | September 30, 2024 | December 31, 2023 | | :----------------------- | :----------------- | :---------------- | | Total Assets | $190,018,239 | $194,743,649 | | Total Liabilities | $25,694,194 | $26,406,786 | | Total Stockholders' Equity | $164,324,045 | $168,336,863 | - Total assets decreased by approximately **$4.7 million**, and total liabilities decreased by about **$0.7 million**, leading to a decrease in total stockholders' equity by approximately **$4 million**[7](index=7&type=chunk)[8](index=8&type=chunk) [Condensed Consolidated Statements of Income and Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) This section presents the company's financial performance, including revenues, gross profit, and net loss, for the reporting periods Three Months Ended September 30, | Metric | 2024 | 2023 | Change ($) | Change (%) | | :----------------- | :------------- | :------------- | :----------- | :--------- | | Revenues | $25,081,500 | $15,771,560 | $9,309,940 | 59.03% | | Gross Profit (Loss)| $1,917,381 | $(153,223) | $2,070,604 | - | | Net Loss | $(1,973,946) | $(1,975,368) | $1,422 | (0.07)% | | Basic & Diluted EPS| $(0.20) | $(0.20) | $0.00 | 0.00% | Nine Months Ended September 30, | Metric | 2024 | 2023 | Change ($) | Change (%) | | :----------------- | :------------- | :------------- | :------------ | :--------- | | Revenues | $58,195,129 | $65,582,351 | $(7,387,222) | (11.26)% | | Gross Profit | $5,581,794 | $749,636 | $4,832,158 | 644.60% | | Net Loss | $(5,798,229) | $(5,962,026) | $163,797 | (2.75)% | | Basic & Diluted EPS| $(0.58) | $(0.59) | $0.01 | (1.69)% | - For the three months ended September 30, 2024, revenues significantly increased by **59.03%**, and the company moved from a gross loss to a gross profit. However, the net loss remained relatively stable. For the nine months, revenues decreased by **11.26%**, but gross profit saw a substantial increase of **644.60%**, leading to a slight reduction in net loss[8](index=8&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the company's cash inflows and outflows from operating, investing, and financing activities Nine Months Ended September 30, | Cash Flow Activity | 2024 | 2023 | Change ($) | | :---------------------------------- | :------------ | :------------ | :------------ | | Net Cash Provided by Operating Activities | $2,831,111 | $7,494,114 | $(4,663,003) | | Net Cash Used in Investing Activities | $(315,152) | $(9,211,711) | $8,896,559 | | Net Cash (Used in) Provided by Financing Activities | $(2,112,706) | $1,997,269 | $(4,109,975) | | Net Increase (Decrease) in Cash and Cash Equivalents | $500,993 | $(86,927) | $587,920 | - Operating cash flow decreased significantly, while investing cash outflow reduced substantially. Financing activities shifted from providing cash to using cash, resulting in a net increase in cash and cash equivalents for the period, reversing the prior year's decrease[10](index=10&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This section details changes in the company's equity, including net loss and foreign currency adjustments Stockholders' Equity Changes (Nine Months Ended September 30, 2024) | Item | Amount ($) | | :---------------------------------- | :------------ | | Balance at December 31, 2023 | $168,336,863 | | Foreign currency translation adjustment | $1,785,411 | | Net loss | $(5,798,229) | | Balance at September 30, 2024 | $164,324,045 | - Total stockholders' equity decreased from **$168.3 million** to **$164.3 million**, primarily due to the net loss, partially offset by a positive foreign currency translation adjustment[12](index=12&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the company's accounting policies, financial line items, and business context [(1) Organization and Business Background](index=10&type=section&id=(1)%20Organization%20and%20Business%20Background) This note describes the company's structure, operations, and its Variable Interest Entity (VIE) arrangements in China - IT Tech Packaging, Inc. operates as a holding company for Hebei Baoding Dongfang Paper Milling Company Limited ('Dongfang Paper'), a producer and distributor of paper products in China, acquired in 2007. The company also controls Dongfang Paper and its subsidiary Tengsheng Paper through a Variable Interest Entity (VIE) structure via contractual agreements[13](index=13&type=chunk)[16](index=16&type=chunk)[19](index=19&type=chunk) VIE Contribution to Company's Financials | Metric | 3 Months Ended Sep 30, 2024 | 3 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 | As of Sep 30, 2024 | As of Dec 31, 2023 | | :---------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :----------------- | :----------------- | | Revenue | 100% | 99.90% | 100% | 99.86% | - | - | | Total Assets| - | - | - | - | 95.31% | 94.93% | - Dongfang Paper and Tengsheng Paper (VIEs) are critical to the company's operations, contributing **nearly 100%** of total revenue and **over 95%** of total assets[25](index=25&type=chunk) [(2) Basis of Presentation and Significant Accounting Policies](index=14&type=section&id=(2)%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) This note outlines the accounting principles, estimates, and key policies used in preparing the financial statements - The financial statements are prepared in accordance with GAAP, requiring management estimates and judgments. Key policies include valuation of long-lived assets, fair value measurements (classified into Level 1, 2, and 3 hierarchy), and share-based compensation accounting[32](index=32&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk)[43](index=43&type=chunk) - Derivative liabilities, specifically from warrants, are measured at fair value using the Black-Scholes pricing model and are classified as Level 3 fair value measurements due to significant unobservable inputs[41](index=41&type=chunk) [(3) Restricted Cash](index=16&type=section&id=(3)%20Restricted%20Cash) This note details the nature and amount of cash held under restrictions, primarily for legal proceedings Restricted Cash Balances | Date | Amount | | :----------------- | :---------- | | September 30, 2024 | $478,066 | | December 31, 2023 | $472,983 | - Restricted cash is held at the Industrial and Commercial Bank of China for Tengsheng Paper, due to a legal proceeding against Tengsheng Paper and its executive director[46](index=46&type=chunk) [(4) Inventories](index=16&type=section&id=(4)%20Inventories) This note provides a breakdown of inventory components and changes over the reporting periods Inventories Breakdown | Category | September 30, 2024 | December 31, 2023 | | :----------------- | :----------------- | :---------------- | | Raw Materials | $4,110,074 | $372,968 | | Semi-finished Goods| $303,433 | $300,207 | | Finished Goods | $1,319,032 | $2,885,019 | | Total Inventory, net | $5,732,539 | $3,555,235 | - Total net inventory increased by **61.24%** from December 31, 2023, primarily driven by a significant increase in raw materials, especially recycled paper board, which rose from **$198,744** to **$3,873,233**[47](index=47&type=chunk) [(5) Prepayments and other current assets](index=16&type=section&id=(5)%20Prepayments%20and%20other%20current%20assets) This note details the composition and changes in the company's prepayments and other short-term assets Prepayments and Other Current Assets | Category | September 30, 2024 | December 31, 2023 | | :--------------------------- | :----------------- | :---------------- | | Prepaid land lease | $7,135 | $- | | Prepayment for purchase of materials | $5,737,653 | $5,446,823 | | Value-added tax recoverable | $13,494,151 | $13,409,459 | | Total | $19,384,595 | $18,981,290 | - Prepayments and other current assets saw a slight increase, mainly due to prepayments for materials and value-added tax recoverable[48](index=48&type=chunk) [(6) Property, plant and equipment, net](index=16&type=section&id=(6)%20Property,%20plant%20and%20equipment,%20net) This note presents the company's fixed assets, including land use rights, buildings, and machinery, net of depreciation Property, Plant and Equipment, Net | Category | September 30, 2024 | December 31, 2023 | | :-------------------------------------- | :----------------- | :---------------- | | Land use rights | $82,380,439 | $81,504,608 | | Building and improvements | $68,300,564 | $67,939,059 | | Machinery and equipment | $160,198,007 | $158,629,858 | | Less: accumulated depreciation and amortization | $(156,475,574) | $(144,447,712) | | Property, Plant and Equipment, net | $154,755,386 | $163,974,022 | - Net property, plant, and equipment decreased by approximately **$9.2 million**, primarily due to increased accumulated depreciation and amortization. Certain land use rights and equipment are pledged as collateral for long-term loans[49](index=49&type=chunk)[50](index=50&type=chunk)[52](index=52&type=chunk) Depreciation and Amortization | Period | 2024 | 2023 | | :------------------------------------ | :------------ | :------------ | | Three months ended September 30 | $3,483,298 | $3,423,231 | | Nine months ended September 30 | $10,346,181 | $10,573,288 | [(7) Leases](index=18&type=section&id=(7)%20Leases) This note describes the company's lease arrangements, both as a lessor and lessee, and associated liabilities - The company acts as both an operating lease lessor (leasing plant to a tenant) and lessee (leasing plant and production equipment). Lease liabilities are determined using the incremental borrowing rate[54](index=54&type=chunk)[56](index=56&type=chunk) Lease Information (Nine Months Ended September 30, 2024) | Metric | Amount ($) | | :-------------------------------------- | :--------- | | Operating lease cost | $74,717 | | Total operating lease payments | $713,531 | | Present value of lease liabilities | $622,942 | | Weighted average remaining lease term (years) | **3.9** | | Weighted average discount rate | **7.56%** | [(8) Loans Payable](index=20&type=section&id=(8)%20Loans%20Payable) This note details the company's short-term and long-term bank loans, including terms and interest expenses Short-term Bank Loans | Bank/Loan Type | September 30, 2024 | December 31, 2023 | | :------------- | :----------------- | :---------------- | | Bank of Cangzhou | $428,119 | $- | | ICBC Loans | $428,119 | $423,567 | | Total | $856,238 | $423,567 | - Short-term bank loans increased by **over 100%** to **$856,238**, with new loans from Bank of Cangzhou and ICBC in 2024. Several ICBC loans from 2023 were repaid in June 2024[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk)[69](index=69&type=chunk) Long-term Loans | Lender/Loan Type | September 30, 2024 | December 31, 2023 | | :--------------- | :----------------- | :---------------- | | Rural Credit Union | $8,931,986 | $11,378,429 | | Less: Current portion | $(4,365,385) | $(6,874,497) | | Long-term loans | $4,566,601 | $4,503,932 | - Total long-term loans decreased by approximately **$2.4 million**. Several loans from the Rural Credit Union of Xushui District were renewed or repaid, with varying interest rates (mostly **7% per annum**)[71](index=71&type=chunk)[73](index=73&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk) Total Interest Expenses | Period | 2024 | 2023 | | :------------------------------------ | :------------ | :------------ | | Three months ended September 30 | $171,430 | $247,628 | | Nine months ended September 30 | $593,271 | $760,807 | [(9) Related Party Transactions](index=22&type=section&id=(9)%20Related%20Party%20Transactions) This note discloses financial transactions and balances with related parties, including the CEO - All loans from CEO Mr. Zhenyong Liu to Dongfang Paper were fully repaid as of September 30, 2024. Accrued interest owing to Mr. Liu was **$604,748** as of September 30, 2024[84](index=84&type=chunk)[216](index=216&type=chunk) - Loans from the Company to Mr. Zhenyong Liu, totaling **$7,059,455**, were fully repaid by December 2023[85](index=85&type=chunk)[217](index=217&type=chunk) Accrued Interest to Related Party (Mr. Zhenyong Liu) | Date | Amount | | :----------------- | :---------- | | September 30, 2024 | $604,748 | | December 31, 2023 | $598,319 | [(10) Other payables and accrued liabilities](index=23&type=section&id=(10)%20Other%20payables%20and%20accrued%20liabilities) This note provides a breakdown of various accrued expenses and other short-term liabilities Other Payables and Accrued Liabilities | Category | September 30, 2024 | December 31, 2023 | | :-------------------------------------- | :----------------- | :---------------- | | Accrued electricity | $117,171 | $3,054 | | Value-added tax payable | $226,354 | $696 | | Accrued interest to a related party | $604,748 | $598,319 | | Payable for purchase of property, plant and equipment | $10,988,359 | $11,175,858 | | Accrued bank loan interest | $1,295,773 | $1,070,708 | | Others (incl. legal proceeding liability) | $552,528 | $16,842 | | Totals | $13,800,118 | $12,912,517 | - Total other payables and accrued liabilities increased by approximately **$0.9 million**, primarily due to higher accrued electricity, VAT payable, accrued bank loan interest, and a **$473,785** accrued liability for a legal proceeding[86](index=86&type=chunk) [(11) Derivative Liabilities](index=24&type=section&id=(11)%20Derivative%20Liabilities) This note explains the company's derivative financial instruments, their valuation, and changes in fair value - Derivative liabilities, related to warrants, are classified as Level 3 fair value measurements and valued using the Black-Scholes pricing model[87](index=87&type=chunk)[89](index=89&type=chunk) Derivative Liabilities Fair Value | Date | Amount ($) | | :----------------- | :--------- | | Balance at Dec 31, 2023 | $54 | | Change in fair value | $(51) | | Balance at Sep 30, 2024 | $3 | - The fair value of derivative liabilities significantly decreased from **$54** to **$3**, resulting in a gain of **$2** for the three months ended September 30, 2024 (compared to **$660,429** in 2023)[91](index=91&type=chunk)[169](index=169&type=chunk) [(12) Common Stock](index=25&type=section&id=(12)%20Common%20Stock) This note details the company's common stock, including outstanding shares and historical stock offerings - As of November 14, 2024, there were **10,065,920 shares** of common stock outstanding. A **1-for-10 reverse stock split** was effective on July 7, 2022[4](index=4&type=chunk)[15](index=15&type=chunk) - The company issued common stock and warrants in public offerings in January and March 2021, raising approximately **$14.4 million** and **$21.9 million**, respectively[93](index=93&type=chunk)[94](index=94&type=chunk) [(13) Warrants](index=25&type=section&id=(13)%20Warrants) This note provides information on outstanding warrants, their exercise prices, and remaining contractual life Outstanding Warrants as of September 30, 2024 | Metric | Value | | :-------------------------- | :--------- | | Number of Shares | 3,016,635 | | Weighted Average Exercise Price | $6.6907 | | Weighted Average Remaining Contractual Life (years) | **1.33** | - The company has **3,016,635 warrants** outstanding and exercisable, with an aggregate intrinsic value of **nil** as of September 30, 2024[100](index=100&type=chunk)[101](index=101&type=chunk) [(14) Earnings Per Share](index=26&type=section&id=(14)%20Earnings%20Per%20Share) This note presents the basic and diluted earnings (loss) per share for the reporting periods Basic and Diluted Loss Per Share | Period | 2024 ($) | 2023 ($) | | :------------------------------------ | :------- | :------- | | Three months ended September 30 | (0.20) | (0.20) | | Nine months ended September 30 | (0.58) | (0.59) | - Basic and diluted loss per share remained stable at **$(0.20)** for the three months ended September 30, 2024, and slightly improved to **$(0.58)** for the nine months ended September 30, 2024, compared to **$(0.59)** in the prior year[102](index=102&type=chunk)[104](index=104&type=chunk) [(15) Income Taxes](index=27&type=section&id=(15)%20Income%20Taxes) This note details the company's income tax provisions, effective tax rates, and deferred tax assets and liabilities - PRC operating companies (Dongfang Paper and Baoding Shengde) are subject to a **25%** Enterprise Income Tax. No U.S. federal income tax provision is made as earnings are considered permanently invested in the PRC[105](index=105&type=chunk)[106](index=106&type=chunk) Total Income Tax Expenses (Benefits) | Period | 2024 ($) | 2023 ($) | | :------------------------------------ | :------- | :------- | | Three months ended September 30 | 345,710 | (3,236) | | Nine months ended September 30 | 799,273 | 348,024 | Effective Income Tax Rate | Period | 2024 | 2023 | | :------------------------------------ | :------- | :------- | | Three months ended September 30 | (21.2)% | 0.2% | | Nine months ended September 30 | (16.0)% | (6.2)% | - The company maintains a **100%** valuation allowance on U.S. deferred tax assets due to limited operating history and continuing losses for U.S. income tax purposes[109](index=109&type=chunk) [(16) Stock Incentive Plans](index=30&type=section&id=(16)%20Stock%20Incentive%20Plans) This note describes the company's equity incentive plans for directors, officers, employees, and consultants - The 2023 Omnibus Equity Incentive Plan was adopted on October 31, 2023, reserving **1,500,000 shares** of common stock for issuance to directors, officers, employees, and consultants[116](index=116&type=chunk) [(17) Commitments and Contingencies](index=30&type=section&id=(17)%20Commitments%20and%20Contingencies) This note outlines the company's contractual obligations, capital expenditure commitments, and guarantees - The company has an annual land lease payment of approximately **$16,902** for **32.95 acres** in Xushui District, expiring in 2031[118](index=118&type=chunk) Capital Expenditure Commitments | Date | Amount | | :----------------- | :---------- | | September 30, 2024 | $3,524,845 | | December 31, 2023 | $3,499,936 | - The company has capital commitments of **$3.5 million** for a new tissue paper production line (PM10) and building improvements, expected to be paid within **1-3 years**[122](index=122&type=chunk) - The company guarantees a **$4,423,895** long-term loan for Baoding Huanrun Trading Co., a major raw material supplier, maturing in 2028[123](index=123&type=chunk) [(18) Segment Reporting](index=31&type=section&id=(18)%20Segment%20Reporting) This note provides financial information by operating segment, including revenues and net income (loss) - The company operates through three segments: Dongfang Paper and Tengsheng Paper (offset printing, corrugating medium, tissue paper) and Baoding Shengde (face masks, digital photo paper). All sales are to customers in the PRC[124](index=124&type=chunk)[125](index=125&type=chunk) Segment Revenues (Three Months Ended September 30, 2024) | Segment | Revenues ($) | | :-------------- | :----------- | | Dongfang Paper | $25,044,376 | | Tengsheng Paper | $37,124 | | Baoding Shengde | $- | Segment Net Income (Loss) (Nine Months Ended September 30, 2024) | Segment | Net Income (Loss) ($) | | :-------------- | :-------------------- | | Dongfang Paper | $1,910,971 | | Tengsheng Paper | $(6,790,051) | | Baoding Shengde | $(227,256) | - Dongfang Paper is the primary revenue generator and profitable segment, while Tengsheng Paper and Baoding Shengde reported net losses for the nine months ended September 30, 2024[128](index=128&type=chunk) [(19) Concentration and Major Customers and Suppliers](index=34&type=section&id=(19)%20Concentration%20and%20Major%20Customers%20and%20Suppliers) This note discloses concentrations of business with major customers and suppliers - No single customer accounted for **over 10%** of total sales for the three and nine months ended September 30, 2024 and 2023[134](index=134&type=chunk) - Three major suppliers accounted for **74%**, **16%**, and **7%** of total purchases for the nine months ended September 30, 2024[136](index=136&type=chunk) [(20) Concentration of Credit Risk](index=34&type=section&id=(20)%20Concentration%20of%20Credit%20Risk) This note describes the company's exposure to credit risk, particularly regarding cash held in financial institutions - The company's cash is primarily held in PRC financial institutions, with balances exceeding the **RMB500,000 ($71,353)** deposit insurance coverage amounting to **$4,557,735** as of September 30, 2024[137](index=137&type=chunk) [(21) Risks and Uncertainties](index=34&type=section&id=(21)%20Risks%20and%20Uncertainties) This note outlines various operational, financial, and regulatory risks and uncertainties faced by the company - The company faces substantial risks from intense industry competition, financing and liquidity requirements, rapidly changing customer demands, foreign currency exchange rates, and operating under PRC laws and restrictions[138](index=138&type=chunk) [(22) Subsequent Event](index=34&type=section&id=(22)%20Subsequent%20Event) This note reports on significant events occurring after the balance sheet date - No subsequent events were reported[138](index=138&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition for the three and nine months ended September 30, 2024, compared to the prior year, highlighting key drivers of revenue, cost, and profitability changes, as well as liquidity and capital resources [Cautionary Notice Regarding Forward-Looking Statements](index=35&type=section&id=Cautionary%20Notice%20Regarding%20Forward-Looking%20Statements) This section warns that forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially - The report contains forward-looking statements subject to various assumptions, risks, and factors that could cause actual results to differ materially. Readers are cautioned not to place undue reliance on these statements[142](index=142&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including revenue, cost of sales, and profitability, for the reporting periods [Comparison of the Three months ended September 30, 2024 and 2023](index=35&type=section&id=Comparison%20of%20the%20Three%20months%20ended%20September%2030,%202024%20and%202023) This section compares the company's financial results for the three months ended September 30, 2024 and 2023 [Revenue](index=35&type=section&id=Revenue_3M) This section analyzes the drivers of revenue changes, including sales volume and average selling prices Revenue (Three Months Ended September 30) | Metric | 2024 ($) | 2023 ($) | Change ($) | Change (%) | | :-------------------------------------- | :----------- | :----------- | :----------- | :--------- | | Total Revenues | 25,081,500 | 15,771,560 | 9,309,940 | 59.03% | | CMP, Offset Printing, Tissue Paper Revenue | 25,044,375 | 15,756,399 | 9,287,976 | 58.95% | | CMP Quantity Sold (tonnes) | 74,884 | 44,396 | 30,488 | 68.67% | | Regular CMP ASP ($/tonne) | 337 | 350 | (13) | (3.71)% | | Light-Weight CMP ASP ($/tonne) | 324 | 340 | (16) | (4.71)% | - Total revenue increased by **59.03%** primarily due to a **68.67%** increase in Corrugating Medium Paper (CMP) sales volume, despite a decrease in average selling prices (ASPs) for both regular and light-weight CMP. Production of offset printing paper and tissue paper products was suspended[143](index=143&type=chunk)[145](index=145&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk) [Cost of Sales](index=39&type=section&id=Cost%20of%20Sales_3M) This section examines the factors influencing the cost of goods sold, such as material costs and production volume Cost of Sales (Three Months Ended September 30) | Metric | 2024 ($) | 2023 ($) | Change ($) | Change (%) | | :-------------------------------------- | :----------- | :----------- | :----------- | :--------- | | Total Cost of Sales | 23,163,835 | 15,907,217 | 7,256,618 | 45.62% | | CMP Cost of Sales | 23,163,835 | 14,844,637 | 8,319,198 | 56.04% | | CMP Average Cost per Tonne ($) | 309 | 334 | (25) | (7.49)% | | Recycled Paper Board Unit Cost ($/tonne)| 171 | 176 | (5) | (2.84)% | - Cost of sales increased by **45.62%** due to higher CMP sales volume, but the average unit cost of sales for CMP decreased by **7.49%**, mainly attributable to lower average unit purchase costs of recycled paper board[156](index=156&type=chunk)[157](index=157&type=chunk)[159](index=159&type=chunk) [Gross Profit (Loss)](index=40&type=section&id=Gross%20Profit%20(Loss)_3M) This section discusses changes in gross profit and gross profit margin, highlighting profitability trends Gross Profit (Loss) (Three Months Ended September 30) | Metric | 2024 ($) | 2023 ($) | Change ($) | Change (%) | | :-------------------------------------- | :----------- | :----------- | :----------- | :--------- | | Gross Profit (Loss) | 1,917,381 | (153,223) | 2,070,604 | - | | Gross Profit Margin | 7.64% | (0.97)% | 8.61 pp | - | | Regular CMP Gross Profit Margin | 7.54% | 7.01% | 0.53 pp | - | | Light-Weight CMP Gross Profit Margin | 7.33% | (7.47)% | 14.80 pp | - | - The company shifted from a gross loss to a gross profit, with the overall gross profit margin improving significantly from **-0.97%** to **7.64%**. This improvement was driven by decreased recycled paper board costs, partially offset by lower ASPs[162](index=162&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) [Selling, General and Administrative Expenses](index=41&type=section&id=Selling,%20General%20and%20Administrative%20Expenses_3M) This section details the components and changes in the company's operating expenses SG&A Expenses (Three Months Ended September 30) | Metric | 2024 ($) | 2023 ($) | Change ($) | Change (%) | | :----- | :---------- | :---------- | :---------- | :--------- | | SG&A | 3,381,502 | 2,334,746 | 1,046,756 | 44.83% | - Selling, general and administrative expenses increased by **44.83%**, mainly due to depreciation of idle fixed assets during production suspension and an accrued liability for a legal proceeding[166](index=166&type=chunk) [Loss from Operations](index=41&type=section&id=Loss%20from%20Operations_3M) This section analyzes the company's operating performance before non-operating income and expenses Operating Loss (Three Months Ended September 30) | Metric | 2024 ($) | 2023 ($) | Change ($) | Change (%) | | :-------------- | :---------- | :---------- | :---------- | :--------- | | Operating Loss | (1,464,121) | (2,484,513) | 1,020,392 | (41.07)% | - Operating loss decreased by **41.07%**, primarily due to the increase in gross profit, partially offset by higher selling, general and administrative expenses[167](index=167&type=chunk) [Other Income and Expenses](index=41&type=section&id=Other%20Income%20and%20Expenses_3M) This section covers non-operating income and expenses, including interest and derivative gains/losses Other Income (Expense) (Three Months Ended September 30) | Metric | 2024 ($) | 2023 ($) | | :----------------------- | :------- | :------- | | Interest expense | (171,430)| (247,818)| | Gain on derivative liability | 2 | 660,429 | - Interest expense decreased by **$76,388**. The gain on derivative liability significantly decreased from **$660,429** in 2023 to **$2** in 2024[168](index=168&type=chunk)[169](index=169&type=chunk) [Net Loss](index=43&type=section&id=Net%20Loss_3M) This section summarizes the company's overall profitability or loss for the reporting period Net Loss (Three Months Ended September 30) | Metric | 2024 ($) | 2023 ($) | Change ($) | Change (%) | | :------- | :---------- | :---------- | :--------- | :--------- | | Net Loss | (1,973,946) | (1,975,368) | 1,422 | (0.07)% | - Net loss remained relatively stable, decreasing slightly by **0.07%** compared to the prior year[170](index=170&type=chunk) [Comparison of the Nine months ended September 30, 2024 and 2023](index=43&type=section&id=Comparison%20of%20the%20Nine%20months%20ended%20September%2030,%202024%20and%202023) This section compares the company's financial results for the nine months ended September 30, 2024 and 2023 [Revenue](index=43&type=section&id=Revenue_9M) This section analyzes the drivers of revenue changes, including sales volume and average selling prices Revenue (Nine Months Ended September 30) | Metric | 2024 ($) | 2023 ($) | Change ($) | Change (%) | | :-------------------------------------- | :----------- | :----------- | :------------ | :--------- | | Total Revenues | 58,195,129 | 65,582,351 | (7,387,222) | (11.26)% | | CMP, Offset Printing, Tissue Paper Revenue | 58,083,990 | 65,483,282 | (7,399,292) | (11.30)% | | Total CMP Quantity Sold (tonnes) | 168,919 | 167,018 | 1,901 | 1.14% | | Regular CMP ASP ($/tonne) | 346 | 370 | (24) | (6.49)% | | Light-Weight CMP ASP ($/tonne) | 333 | 356 | (23) | (6.46)% | - Total revenue decreased by **11.26%**, primarily due to a decrease in ASPs for CMP and the suspension of offset printing paper and tissue paper products production, despite a slight increase in total CMP quantity sold[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk) [Cost of Sales](index=44&type=section&id=Cost%20of%20Sales_9M) This section examines the factors influencing the cost of goods sold, such as material costs and production volume Cost of Sales (Nine Months Ended September 30) | Metric | 2024 ($) | 2023 ($) | Change ($) | Change (%) | | :-------------------------------------- | :----------- | :----------- | :------------ | :--------- | | Total Cost of Sales | 52,612,788 | 64,717,786 | (12,104,998) | (18.70)% | | CMP Cost of Sales | 52,612,788 | 58,592,582 | (5,979,794) | (10.21)% | | CMP Average Cost per Tonne ($) | 311 | 351 | (40) | (11.40)% | - Total cost of sales decreased by **18.70%**, mainly due to a significant decrease in the average unit material costs of CMP (down **11.40%**), partially offset by increased regular CMP sales volume[175](index=175&type=chunk)[176](index=176&type=chunk) [Gross Profit](index=44&type=section&id=Gross%20Profit_9M) This section discusses changes in gross profit and gross profit margin, highlighting profitability trends Gross Profit (Nine Months Ended September 30) | Metric | 2024 ($) | 2023 ($) | Change ($) | Change (%) | | :-------------------------------------- | :----------- | :----------- | :----------- | :--------- | | Gross Profit | 5,581,794 | 749,636 | 4,832,158 | 644.60% | | Gross Profit Margin | 9.59% | 1.14% | 8.45 pp | - | | Regular CMP Gross Profit Margin | 9.44% | 5.26% | 4.18 pp | - | | Light-Weight CMP Gross Profit Margin | 9.33% | 1.68% | 7.65 pp | - | - Gross profit increased substantially by **644.60%**, with the overall gross profit margin improving from **1.14%** to **9.59%**. This was primarily driven by the decrease in unit material costs of CMP, despite lower ASPs[178](index=178&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk) [Selling, General and Administrative Expenses](index=45&type=section&id=Selling,%20General%20and%20Administrative%20Expenses_9M) This section details the components and changes in the company's operating expenses SG&A Expenses (Nine Months Ended September 30) | Metric | 2024 ($) | 2023 ($) | Change ($) | Change (%) | | :----- | :---------- | :---------- | :---------- | :--------- | | SG&A | 9,999,833 | 6,153,513 | 3,846,320 | 62.51% | - Selling, general and administrative expenses increased by **62.51%**, mainly due to depreciation of idle fixed assets during production suspension and an accrued liability for a legal proceeding[182](index=182&type=chunk) [Loss from Operations](index=45&type=section&id=Loss%20from%20Operations_9M) This section analyzes the company's operating performance before non-operating income and expenses Operating Loss (Nine Months Ended September 30) | Metric | 2024 ($) | 2023 ($) | Change ($) | Change (%) | | :-------------- | :---------- | :---------- | :---------- | :--------- | | Operating Loss | (4,418,039) | (5,775,557) | 1,357,518 | (23.50)% | - Operating loss decreased by **23.50%**, driven by the significant increase in gross profit, partially offset by higher selling, general and administrative expenses[183](index=183&type=chunk) [Other Income and Expenses](index=45&type=section&id=Other%20Income%20and%20Expenses_9M) This section covers non-operating income and expenses, including interest and derivative gains/losses Other Income (Expense) (Nine Months Ended September 30) | Metric | 2024 ($) | 2023 ($) | | :----------------------- | :------- | :------- | | Interest expense | (593,271)| (767,668)| | Gain on derivative liability | 51 | 646,020 | - Interest expense decreased by **$174,397**. The gain on derivative liability significantly decreased from **$646,020** in 2023 to **$51** in 2024[184](index=184&type=chunk)[185](index=185&type=chunk) [Net Loss](index=45&type=section&id=Net%20Loss_9M) This section summarizes the company's overall profitability or loss for the reporting period Net Loss (Nine Months Ended September 30) | Metric | 2024 ($) | 2023 ($) | Change ($) | Change (%) | | :------- | :---------- | :---------- | :--------- | :--------- | | Net Loss | (5,798,229) | (5,962,026) | 163,797 | (2.75)% | - Net loss decreased by **2.75%**, primarily due to improved operating results[186](index=186&type=chunk) [Accounts Receivable](index=45&type=section&id=Accounts%20Receivable) This section analyzes changes in the company's accounts receivable balance and its implications Accounts Receivable, Net | Date | Amount | Change ($) | Change (%) | | :----------------- | :---------- | :---------- | :--------- | | September 30, 2024 | $1,727,370 | 1,151,844 | 200.14% | | December 31, 2023 | $575,526 | - | - | - Net accounts receivable increased significantly by **200.14%** to **$1,727,370** as of September 30, 2024[186](index=186&type=chunk) [Inventories](index=45&type=section&id=Inventories_MD&A) This section discusses inventory levels and management strategies, particularly for raw materials Inventory Changes | Category | September 30, 2024 | December 31, 2023 | Change ($) | Change (%) | | :----------------- | :----------------- | :---------------- | :---------- | :--------- | | Total Inventory, net | $5,732,539 | $3,555,235 | 2,177,304 | 61.2% | | Recycled paper board | $3,873,233 | $198,744 | 3,674,489 | 1848.9% | - Total net inventory increased by **61.24%**, primarily driven by an **1848.9%** increase in recycled paper board inventory, reflecting a strategy to manage stock turnover and price volatility[187](index=187&type=chunk)[188](index=188&type=chunk) [Renewal of operating lease](index=46&type=section&id=Renewal%20of%20operating%20lease_MD&A) This section details the renewal of a significant operating lease agreement for industrial buildings - The lease agreement for industrial buildings, originally sold and leased back, was renewed in August 2022 for a term of **six years** with an annual rental payment of approximately **$140,847**[189](index=189&type=chunk) [Capital Expenditure Commitment as of September 30, 2024](index=46&type=section&id=Capital%20Expenditure%20Commitment%20as%20of%20September%2030,%202024_MD&A) This section outlines the company's future capital spending plans and their financing - As of September 30, 2024, the company had approximately **$3.5 million** in capital expenditure commitments, mainly for the purchase of paper machinery for the new PM10 tissue paper production line, to be financed by bank loans and cash flows[190](index=190&type=chunk)[191](index=191&type=chunk) [Cash and Cash Equivalents](index=46&type=section&id=Cash%20and%20Cash%20Equivalents_MD&A) This section analyzes the company's cash position and the factors influencing its changes Cash, Cash Equivalents and Restricted Cash | Date | Amount | Change ($) | Change (%) | | :----------------- | :---------- | :---------- | :--------- | | September 30, 2024 | $4,892,914 | 500,993 | 11.41% | | December 31, 2023 | $4,391,921 | - | - | - Cash, cash equivalents, and restricted cash increased by **$500,993**. This was influenced by a decrease in net cash from operating activities, a significant reduction in cash used in investing activities, and a shift to net cash used in financing activities[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk) [Short-term bank loans](index=48&type=section&id=Short-term%20bank%20loans_MD&A) This section details the company's short-term borrowing activities and associated interest rates Short-term Bank Loans | Bank/Loan Type | September 30, 2024 | December 31, 2023 | | :------------- | :----------------- | :---------------- | | Bank of Cangzhou | $428,119 | $- | | ICBC Loans | $428,119 | $423,567 | | Total | $856,238 | $423,567 | - Short-term bank loans increased to **$856,238**, with new loans from Bank of Cangzhou and ICBC in 2024. The average short-term borrowing rate for the nine months ended September 30, 2024, was approximately **4.47%**[195](index=195&type=chunk)[199](index=199&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk) [Long-term loans](index=49&type=section&id=Long-term%20loans_MD&A) This section discusses the company's long-term debt obligations, renewals, and repayment schedules Long-term Loans | Lender/Loan Type | September 30, 2024 | December 31, 2023 | | :--------------- | :----------------- | :---------------- | | Rural Credit Union | $8,931,986 | $11,378,429 | | Less: Current portion | $(4,365,385) | $(6,874,497) | | Long-term loans | $4,566,601 | $4,503,932 | - Total long-term loans decreased by approximately **$2.4 million**. Several loans from the Rural Credit Union of Xushui District were renewed or repaid, with interest rates around **7% per annum**[204](index=204&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk) [Shareholder Loans](index=50&type=section&id=Shareholder%20Loans_MD&A) This section provides an update on loans involving the company's CEO and their repayment status - All loans from CEO Mr. Zhenyong Liu to Dongfang Paper were fully repaid as of September 30, 2024. Accrued interest owing to Mr. Liu was **$604,748**[216](index=216&type=chunk) - Loans from the Company to Mr. Zhenyong Liu, totaling **$7,059,455**, were fully repaid by December 2023[217](index=217&type=chunk) [Critical Accounting Policies and Estimates](index=51&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights the key accounting policies and significant management judgments impacting financial reporting - Key accounting policies include revenue recognition (upon delivery and fixed price), valuation of long-lived assets (impairment review based on cash flows), and foreign currency translation (RMB functional currency, translated to USD at period-end rates)[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk) [Off-Balance Sheet Arrangements](index=51&type=section&id=Off-Balance%20Sheet%20Arrangements) This section discloses the company's off-balance sheet obligations, such as loan guarantees - The company guarantees a **$4,423,895** long-term bank loan for Baoding Huanrun Trading Co., a major raw material supplier, maturing in 2028[223](index=223&type=chunk) [Recent Accounting Pronouncements](index=52&type=section&id=Recent%20Accounting%20Pronouncements) This section discusses the potential impact of newly issued accounting standards on the company's financial statements - The company is evaluating the impact of ASU 2023-09 (Improvements to Income Tax Disclosures) and ASU 2021-08 (Accounting for Contract Assets and Liabilities from Contracts with Customers), with no material impact expected from ASU 2021-08[224](index=224&type=chunk)[225](index=225&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section assesses the company's exposure to market risks, including foreign exchange and inflation [Foreign Exchange Risk](index=52&type=section&id=Foreign%20Exchange%20Risk) This section assesses the company's exposure to currency fluctuations and their potential financial impact - The company is exposed to foreign exchange risk due to RMB-denominated revenues and costs, and US dollar reporting. No hedging transactions are currently in place[226](index=226&type=chunk) [Inflation](index=52&type=section&id=Inflation) This section discusses the potential effects of inflation on the company's operating costs and profitability - Inflation, particularly in product and overhead costs, could adversely affect operating results if selling prices do not increase proportionally. The company does not believe inflation in China has had a material impact to date[227](index=227&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports on the effectiveness of the company's disclosure controls and internal control over financial reporting [Effectiveness of Disclosure Controls and Procedures](index=52&type=section&id=Effectiveness%20of%20Disclosure%20Controls%20and%20Procedures) This section reports on management's assessment of the effectiveness of the company's disclosure controls - Management, including the principal executive and financial officers, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2024[228](index=228&type=chunk) [Changes in Internal Control over Financial Reporting](index=52&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section addresses any material changes in the company's internal control over financial reporting - There were no material changes to internal control over financial reporting during the quarter ended September 30, 2024[229](index=229&type=chunk) PART II - OTHER INFORMATION This section covers non-financial information, including legal proceedings, risk factors, equity security sales, defaults, mine safety disclosures, other information, and exhibits [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) This section details ongoing legal disputes and their potential financial implications for the company - The company is a defendant in a breach of contract lawsuit by FT Global Capital, Inc., where a default judgment on liability was granted against the company, with damages to be determined[231](index=231&type=chunk) - Tengsheng Paper, a VIE, was ordered by a PRC court to repay a **RMB3.32 million** loan, for which it is jointly liable, and its bank deposits were frozen[232](index=232&type=chunk) [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) This section identifies and describes the significant risks and uncertainties that could affect the company's business and financial results - As a smaller reporting company, the registrant is not required to provide information under this item[234](index=234&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=53&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on any sales of equity securities not registered under the Securities Act and the application of proceeds - No unregistered sales of equity securities or use of proceeds were reported[234](index=234&type=chunk) [Item 3. Defaults Upon Senior Securities](index=53&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section discloses any defaults on the company's senior debt obligations - No defaults upon senior securities were reported[234](index=234&type=chunk) [Item 4. Mine Safety Disclosures](index=53&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section provides information related to mine safety, if applicable to the company's operations - This item is not applicable to the company[234](index=234&type=chunk) [Item 5. Other Information](index=54&type=section&id=Item%205.%20Other%20Information) This section includes any other material information not covered elsewhere in the report - No directors or officers reported the adoption or termination of Rule 10b5-1 trading arrangements during the quarter[236](index=236&type=chunk) [Item 6. Exhibits](index=54&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the report, including certifications and financial data - The report includes various certifications (e.g., Rule 13a-14, 18 U.S.C. Section 1350) and Inline XBRL documents as exhibits[237](index=237&type=chunk) [SIGNATURES](index=55&type=section&id=SIGNATURES) This section contains the official signatures of the company's principal executive and financial officers, certifying the report - The report is signed by Zhenyong Liu, Chief Executive Officer, and Jing Hao, Chief Financial Officer, on November 15, 2024[240](index=240&type=chunk)