IT Tech Packaging, Inc. (NYSE:ITP) Q1 2021 Results Earnings Conference Call May 12, 2021 8:00 AM ET Company Participants Zhenyong Liu - Chairman & Chief Executive Officer Jing Hao - Chief Financial Officer Conference Call Participants Operator Hello ladies and gentlemen and welcome to participate in IT Tech Packaging's First Quarter 2021 Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. Joining us to ...

IT Tech Packaging, Inc. (NYSE:ITP) Q4 2020 Earnings Conference Call March 24, 2021 8:00 AM ET Company Participants Janice Wang - EverGreen, Investor Relations Zhenyong Liu - Chairman & Chief Executive Officer Jing Hao - Chief Financial Officer Conference Call Participants Operator Hello ladies and gentlemen and welcome to participate in IT Tech Packaging's Fourth Quarter and Fiscal Year 2020 Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded and that al ...

PART I [Business](index=5&type=section&id=Item%201.%20Business) The company produces paper products and face masks in China through a VIE structure, funded by recent public offerings - The company operates through a complex **Variable Interest Entity (VIE) structure**, where it controls its primary operating entity, Dongfang Paper, through a series of contractual agreements rather than direct equity ownership[16](index=16&type=chunk)[93](index=93&type=chunk)[281](index=281&type=chunk) - In response to the COVID-19 pandemic, the company launched a production line for **non-medical single-use face masks** in April 2020[44](index=44&type=chunk) 2020 Product Revenue and Production Breakdown | Product Category | % of Total Revenue | % of Total Production Quantity | | :--- | :--- | :--- | | Corrugating Medium Paper | 78.42% | 86.61% | | Offset Printing Paper | 12.15% | 8.96% | | Tissue Paper Products | 8.34% | 4.43% | 2021 Public Offerings | Offering Date | Gross Proceeds | Price per Share/Warrant | Use of Proceeds | | :--- | :--- | :--- | :--- | | March 2021 | ~$21.9 million | $0.75 | General corporate and working capital | | January 2021 | ~$14.4 million | $0.55 | General corporate and working capital | - The company is developing a **biomass cogeneration project**, having selected a supplier for a 75-tonne-per-hour biomass boiler in February 2021, with plans to participate in bidding for urban central heating projects[27](index=27&type=chunk) [Risk Factors](index=25&type=section&id=Item%201A.%20RISK%20FACTORS) The company faces significant operational, regulatory, and structural risks related to its VIE structure and operations in China - The COVID-19 outbreak caused a temporary closure of Corrugating Medium Paper (CMP) production in early 2020, leading to a **49.89% decrease in CMP revenue** in the first quarter of 2020[90](index=90&type=chunk) - The company relies on contractual arrangements with its **VIE, Dongfang Paper**, for nearly all revenue; if the PRC government deems these agreements non-compliant, the business could face fines, license revocation, or be forced to restructure[93](index=93&type=chunk)[94](index=94&type=chunk)[96](index=96&type=chunk) - The Chairman and CEO, Zhenyong Liu, owns **93.39% of the equity in the operating entity Dongfang Paper**, creating potential conflicts of interest with his duties to the Company[98](index=98&type=chunk) - The **PRC's legal system is described as vague and uncertain**, which poses risks regarding the interpretation and enforcement of laws governing business operations and contractual arrangements[136](index=136&type=chunk) - The newly enacted **Foreign Investment Law in China creates uncertainty** as to whether the company's VIE structure will be classified as foreign investment, which could lead to restructuring requirements[159](index=159&type=chunk)[160](index=160&type=chunk) [Unresolved Staff Comments](index=43&type=section&id=Item%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports no unresolved staff comments - There are no unresolved staff comments[173](index=173&type=chunk) [Properties](index=43&type=section&id=Item%202.%20PROPERTIES) The company's production facilities are located in Hebei Province on leased and soon-to-be-acquired land - The company's main production base, Xushui Paper Mill, is on approximately **33 acres of land leased from the local government** under a 30-year lease expiring in 2031[174](index=174&type=chunk) - Dongfang Paper is acquiring Hebei Tengsheng Paper Co, Ltd for approximately **$46 million (RMB 320 million)**, which owns the land for the second production base in Xingtai[175](index=175&type=chunk) - The office and industrial buildings at the headquarters are **leased from Hebei Fangsheng, a related party**, under a lease extended to August 2022[176](index=176&type=chunk) [Legal Proceedings](index=43&type=section&id=Item%203.%20LEGAL%20PROCEEDINGS) The company reports no legal proceedings - There are no legal proceedings[177](index=177&type=chunk) [Mine Safety Disclosures](index=43&type=section&id=Item%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Not Applicable[177](index=177&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=44&type=section&id=Item%205.%20MARKET%20FOR%20REGISTRANT'S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common stock trades on the NYSE AMERICAN, with no dividends expected and all incentive plan shares issued - The company's common stock is traded on the **NYSE AMERICAN exchange under the symbol 'ITP'**[178](index=178&type=chunk) - The company **does not expect to pay dividends** in the near future, with the last dividend paid in December 2013[178](index=178&type=chunk) - The company has a 2015 Omnibus Equity Incentive Plan (1.5 million shares) and a 2019 Incentive Stock Plan (2.0 million shares); as of December 31, 2020, **all shares authorized under these plans have been issued**[179](index=179&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk) [Selected Financial Data](index=46&type=section&id=Item%206.%20SELECTED%20FINANCIAL%20DATA) Financials show a revenue decline to $100.9 million and a net loss of $5.6 million in 2020, with increased total assets Selected Financial Data (in millions, except per share data) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | **Revenues** | $100.9 | $117.6 | | **Gross Profit** | $5.7 | $13.7 | | **(Loss) Income from Operations** | $(5.5) | $3.9 | | **Net (Loss) Income** | $(5.6) | $2.2 | | **Basic and Diluted (Losses) Earnings per Share** | $(0.21) | $0.10 | | **Total Assets** | $199.9 | $190.2 | | **Total Stockholders' Equity** | $175.1 | $166.0 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=47&type=section&id=Item%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) FY2020 saw a 14.17% revenue decrease and a net loss of $5.6 million, driven by lower paper sales and a working capital deficit FY2020 vs FY2019 Revenue Performance | Metric | FY2020 | FY2019 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $100.9M | $117.6M | -14.17% | | Gross Profit | $5.7M | $13.7M | -58.32% | | Net (Loss) Income | $(5.6M) | $2.2M | -350.05% | Revenue by Product (FY2020 vs FY2019) | Product | 2020 Revenue | 2019 Revenue | Change (%) | | :--- | :--- | :--- | :--- | | Total CMP | $79.2M | $90.8M | -12.84% | | Offset Printing Paper | $12.3M | $20.4M | -39.98% | | Tissue Paper Products | $8.4M | $6.4M | +32.49% | | Face Masks | $1.1M | $0 | N/A | - The company had a **working capital deficit of approximately $3.4 million** as of December 31, 2020, a significant shift from a working capital of $7.2 million in 2019, mainly attributed to payments for the acquisition of Hebei Tengsheng[220](index=220&type=chunk) - The company entered into a **sale-leaseback financing arrangement** in August 2020 for proceeds of approximately US$2.5 million (RMB 16 million)[223](index=223&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=60&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 does not use hedging instruments - The company is exposed to **foreign exchange risk** as almost all revenues and costs are in RMB, while reporting is in USD; a depreciation of the RMB against the USD would negatively impact reported results[247](index=247&type=chunk) - The company has **not entered into any hedging transactions** to mitigate foreign exchange risk[247](index=247&type=chunk) [Financial Statements and Supplementary Data](index=60&type=section&id=Item%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) Audited financial statements for fiscal years 2020 and 2019 are included in the report beginning on page F-1 - The audited financial statements for fiscal years 2020 and 2019 are included in the report, starting from page F-1[249](index=249&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=105&type=section&id=Item%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) The company reports no changes in or disagreements with its accountants - None reported[435](index=435&type=chunk) [Controls and Procedures](index=105&type=section&id=Item%209A.%20CONTROLS%20AND%20PROCEDURES) This item is not applicable - Not Applicable[435](index=435&type=chunk) [Other Information](index=105&type=section&id=Item%209B.%20OTHER%20INFORMATION) The company reports no other information - None reported[435](index=435&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=106&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The board consists of five members, including three independent directors, and has established audit, compensation, and nominating committees - The Board of Directors has five members, with **three classified as independent**: Marco Ku Hon Wai, Wenbing Christopher Wang, and Lusha Niu[437](index=437&type=chunk)[447](index=447&type=chunk) - The Board has an Audit Committee, a Compensation Committee, and a Nominating Committee, **all comprised solely of independent directors**[447](index=447&type=chunk) - The company has determined that both Marco Ku Hon Wai and Wenbing Christopher Wang qualify as **audit committee financial experts**[448](index=448&type=chunk) - Zhenyong Liu holds the **dual role of Chairman and Chief Executive Officer**, which the Board believes is the most effective leadership structure for the company[454](index=454&type=chunk) [Executive Compensation](index=112&type=section&id=Item%2011.%20Executive%20Compensation) CEO Zhenyong Liu's 2020 total compensation was $196,782, including salary, bonus, and stock awards 2020 Executive Compensation Summary | Name and Position | Salary ($) | Bonus ($) | Stock Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | | Zhenyong Liu, Chairman, CEO | 36,782 | 40,000 | 120,000 | 196,782 | | Jing Hao, CFO | 36,782 | 40,000 | - | 76,782 | | Dahong Zhou, Secretary | 4,452 | - | - | 4,452 | - On April 8, 2020, the company issued **200,000 shares of common stock to CEO Zhenyong Liu** under the 2019 ISP, valued at $120,000[461](index=461&type=chunk) - Independent directors Marco Ku Hon Wai and Wenbing Christopher Wang each received **annual compensation of $20,000**[465](index=465&type=chunk)[466](index=466&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=115&type=section&id=Item%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) CEO Zhenyong Liu beneficially owned 4.7% of common stock, with all executives and directors as a group owning 4.8% Beneficial Ownership of Directors and Executive Officers (as of March 19, 2021) | Name | Beneficial Ownership (Shares) | Percentage of Common Stock | | :--- | :--- | :--- | | Zhenyong Liu (CEO and Director) | 5,364,841 | 4.7% | | All Directors and Executive Officers as a Group (7 persons) | 5,417,161 | 4.8% | [Certain Relationships and Related Transactions, and Director Independence](index=115&type=section&id=Item%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) The company engaged in related party transactions, primarily loans from its CEO and a property leaseback arrangement - CEO Zhenyong Liu has historically provided significant loans to the company for working capital; as of year-end 2020, the principal on these loans was fully paid, but **accrued interest of $649,468 was still owed to him**[473](index=473&type=chunk)[477](index=477&type=chunk) - In 2013, the company sold its headquarters' land use right and buildings to **Hebei Fangsheng, a related party**, and leased back the industrial buildings[477](index=477&type=chunk)[478](index=478&type=chunk) - The Board of Directors reviews and approves all potential **related party transactions** on a case-by-case basis[479](index=479&type=chunk) - The company identifies Marco Ku Hon Wai, Wenbing Christopher Wang, and Lusha Niu as its **three independent directors**[480](index=480&type=chunk) [Principal Accountant Fees and Services](index=118&type=section&id=Item%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) The company paid its auditor, WWC, P.C., $188,208 in audit fees for 2020, with no other service fees incurred Audit Fees Paid to WWC, P.C. | Fiscal Year | Audit Fees | | :--- | :--- | | 2020 | $188,208 | | 2019 | $171,600 | - **No fees were paid for audit-related, tax, or other services** to the principal accountant in fiscal years 2020 and 2019[481](index=481&type=chunk)[482](index=482&type=chunk) PART IV [Exhibits, Financial Statements Schedules](index=119&type=section&id=Item%2015.%20EXHIBITS%2C%20FINANCIAL%20STATEMENTS%20SCHEDULES) This section lists all filed exhibits, including VIE agreements, financing documents, and Sarbanes-Oxley certifications - The exhibits include the full set of contractual agreements establishing the **VIE structure with Dongfang Paper**, such as the Exclusive Technical Service Agreement, Proxy Agreement, and Call Option Agreement[484](index=484&type=chunk)[485](index=485&type=chunk) - Exhibits related to recent financing activities are included, such as the **Securities Purchase Agreements from 2020 and 2021** and the Underwriting Agreement from March 2021[487](index=487&type=chunk) - **Certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act**, signed by the CEO and CFO, are filed as exhibits[487](index=487&type=chunk) [Form 10-K Summary](index=122&type=section&id=Item%2016%20FORM%2010-K%20SUMMARY) This item is not applicable - Not applicable[487](index=487&type=chunk) Financial Statements and Supplementary Data [Report of Independent Registered Public Accounting Firm](index=62&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The auditor issued an unqualified opinion on the financial statements, identifying property valuation as a critical audit matter - The auditor, WWC, P.C., provided an **unqualified opinion** on the company's consolidated financial statements for fiscal years 2020 and 2019[251](index=251&type=chunk) - A **critical audit matter** was noted regarding the substantial amount and valuation of property, plant, and equipment, which required extended audit procedures[255](index=255&type=chunk) [Consolidated Financial Statements](index=64&type=section&id=Consolidated%20Financial%20Statements) The statements show a $5.6 million net loss for 2020 on assets of $199.9 million and liabilities of $24.8 million Consolidated Balance Sheet Highlights (as of Dec 31, in millions) | Account | 2020 | 2019 | | :--- | :--- | :--- | | Total Current Assets | $14.9 | $24.0 | | Property, Plant, and Equipment, net | $145.1 | $151.6 | | **Total Assets** | **$199.9** | **$190.2** | | Total Current Liabilities | $18.3 | $16.8 | | **Total Liabilities** | **$24.8** | **$24.2** | | **Total Stockholders' Equity** | **$175.1** | **$166.0** | Consolidated Statement of Income Highlights (Year Ended Dec 31, in millions) | Account | 2020 | 2019 | | :--- | :--- | :--- | | Revenues | $100.9 | $117.6 | | Gross Profit | $5.7 | $13.7 | | (Loss) Income from Operations | $(5.5) | $3.9 | | **Net (Loss) Income** | **$(5.6)** | **$2.2** | Consolidated Statement of Cash Flows Highlights (Year Ended Dec 31, in millions) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $16.1 | $7.5 | | Net Cash Used in Investing Activities | $(20.5) | $(7.9) | | Net Cash Provided by (Used in) Financing Activities | $2.1 | $(5.8) | [Notes to Consolidated Financial Statements](index=70&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail the VIE structure, debt, capital commitments, related party transactions, and two subsequent public offerings in 2021 - The company's VIE, Dongfang Paper, generated **98.91% of total revenue in 2020** and held **90.70% of total assets** as of December 31, 2020[285](index=285&type=chunk) - As of Dec 31, 2020, the company had **short-term bank loans of $6.4 million** and **long-term loans of $9.6 million**, with certain property, plant, and equipment pledged as collateral[346](index=346&type=chunk)[350](index=350&type=chunk) - The company has significant capital commitments, including a remaining payment of **$29 million for the acquisition of Hebei Tengsheng** and **$4.6 million for new machinery**[408](index=408&type=chunk) - Subsequent to year-end, the company conducted two public offerings in January and March 2021, raising gross proceeds of approximately **$14.4 million and $21.9 million**, respectively[422](index=422&type=chunk)[423](index=423&type=chunk)

IT Tech Packaging, Inc. (NYSE:ITP) Q3 2020 Earnings Conference Call November 13, 2020 8:00 AM ET Company Participants Zhenyong Liu - Chairman & Chief Executive Officer Jing Hao - Chief Financial Officer Conference Call Participants Operator Hello ladies and gentlemen, and welcome to participate in IT Tech Packaging's Third Quarter 2020 earnings conference call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. Joining us toda ...

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, 2020 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) | --- | --- | |------------------- ...