IT Tech Packaging(ITP) - 2021 Q2 - Quarterly Report

Revenue and Sales Performance - Revenue for the three months ended June 30, 2021, was $46,534,915, an increase of $20,172,642, or 76.52%, from $26,362,273 for the same period in 2020[148] - Revenue from sales of offset printing paper, CMP, and tissue paper products for the three months ended June 30, 2021, was $46,426,045, an increase of $20,909,326, or 81.94%, from $25,516,720 for the second quarter of 2020[148] - Revenue from CMP amounted to $36,813,631, representing an increase of $14,938,906, or 68.29%, from $21,874,725 for the comparable period in 2020[153] - Revenue from offset printing paper was $7,184,221, representing an increase of $5,922,033, or 469.19%, from $1,262,188 for the three months ended June 30, 2020[157] - Revenue generated from selling face masks was $108,869 for the three months ended June 30, 2021, with 2,635 thousand pieces sold[159] - Revenue for the six months ended June 30, 2021 was $70,744,342, an increase of 101.52% from $35,106,124 in the same period of 2020[180] - Revenue from face masks was $239,327 for the six months ended June 30, 2021, with sales of 6,470 thousand pieces[183] - Total revenue for CMP, offset printing paper, and tissue paper products was $65,680,350, an increase of $33,305,489, or 102.87%, from $32,374,861 for the same period in 2020[187] Sales Volume and Pricing - Total offset printing paper, CMP, and tissue paper products sold during the three months ended June 30, 2021, amounted to 86,609 tonnes, an increase of 21,951 tonnes, or 33.95%, compared to 64,658 tonnes sold in the comparable period in the previous year[148] - ASP for regular CMP increased from $370/tonne for the three months ended June 30, 2020, to $500/tonne for the same period in 2021, representing a 35.14% increase[153] - ASP for offset printing paper increased from $578/tonne for the three months ended June 30, 2020, to $690/tonne for the same period in 2021, representing a 19.38% increase[157] Cost of Sales and Gross Profit - Total cost of sales for CMP, offset printing paper, and tissue paper products for the quarter ended June 30, 2021, was $43,407,855, an increase of $19,946,564, or 85.02%, from $23,461,291 for the comparable period in 2020[160] - Cost of sales for CMP increased by $15,094,405, or 76.45%, from $19,743,977 in Q2 2020 to $34,838,381 in Q2 2021, with average cost per tonne rising by 42.30% from $331 to $471[161][164] - Cost of sales for offset printing paper rose to $5,909,029 in Q2 2021, a significant increase of 513.27% from $963,531 in Q2 2020, with average cost per tonne increasing by 28.57% from $441 to $567[162][164] - Gross profit for the three months ended June 30, 2021 was $3,029,019, an increase of 18.38% from $2,558,829 in Q2 2020, representing 6.51% of total revenue[169] - Gross profit for the six months ended June 30, 2021 was $4,860,024, representing an increase of $2,470,914, or 103.42%, from $2,389,110 for the same period in 2020[188] - Gross profit margin for offset printing paper decreased by 5.91 percentage points to 17.75% in Q2 2021, compared to 23.66% in Q2 2020[172] - Gross profit margin for tissue paper products improved by 13.36 percentage points, from -32.07% for the six months ended June 30, 2020, to -18.71% for the same period in 2021[191] Operating Income and Expenses - Operating income for Q2 2021 was $431,408, a substantial increase of 154.02% from a loss of $798,643 in Q2 2020, driven by higher gross profit and lower selling expenses[176] - Selling, general and administrative expenses decreased by 22.63% to $2,597,611 in Q2 2021 from $3,357,472 in Q2 2020[175] - Operating loss decreased by $3,372,420, or 92.01%, to $292,905 for the six months ended June 30, 2021, compared to $3,665,325 for the same period in 2020[193] Net Loss and Financial Position - Net loss for Q2 2021 was $453,248, a reduction of 53.75% from a net loss of $980,031 in Q2 2020[179] - Net loss was $4,792,104 for the six months ended June 30, 2021, an increase of loss of $1,375,786, or 40.27%, from $3,416,318 for the same period in 2020[196] - As of June 30, 2021, cash and cash equivalents increased to $30,273,543, up by $26,131,106 from $4,142,437 as of December 31, 2020[206] - Net cash used in operating activities for the six months ended June 30, 2021 was $15,570,363, a decrease of $21,426,988 or 365.86% from the previous year[207] - Net cash provided by financing activities was $41,671,591 for the six months ended June 30, 2021, compared to $2,273,360 for the same period in 2020[208] Assets and Liabilities - Accounts receivable increased by $3,204,213, or 134.12%, to $5,593,270 as of June 30, 2021, compared to $2,389,057 as of December 31, 2020[196] - Inventory value increased by 845.97% to $11,671,350 as of June 30, 2021, from $1,233,801 as of December 31, 2020[197] - As of June 30, 2021, total outstanding loans from the Rural Credit Union of Xushui District amounted to $9,690,252, up from $9,594,017 as of December 31, 2020[211] - The amount due to shareholders was $727,433, representing funds from shareholders to cover various expenses incurred in the U.S., which is due on demand and interest-free[221] Capital Expenditures and Commitments - Capital expenditure commitments as of June 30, 2021 were approximately $4.6 million, mainly related to the purchase of a paper machine for a new tissue paper production line PM10[200] Financial Risks and Currency Exchange - The company has not entered into any hedging transactions to mitigate foreign exchange risks, exposing it to fluctuations between USD and RMB[229] - The current exchange rate for translating RMB to USD as of June 30, 2021, was 6.4601:1, compared to 6.5249:1 as of December 31, 2020[225] - The average exchange rates for revenues and expenses for the three months ended June 30, 2021, were 6.4682:1, compared to 6.9931:1 for the same period in 2020[225] Other Financial Information - The company completed the installation of a new tissue paper production line (PM10) in April 2021 and is working on accessory equipment installation[146] - The company recorded a deferred gain of $430,695 from the sale-leaseback arrangement, which is amortized over the lease term[205] - The company expects to participate in the bidding process for urban central heating projects following the qualification obtained for supplying central heating in industrial parks[201] - The company is currently evaluating the impact of adopting ASU 2016-13 on its condensed consolidated financial statements, which addresses expected credit losses[228] - Inflation has not materially impacted the company's financial position or results of operations to date, but future high inflation rates may adversely affect gross margins[230] - The company recognizes revenue when goods are delivered, and collectability is reasonably assured, ensuring a formal arrangement exists[223]